A real estate business deals with buying, selling, management, or investment of land and buildings. If you have a passion for dealing with buildings and if you have a brilliant understanding of which properties are better and which are not, then you should learn how to start a real estate business.
There is a lot of thought and planning that goes behind starting your business, and when it comes to real estate, you need a full-proof real estate business plan. During the covid-19 pandemic, the global market for real estate is estimated at US$3.5 Trillion in 2020. The industry is expected to reach US$4.2 trillion in the next 6-7 years. The annual growth rate is 2.9%, which means it’s the right time to jump on the bandwagon. Here is our guide on how to start a real estate business.
Pros and Cons of Real Estate Business
Each business comes with its set of advantages and disadvantages and real estate is the same. Before becoming a real estate agent or opening your own business, you need to know all the advantages and disadvantages of the industry. If you desperately want to learn how to start a real estate business, then here are all the pros and cons of starting a real estate business.
Pros of Real Estate Business:
- One of the main advantages of starting a real estate business is that you have the potential for unlimited income. As most real estate agents work on commission, there’s no limit to how much you can earn.
- No special training or education is required as such, anyone can become an Estate Agent ( Successful or not that’s a separate matter 😊 )
- Its flexi-king, the hours aren’t fixed, you can work as much as you want. If you have a full-time job, then you can work at your leisure and earn a good enough passive income.
- Love the freedom of working for yourself? Well, having your real estate business makes you an entrepreneur. You can do things in your own way when you own the business.
- The business requires meeting up with people on a daily basis. If you are a people person, then this is the right career direction for you.
- The work is fulfilling and rewarding. As an agent, you are helping people find the home of their dreams. Buying a home is a life-long goal for most people and you help fulfill that as an agent.
Cons of Real Estate Business:
- You need to have huge amounts of patience if you want to succeed in the business. It may take a few months to find the first client and to close the first deal.
- Rejection is a constant part of being a real estate agent. You need to be okay with the rejection so you can succeed.
- The market is extremely competitive as the growth rate is steady and the income potential is vast. You’ll have to work hard to make your place in the industry.
- Even if you are a people person, it can be hard to deal with people. You need to have good negotiation skills and should know how to handle difficult/awkward situations.
What Tools Do You Need to Start a Real Estate Business?
Most of the real estate industry operates on referrals, marketing, and brand reputation. Unlike other business types, no tools or equipment are needed for a business to succeed. The only major requirement to start your business and keep it running is good real estate business software.
Not having an extensive list of tools and equipment that you need is a good thing as it reduces the monetary burden. If you want to learn how to start a real estate business, then your real estate business plan needs to have all the vital information. You don’t need any large objects to build your business, still, some common tools you’ll need are:
- Smartphone: For calling, texting, emailing, maintaining the calendar, and getting new leads
- Website/blog: This is vital for promoting your business to prospective clients
- Subscription or Access to websites that are great for real estate agents.
- Computer/laptop for maintaining records and websites.
- High-speed internet connectivity
- Transportation means i-e a nice car, as you will driving around a lot.
Average Setup Costs for Starting a Real Estate Business
Knowing how much does it costs for setting up real estate business is a part of learning how to start a real estate business. As the industry offers almost unlimited earning potential, one would think that the costs for starting the business are exceptionally high. Unlike general opinion, starting a real estate business is relatively cheap. On average, you need just $1,500 – $5,000 to start the business. Here’s a breakdown of the cost of starting your business:
- Professional fees: This is the cost incurred on license and renewal fee annually ($100 – $500)
- Transportation costs: According to a survey including just real estate agents, their biggest business expense is transportation ($1,000 – $1,200)
- Marketing & Advertising costs: There are a variety of methods using which you can promote your business, based on the type, the costs vary. ($100 – $150)
- Operational costs: Operational costs are different from set up costs. Annual operational costs for a real estate business can vary because of a lot of factors. ($5,000-$7,000)
- Training and educational costs: Some real estate agents tend to take educational seminars and lectures. ($500 – $700).
Starting your real estate business is easy if we’re just talking about the setup costs. You can start the business with the bare minimum and still find the right kind of success. Remove the operational costs, and you’ll be able to start the business with limited money.
How Do You Prepare for Starting Your Real Estate Business?
Starting a business can be challenging on multiple levels, and the real estate business is no different. If you want to succeed, then you need to learn how to start a real estate business and follow all the necessary steps. Here are all the things you need to keep in mind while starting your business.
- Thorough Market Research
Doing market research is a huge part of learning how to start a real estate business. If you’ve got questions like “How will your ideas work? How will you find the right niche?” The answer is market research.
With ideal market research, you can learn a lot of things. Before you invest your money into something, knowing what you’re getting into makes all the sense. Taking your time to do market research initially will save time and money. This way you’ll be able to figure out the strategies used by competitors, learn about niches and target markets, and so on.
- Ideal Business Name & Logo
The second step that you need to take while preparing for launching your business is to choose a business name and logo. This is a step most businesses don’t put much thought into, your business name is like an identity for your business. A catchy, creative, and exciting name helps your business stand out from the crowd.
While choosing your business name, you need to keep some things in mind. Your name should be easy to remember, catchy, and should not be similar to other businesses. As for your logo, you can hire a professional to build your logo. If you want to try your hand at this, online tools like Canva can be used to build a logo.
