William L. Coney Blog: How to Start a Real Estate Business

how to start a real estate business

This article is part of our Real Estate Business Startup Guide—a curated list of articles to help you plan, start, and grow your real estate business!

If you’re reading this article, there’s a good chance you love talking to others, building connections, and helping out—you’re a people person. And in terms of profitability, real estate is a solid bet for many who are looking for passive investment streams, or to build a service that’s in high demand in many parts of the US.

A little bit about the sources in this article:

I interviewed more than 13 real estate agents for this article! Unsurprisingly, there’s some feedback that seems to hold true across the board, including the importance of having a good online presence, a solid understanding of SEO, a niche or a well-defined target audience, brilliant people skills, and the ability to manage your contacts and connections.

Step 1: Planning

Whether you’re starting a real estate business, a corner coffee shop, or a company that manufactures rocket parts, it’s a good idea to write a business plan. Business planning makes you more successful— it’s been scientifically proven!

Not only will working through the planning process prompt you to think about important things like how you’re positioned to compete with similar businesses, and how much cash you’ll need to actually get started, it will also help you validate your idea and get into a habit of setting goals and milestones.

According to real estate investor Eric Bowlin, the purpose of a business plan is twofold. He says, “First, it gives you a way to formalize your goals and direction. More importantly, it is a document that you can provide to lenders or investors to clearly illustrate not only your direction but where you are and how you got there.” During the planning process, Eric got a lot of great advice from a local Small Business Development Center.

If you haven’t had any experience in the real estate industry, it’s a good idea to get advice from someone who has. Real estate agent Jamal Asskoumi of Castle Smart says, “If you yourself are not directly involved in real estate, then it’s best to find someone who is, at the planning stage. They’ll know a lot more of the do’s and don’ts.”

Of course, you could always go down the route of taking formal courses on the topic, or reading the right books (see the resources section at the end of this article).

Tools like LivePlan make the business planning process even easier, guiding you through each section. The same is true of sample business plans—take a look through some of the free sample real estate business plans on Bplans.

Resources to help you plan your business:

Step 2: Market research and idea validation

How do you know you’ve got an idea that will work? How do you know you’ve picked a niche in the real estate market that actually has a target audience? How do you figure out how to position yourself within this niche?

These questions and many more like them can be answered in the initial market research phase. By conducting both primary and secondary market research, you give yourself a broader idea of whether or not the target market you’ve picked is valuable enough to pursue.

Of course, there’s no one-fits-all approach to figuring out what niche you’re best served to help—and the variety of responses we got from real estate agents across the United States is proof of that.

Do market research early

Taking the time to do your market research early will also save you both time and money. Michelle Stansbury, a realtor at Bluegrass Partners Trust Realty says, “My first year was a lot of fumbling around figuring out what didn’t work. My second year I tripled my business.”

Do market research to assess your own skills

Brad Pauly, the owner of Pauly Presley Realty, took the same trial and error approach but for him, it was a good way to figure out his own strengths and weaknesses. “I figured out my target market through trial and error,” he says. “When I started in the industry, I wouldn’t turn away any business! Once I realized my strong suits, I focused on them. Four years after I was licensed, I obtained my broker’s license and created the company we have today.”

If you’re not sure of your own strengths and weaknesses, conducting a SWOT analysis can help you figure them out.

Get some real-world experience or find a mentor

If you’re a doer first, another route to market research is to simply get in there and start doing things. Most people don’t have the additional time or money to do this, but if you do, good for you, it’s as valid a method as any. Morgan Franklin, a licensed real estate agent based out of Lexington, Kentucky, says, “I was confident [my idea] was going to work because I had already developed enough business to pay all of my startup expenses before I took my real estate exam.”

However, Morgan did spend some time working for a real estate attorney so he had a bit of know-how before diving in. “If you have no experience, I would strongly urge a new agent to find a mentor to work with for the first year or two,” he suggests. If you haven’t had much exposure to the industry, going the “mentor” route is a good idea.

That said, Morgan did do a fair bit of research himself. When asked how he figured out who his target market was, he responded, “I looked at the volume of sales in my city, from the property valuation administrator, and then looked for the ‘sweet spot.’ That is where the bulk of the volume of transactions was occurring. From there, I aimed for the upper end of that group.”

Cheryl Julcher, the Managing Broker at Yellow Brick Properties, did her market research, but also chose to start in an area she felt passionate about. “Here at Yellow Brick, we are all about healthy, safe, comfortable, and smart homes—eco-conscious and sustainable housing,” she explains.

“We went with our passion, and that is what I would advise anyone to do,” says Cheryl. “Go with the market sector —millennials, empty nesters, etc.—that you care about the most and are most knowledgeable about.”

