How To Start A Real Estate Business In 10 Steps [Updated 2021]

Key Takeaways:


The IRS recently reported that over the last 50 years, of all the Americans who declared more than one million dollars on their income tax returns, 71 percent were involved in real estate.

How long have you wanted to unchain yourself from the desk of your nine-to-five job? How important is it to you to live a life of financial freedom to provide for yourself and your family? If you relate to any of the above questions, the real question is: have you ever considered starting your own real estate business?

What Is A Real Estate Business?

A real estate business is a business entity that deals with the buying, selling, management, or investment of real estate properties. According to The Balance, real estate is defined as “the property, land, buildings, air rights above the land and underground rights below the land.”

An unfortunate reality that many face today is that less than five percent of people who reach age 65 have enough money to retire or are “financially secure enough,” according to the US census bureau. If you want to set yourself up for a stress-free retirement, it may be time to consider starting a real estate investing business to achieve your personal financial goals.

Starting a real estate investment business will not be easy, but it will be well worth the work with the right preparation. Best of all, there are several resources on small business systems that can make the learning process easier and more efficient. Read through our guide below; after all, it is designed to help you succeed.

Is A Real Estate Business Profitable?

The simple answer to this question is, yes—if you handle your assets intelligently. The most common way a real estate business can be profitable is through appreciation. Appreciation is the increase in value of an asset over time. The asset can be residential properties, commercial properties, and even undeveloped land. The increase can occur for a variety of reasons, such as increasing demand with a decreasing supply. Achieving profit in your real estate business comes through selling your asset after it increases in value—secondly, real estate profits from generating income through regular payments or rent.

Real Estate Profits Through Appreciation

For residential properties, the biggest factor that attributes to appreciation is location. An evolving neighborhood that adds better schools, new shopping centers, playgrounds, or anything that makes the area a more desirable place to live adds value to the home. Home improvements, whether interior or exterior, can also add a significant amount of value. In turn, your real estate business can make large amounts of profit through house flipping or rehabbing. Commercial properties work in a very similar way to residential by gaining profit through developments in location and improving the property.

In terms of underdeveloped land, profits are also generated through development. As a city expands, the land outside of its limits becomes more desirable to those who wish to develop it. Once a developer starts to build houses or commercial buildings, the value of the land increases even higher.

Real Estate Profits Through Income

Simply put, residential and commercial real estate generate income through rent. Tenants pay an agreed-upon amount per month which can increase through inflation and demand. After your costs are taken out, you claim the remaining portion as income. A smart move for your real estate business is to invest in a property in a desirable location, offering you the ability to secure tenants easily.

Depending on your rights to the land, raw land can also generate income as companies may pay regular payments for any new structures built on the land or royalties for any discoveries made. These include but are not limited to new access roads, pipelines, cell towers, pipelines, or pump jacks. It is common for raw land to be rented for agricultural purposes, and some land may have valuable harvestable assets that can be collected periodically.

how to start a real estate business

How To Start A Real Estate Business

Those wondering how to start a real estate business should be cautioned that owning a real estate company is no easy feat. Just like starting a business in any other industry, entrepreneurs should log countless hours conducting research and craft a meticulous business plan before actually jumping into business. Take guidance from the following tips as you open the door to starting a real estate business:

  1. Think Through Professional Goals

  2. Conduct In-Depth Research

  3. Organize Your Finances

  4. Craft Your Business Strategy

  5. Form An LLC

  6. Plan Your Marketing

  7. Build A Website

  8. Launch Campaigns

  9. Stay On Top Of Leads

  10. Build A Support Network

Set Your Business Goals

Before you hit the ground running, take time to evaluate and prioritize your plans for the future. This means thinking through your personal, professional, and financial goals—as these will influence how you start and build your real estate investing business. Start by asking yourself where you plan to be in five, ten, and fifteen years. Then, strategize more immediate steps to help you get here. The importance of this process cannot be overstated. Goals not only help investors stay focused, but they also help them take action.

One framework I find particularly helpful is SMART goals. This stands for specific, measurable, attainable, relevant, and time-bound. Essentially, it helps investors balance ambition and action steps as they plan out the future. SMART goals operate in both short-term and long-term frameworks, making them perfect for any starting point. For more information on setting SMART goals, be sure to read our guide today.