- Finding a Niche That Suits Your Goals
Just like any other business, finding the right niche is the key to success. Real estate niches are specific audiences, locations, or types of property. To fulfill your monetary goals and get the most out of your business, you need to decide on the right niche. You can’t determine the niche you want to focus on without proper market research. That’s why it’s important to spend as much time as possible on market research. Here are some of the most common real estate business types:
- Homeowners that are looking to downsize or upgrade
- Expired listings or listings that didn’t sell before
- Real estate investors
- Vacation rental properties
- Current FSBOs (For sale by owners)
- Affordably designed Flips
- Up & Coming neighbourhood sales
- Off-market properties
- Geographic specific areas
- Property Auctions
There are several niches outside of our very small and specific list. Once you get a taste of the industry on your own, you’ll learn other real estate business types that are perfect according to your style.
- A Specific Target Market
Your target audience is the demographic of people you as a business want to sell the products to. Just like finding a niche, choosing the people you want to sell to makes a lot of difference. If you think you’re more comfortable selling properties to people in the age group of 25-35, then that should be your primary target audience. Unlike a niche, a target market in a real estate business is more flexible. Finding a specific target market you wish to cater to is a part of learning how to start a real estate business.
Different types of people look for different sources to buy and sell the properties. That’s why you need to define a target market you’re comfortable in and focus on that. Here’s a list of the most common target markets in real estate:
- First-Time Buyers: This target market is full of people in their 20s and 30s switching from renting to owning. Most of these first-time buyers don’t have kids. Some of them may not even be married. For this target market, trends keep changing, so you need to be up-to-date.
- Moving-Up Buyers: This market contains buyers that want to move up with their properties. They are slightly older than the first-time buyers, they either have a child or have a child on the way. Their major concern is that they want plenty of space and a good locality. They usually want more luxury and status as opposed to first-time buyers.
- Downsizers: This target market consists of older couples, usually, they want to downsize and experience a calm life. Most of them care about quality rather than quantity, their only demand is a quiet and safe area to live in.
- Investors and Second time buyers: Clients who want to put their money in burgeoning buy to let and property investment sector.
- Skills You Need as a Real Estate Agent
To find success in a real estate business in the UK, or anywhere in the world, you need to be able to convince people. Knowing how to interact with people and being able to negotiate, bargain, or convince people are the primary skills you need.
One of the best ways to learn how to show a property, how to highlight certain parts, and what legalities are involved is by working under someone. Understand how the market works and how to woo customers into buying the right property. Other skills you may need when you start your own business are:
- Record keeping
- Time managment
- People’s skill
- Website management
- Online/offline marketing and promotion
- Tax & finance management
- Setting Up the Price Structure
As a real estate agent, you aren’t selling any product or service that you build yourself. You’re earning a commission on every property you sell. While there isn’t a limit as to how much you can earn, there isn’t something like setting up a price structure.
In a free market, a product is worth whatever someone is willing to pay for it. And most properties have a predetermined commission. Your ideal pricing structure is based on your niche and the target market.
- Do You Require Office Space?
Knowing if you need an office space or not is an important aspect while learning how to start a real estate business. Most of the work regarding the sale and purchase of properties is outdoor work, so there is no need for you to get a physical office.
You could have a home-based office space and save money on rent. As you’re just starting out, having a home-based office makes a lot more sense. However, large real estate businesses tend to have shiny, fancy offices. So in the future, when your business grows, you can have a fancy office for yourself as well. The office should be in a good location, should be easy to find for the customers.
- Arranging the Finances
Real estate is one of the least expensive businesses to set up. So arranging finance for setting up your real estate business is easy. Usually, most people have enough savings to start a business right away. If you don’t have the money required, you can either wait or save money that you can use for starting your business.
The major expense is the operational cost, so you’ll have to arrange for that cost too. The best way is to ask your friends and family for the money, this way you can skip interest rates and more. If that’s not an option, then you can reach out to your local bank for a real estate business loan.
- Do You Need to Hire?
Learning how to start a real estate business includes learning the need for human resources. As you’re starting a real estate business, most of the work can be done by yourself. You don’t need human resources until your business has grown too big to manage by yourself.
You can acquire skills like human resource management, accounting, and tax management. If you don’t have a team, you can earn more as you won’t have to share the commissions or profits.
What Possible Challenges You Could Face While Starting a Real Estate Business?
No business, no industry is perfect. The real estate business is full of competitors and industry giants that make it harder for smaller businesses and newcomers to survive. Arranging the finance and figuring out your niche, choosing the target market are some of the major hurdles that you have to face.
The business industry is extremely volatile, you need to know that you may go long periods without any pay check. While all this sounds demotivating, the industry market size and the annual growth rate speaks for themselves. So you need to do your market research, build a strong marketing strategy, and build a profitable online presence. With hard work, dedication, and industry analysis, you can build a strong real estate business in no time.
Conclusion: How to Start a Real Estate Business?
The demand for residential and commercial realty is growing at an exceptional rate even amid the covid-19 pandemic. Starting a real estate business can be incredibly overwhelming, but with enough research and clarity, it can be done.
To conclude, starting a real estate business requires you to build a real estate business plan. Researching on the ideal niche, finding out the targeting consumers. You need minimal investment for starting the business. By following the steps we’ve mentioned above and building a strong business plan, you can meet up with your financial goals and build a successful business in no time.
How profitable is the real estate business?
The real estate business has a $3.5 trillion market size, and the annual 2.9% CAGR makes real estate an exciting business opportunity. Despite the pandemic, the sales of homes and other properties is at an all-time high. The commissions are pretty high and there is no income cap so it’s safe to say that real estate is a profitable opportunity.
Which niche is most lucrative in the real estate industry?
Each niche has its own pros and cons. The commission is different for each kind of niche. But as there is no income cap, you can earn as much as you want regardless of the niche.