If you have strong feelings about a particular sector, chances are it’s a good place to at least start doing your market research.

Market research resources:

Step 3: Branding

Branding is important for businesses of every size. If you’ve got a memorable brand, it’s easier to build credibility, look bigger than you are, attract customers, and in general be the first person or company people think of.

According to branding expert Sara Conte of Brand Genie, “Although you can influence your brand through well-designed logos, hilarious ad campaigns, carefully crafted press releases, or super-friendly service, ultimately, your brand is what the outside world says it is.”

Essentially, your reputation is your brand.

Branding tip #1: Your reputation is all down to your relationships

Real estate agent Jamal Asskoumi, of Castle Smart, knows this well; not only does he believe in the importance of setting yourself apart from the competition, but also in the importance of your relationships with your clients.

“When branding in real estate, try to make it as personal as possible. This is a business which relies heavily on interaction and building relationships. Ensure your business exudes the same welcoming smile you have.”

Be someone people want to align themselves with. You are the brand, after all.

Realtor Tim Frie takes this idea a step further. He says, “Building a reputation is more important than building a brand in real estate…plus, building a reputation is a lot easier than constructing a brand.”

Branding tip #2: Provide value and give people what they need

Reputation and authenticity seem to go hand in hand in real estate. Michael Kelczewski a real estate agent for Brandywine Fine Properties Sotheby’s International, feels that people can sense non-verbal cues and behavior patterns. As a result, there’s much less that can go wrong if you behave authentically.

Real estate investor, Eric Bowlin, holds the same belief. “Real estate is actually about people more than the land,” he says. “As a small business in real estate, I think it’s more about branding yourself than branding the business. Make people want to work with you.”

Branding tip #3: Creatively create your own space

If, however, you take pride in having the creative chops to brand something that stands out because it’s new and innovative, you have a unique opportunity.

Cheryl Julcher of Yellow Brick Properties differentiated her brand from competitors by developing a brand of homes called Zoetic Homes. “Each home comes with a nutrition label, is quality verified by an independent third party, and is guaranteed to have a design that matches actual performance.”

Branding tip #4: Be the go-to expert

Being an expert in your industry is another great way to set yourself apart. For Morgan Franklin, the secret ingredients were video and an active social media presence.

“I have branded myself as a local expert and have differentiated myself through the use of social media, and more specifically, video,” says Morgan. “I host a weekly real estate show that is published to YouTube and Facebook. This has been huge as it has associated my brand with higher-end properties even though I haven’t had those listings.”

On the flipside, if you’re young and inexperienced, you might have as good an opportunity to sell yourself. “Sell your inexperience (and youth if that applies to you) as an asset,” says agent Michelle Stansbury. “You will be hungry to succeed and are more likely to work harder to get homes sold than the agents who have already ‘made it.’ Inexperience isn’t a total weakness and don’t let anyone convince you that it is.”

Resources to help you build a brand:

Step 4: Making it legal

One of the best things about getting into real estate is that for most states, there’s really only one exam you need to pass. Study hard, and you might be able to do it in a couple of months. Naturally, this differs slightly from state to state, so make sure to check in with your own state about regulations and rules.

In Florida, for example, you don’t need to be a real estate agent or a broker in order to open up a real estate company. According to Tim Frie, “You just need a broker-of-record who is an officer or manager of the company who is responsible for overseeing the actions and transactions of the sales associates.”

The Real Estate Prep Guide website is a great place to find test prep materials or to get a taste of what the real estate exam in your state looks like.

Of course, real estate qualifications aside, there are some things that you can do pretty early on, including figuring out a name for your business, registering said name, applying for a Federal Tax ID, and obtaining any necessary business licenses and permits.

For Tim, choosing a company name was a strategic action. “My partners and I decided on something very close to home: a combination of two of our names. A lot of notable real estate companies are named like this: Coldwell Banker, Keller William, Engel & Volkers, Long, and Foster. Not only did we want to emulate what was already proven in the industry, but through the way that we provide service, we wanted something very deep to leave behind as a legacy that was a result of our hard work and dedication.”

Many other real estate agents also simply go with their own name, as it’s a great way to attach your business to your personal brand.

Providing you know what things you need to get done to start, the process of actually getting started isn’t all that hard. “Create a corporation, register your DBA, make sure you are in good standing with all boards and commissions,” says Brad Pauly owner of Pauly Presley Realty, listing some key things you need to do to get started. He also advises aspiring entrepreneurs to look into getting liability insurance. That’s key!

If you’re still worried about where to start and how to make it “legal,” real estate broker James Brooks advises consulting an attorney who specializes in real estate law.

Resources to help you make it legal:

Step 5: Getting financed

One of the great things about getting started in the real estate industry is that having a huge amount of cash on hand isn’t always necessary.