Conduct In-Depth Research

A successful business plan is always preceded by in-depth industry research, which should identify a specific niche, market area, and potential competitors. There are several exit strategies your real estate business could focus on, though some are more geared towards beginners. Many first-time investors will opt for wholesaling, allowing them to learn the ropes before purchasing properties. However, depending on your goals, rehabbing or buy-and-hold strategies may be great options as well.

Your research should then focus on what market area is best suited to your investing niche. Look at median home values and rental prices, research neighborhood amenities, and most importantly, don’t be afraid to look outside your current location. Online research, networking events, and even getting a mentor can help during this part of the process. Always remember, the more research you complete now, the more prepared you will be to start developing your business plan.

Organize Your Finances

There are several methods to get involved in real estate with no money down; however, that doesn’t mean you should avoid taking stock of your current financial standing. Chances are, when you approach a lender, they will want information on your financial history. It is important to take a look before you are ever approached with questions. Request a copy of your credit report and review any existing accounts or investments you have. I always tell investors that no matter where you start financially, there are ways to get started in real estate investing.

Depending on your investment strategy, there are a few financing options that may be right for you. Real estate investors can start somewhere traditional, like a mortgage from a financial institution or government loan. Or, they can opt for nontraditional financing options like private money lenders, business partnerships, and even crowdfunding. You don’t have to settle on one “method” right now, but you should be familiar with a few options. That way, when it’s time to get your business up and running, you know exactly where to go.

Craft Your Business Strategy

Once you have conducted sufficient research, you should already have started formulating ideas in your mind on exactly what will help your business succeed in your market. Write out a business plan that also includes the resources and tools you plan to leverage.

Form A Real Estate LLC

A limited liability company (LLC) refers to a business structure set up to protect business costs from interfering with an investor’s personal finances. The designation allows investors to purchase and own real eshttps://www.fortunebuilders.com/forming-a-real-estate-llctate, without involving personal liability. Each state has different fees and regulations associated with establishing an LLC, though the overall process is largely the same:

  1. Confirm the regulations in your state before getting started

  2. Choose a unique business name

  3. File an Article of Organization with your state

  4. Create an operating agreement for the business

  5. Publish an intent to file (if required in your state)

  6. Apply for a tax identification number through the IRS

After you form your LLC, there may be a few other permits required before you can officially open for business. Confirm with your state what these are, and you’ll be on your way to securing your first deal.

Plan Your Business Marketing

Having a successful real estate business is synonymous with having a successful marketing strategy. What is your unique value proposition? Answering this question will help you establish a brand for your business and any subsequent marketing campaigns. This is also a great time to settle on a logo, core values, and a mission statement. These components will help inform how you reach out to potential customers and serve as a jumping-off point for your marketing materials.

After you create a foundation for your real estate business, it is time to start your first campaign. Read through the following list of common marketing materials for some inspiration:

  • Direct Mail: Believe it or not, direct mail still has a place in this digital age. Real estate investors are constantly using postcards, handwritten letters, and other mailers to reach potential sellers. The most important thing to remember when using direct mail is to remain consistent: more often than not, your response rates will increase on the second or third attempt.

  • Email Campaigns: Email is a great way to reach potential leads, as long as you can gather enough contact information. Because email addresses are not as readily available as property information, it may take a while to put together a strong list. That being said, in time, this is a highly cost-effective method to reach both buyers and sellers.

  • Social Media: Social media is great for beginners because it is an entirely free way to spread the word about your business. Create profiles across Facebook, Twitter, Instagram, and LinkedIn, and post updates when you can. In time, you may find paid social media advertising to be helpful as well.

  • Networking: Real estate thrives on networking,, in many cases it really is about who you know. Start by attending real estate events in your area, and branch out from there. Not sure where to find events? I recommend searching on Facebook or Meetup.com. Once you start building connections, you can even start organizing networking opportunities yourself.

  • Bandit Signs: When newcomers think of real estate, this is often the first thing that comes to mind. Bandit signs are those posters that sit at popular intersections with messages like, “We buy houses!” or “Call us for a cash offer!” Have you ever stopped to think why there are so many? It’s because they work. Bandit signs can be a great way to spread the word about your real estate business. Just make sure they are legal in your area.