It’s also a business that you can start part-time while you’re still holding down a day job (though of course, you may need a flexible employer so that you duck aside to occasionally take phone calls).

Joshua Jarvis, the owner of Jarvis Team Realty, says, “The startup cost to launch in real estate is very low. I used the savings I had and for less than $1,000 I was able to start. Now my monthly budget is 10 times this, but you don’t really need any money to start—or so most think.”

The real thing to think about, according to Joshua, is cash flow. “Don’t just calculate the startup cost, calculate ‘carrying cost,’” he says. “As in, how many months it will take you to start cash flowing. In real estate, there are a good 60 days or more before you could get paid.”

For Hollywood real estate agent, Gwen Banta, getting the finances to take the job seriously had a lot to do with other revenue streams to begin with, including her work as an actress and writer.

If you do find that you need investor funding or a bank loan, writing a business plan is a solid first step.

Real estate agent Jamal Asskoumi, took the finances for his business from personal savings. “If you cannot fund the project yourself, ensure you know how and where to find investors,” he says. “Also, create a flawless business plan to present to them.”

If you’re wondering what a real estate business plan looks like, take a look at some of our free sample real estate business plans. They’ll give you a great idea of how to structure your own plan. Also, be sure to check out the resources below, including our guides on funding and pitching, which will help you when it comes time to present to an investor or a bank.

Funding resources:

Step 6: Setting up shop

For most people getting started in real estate, an office location isn’t necessary. At this beginning phase, the focus is really more on building a reputation within your chosen niche.

Real estate investor Eric Bowlin says, “The vast majority of people I know who work in real estate have started in their own home. It’s more important to choose a target market than to worry about a location for your storefront. At startup, you need to be flexible and able to rapidly adjust your plan if it’s not working. A physical location will tie you down to that market and make you less flexible while simultaneously adding expenses.”

Of course, there may come a time when you do want to find a business location, hire employees, and get set up with the right technology. Then again, hiring employees isn’t for everyone. Eric says, “I’ve had employees in the past and I will never hire an employee again. The government regulations for employees is far too burdensome and expensive. Instead, everyone I work with is treated like a contractor and given a 1099.”

When it comes to technology, great customer relationship management software and a shared inbox solution seems to be the real estate agent’s prized possession. Cheryl Julcher doesn’t mince her words: “Our essential technology is our CRM, and the ability to work from anywhere 24/7.”

And she’s not the only one who advises using a tool that helps you manage your contacts. For owner Joshua Jarvis, a good CRM is practically indispensable, and it’s something many real estate agents overlook. “The only real piece of technology that might not be common sense is a database. Whether it’s an advanced CRM or simply Outlook, this is huge. Your database is your business.”

If you haven’t already been convinced, doing well in real estate boils down to those personal connections you make, whether or not you’ve got a real-life office location. If you do hire employees, make sure they’re a good fit with your values and your brand first. After all, you don’t want to damage the great reputation you’ve spent so much time building.

Resources to help you set up shop:

Step 7: Marketing and launching

Ask any real estate agent how they market their business, and you’ll find that “SEO” and “a good web presence” are common responses. Beyond the required networking you’ll need to do, maintaining an online presence in your real estate niche is key to your success.

Again, we go back to the importance of your personal relationships with people. Getting business is all about seeing people, wherever they are, though it’s equally important to have an online presence so that people can find you themselves!

Tim Frie says, “A lot of real estate marketing is based on forming relationships, and you can do that most efficiently by blending an online strategy with a traditional outreach and connection strategy.”

If you don’t have any customers, a good place to start is to reach out to people in your existing network. “Tell them about what you’re doing,” Tim says. “Ask if they know anyone who you can provide value to. If you’re new and starting out, you need to put yourself in situations that allow you to create new connections, meet new people, and provide value just by being yourself. Once people like you, they’ll correlate your name with ‘real estate’ when they themselves or someone they know want to buy or sell a house.”

Resources to help you market and launch your real estate business:

Books and resources

The E-Myth: Why Most Businesses Don’t Work and What to Do About It by Michael Gerber
Millionaire Real Estate Agent: It’s Not About the Money…It’s About Being the Best You Can Be! By Gary Keller
EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches by Dave Ramsey
6 Steps to 7 Figures: A Real Estate Professional’s Guide to Building Wealth and Creating Your Own Destiny Paperback by Pat Hiban
Defeat Mega Agents: So You Can Stop Being the Small Guy in Your Marketplace by Ryan Fletcher
The Digital Real Estate Agent: Building the Brand of You by Blaise Dietz and Michael Mannino II

from Bplans Articles http://bit.ly/2EZJ4Xi

William L. Coney Blog

Wednesday, January 2, 2019

How to Start a Real Estate Business