Build A Website

In today’s digital age, having a proper web presence is critical. Your marketing materials will, without a doubt, refer potential clients back to your website, so making sure your website is ready to go should be a top priority. Consider using websites like WordPress or Wix, which offer beginner-friendly experiences at relatively affordable prices.

Launch Campaigns

Make sure to be consistent across all of your marketing channels, whether social media, e-mail, snail mail, or traditional marketing. Be sure to schedule out follow-ups to each of the campaigns that you deliver.

Stay On Top Of Leads

One of the worst things you can do for your business is to launch marketing campaigns without a plan to track and follow up with your leads. Even if someone does not present an immediate opportunity, cultivating a relationship over time may earn you their business down the line. A great way to keep track of your leads is with the help of a Customer Relationship Management system or CRM. This type of software provides a way to manage all of your marketing campaigns and leads in one place. Programs like Hubspot, AgileCRM, and Apptivo are great places to start your research. Look for free trials or pricing plans based on the number of leads you work with.

Build A Support Network

As cliche as it sounds, no person is an island when starting a real estate investment business. On the contrary, many leads and deals in real estate will come directly from your personal network. Whether your network consists of clients, colleagues, mentors, or even competitors, make sure to invest ample time in cultivating these key relationships.

real estate business

Top 5 Benefits Of Starting A Real Estate Investment Business

The benefits that come with investing in real estate are nearly endless. Not only do you have to ability to make a sizable profit on every deal, but also, real estate is proving to be a solid hedge against the stock market and inflation. Some other benefits that are guaranteed to come with starting a real estate business include but are not limited to:

  1. Tax Benefits. If you gross $100,000 per year at your nine to five job and I earn $100,000 per year from my rental property, who gets to keep more after taxes? You guessed it; my rental property is taxed much lower because the government rewards rental property owners. The government also offers lower tax rates on long-term profits along with other benefits like depreciation and the exclusion of self-employment tax.

  2. Cash Flow. Not only do real estate investors have the ability to receive a substantial cash flow from steady wholesale or rehab deals, but they can also ensure themselves a secure monthly cash flow with rental property deals. The best part about rental property cash flow is that after all of your bills are paid, the extra money is considered a passive income. You get to collect a monthly paycheck, all the while managing the rest of your investing business.

  3. Appreciation. While you are paying off the loan of whatever property you invested in, the value of that property is increasing or appreciating.  While things like recessions and market fluctuations are bound to occur, it is safe to say that the value of real estate will increase over an extended period of time.  That being said, any property you purchase today will be worth far more 30 years from now; however, with a fixed-rate mortgage, you will always be paying the same dollar amount.

  4. Control. Arguably the greatest benefit of starting a real estate business is the control and pride you feel due to owning something you created. Your destiny is not tied to an office on Wall Street or your company’s CEO; it only belongs to you.  Real estate investing puts you and you alone in the driver’s seat of your financial future.

  5. Security. Of course, investing of any kind will always be associated with some risk. However, steadily building a real estate portfolio over time means that you are securing your own future. Unfortunately, too many individuals today have no specific plan for how they will secure their retirement. Real estate investing is not only what some say is the fastest way to get out of debt but is an undeniable method of creating for yourself multiple streams of income that will continue well into your retirement years and can even be passed on to future generations.

It is not advised to jump into the real estate investing world without first properly educating yourself.  You must learn the best ways to find deals, how to market yourself, how to negotiate, and of course, how to finance deals; however, once you’ve mastered those, you’ll be on your way to maintaining a successful business.  So my partners at CT Homes and I put together a comprehensive list of the most common questions for you to study before embarking on your investing journey.  Start from the top and work your way down and once you’ve thoroughly analyzed each question, you’re sure to already be ahead of your competition.

Starting A Real Estate Business FAQ

When you are finally ready to delve into the world of real estate investing, it is okay to feel anxious and overwhelmed.  Starting your first real estate business will be no easy task, but if you do your due diligence and study the answers to these important questions, you are guaranteed to realize success.

Summary

Starting a real estate business can sound overwhelming, but by following the above steps as well as familiarizing yourself with the answers to commonly asked questions,  becoming a real estate professional will be easier than you’d think.  Be sure to define your goals, review your finances and prioritize networking to build your circle and watch your business flourish. With the right tools, your business has the potential to help you achieve your goals and become financially free.

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