Last Updated: February 2, 2023
Around 90% of the millionaires in the world have become wealthy through real estate. Starting a real estate business is not an easy feat. But with cogent information, you can make a fortune. This article addresses the types of real estate businesses and how to start a real estate business.
What Is Real Estate?
Real estate is a broad term that includes property, land (raw or developed), or air rights (above and below land). Real estate is technically land, plus any permanent improvements made to it (artificial or natural). The property you live in and the market you shop from are considered real estate. We are surrounded by real estate.
But how does real estate work? Real estate can be transformed from unimproved to improved, and it can be purchased or sold. Unfortunately, people think that the real estate market consists only of salespeople, agents, or brokers. On the contrary, many kinds of people make a living through real estate.
|NOTE: Marshall Field once said that buying real estate is not only the best, quickest, and safest way to become wealthy, but it’s the only way.
Types of Real Estate Businesses
We have compiled a list of the five best money-making real estate business ideas:
Property investment is the primary reason people tend to become informed on how to get into real estate, which involves purchasing property to earn a profit—typically through rental income. In addition, the properties bought are not usually for primary residents, thereby generating income.
If you wonder how to get started in real estate, one of the best ways to make money is through residential properties. Unfortunately, people think that you need to have your own property to make money. But property management proves everyone wrong. The property manager is responsible for maintenance and collecting rent in exchange for a fee. The only downside is that this job requires the property manager to be available 24/7.
For those wondering how to start a real estate development company, it’s essential to understand what it means. The property development industry takes credit for creating all buildings, which includes developing buildings or land into higher use-value. Property developers turn ideas from paper to reality. Buying raw land and building a property from the ground up is considered property development.
Over the last few years, the most popularized types of real estate businesses have been property management and flipping houses. Property flipping has gained popularity on TV. With flipping houses, you don’t buy a property to live in; you are buying it to sell. House flipping is where you buy a property (house, flat, apartment) and resell it for more money. Typically, you buy a distressed property, modernize it, and repair what needs to be repaired.
Real Estate Agent/Broker
Getting into real estate as a real estate agent or broker is more challenging than the previously mentioned types of business, as it requires formal education. But once you acquire the education, it’s one of the best ways to conduct business. The real estate agent or broker acts as a middleman between the seller and buyer of the property.
|NOTE: Full-time flippers flip 1 to 20 houses per year, while the average house-flipper flips between two to seven homes per year.
|Real estate can be defined as all property that surrounds us.
|Property investment is one type of business to have in mind.
|People have numerous real estate business ideas, one of which is property flipping.
|To become a real estate agent or broker, you first need a certificate of having finished formal education.
How to Start a Real Estate Business
If you wish to know how to start your own real estate company, consider the seven steps below.
Decide on the Type of Business
Once you decide how to get started in real estate and what type of business you want to engage in, your whole process will be easier than you thought.
There are several real estate carriers you can pursue. When deciding which road to take, think of what you can do. The best real estate advice is to make a list of strengths and weaknesses. If you’re the type of person who has a niche for managing, then choose property management. If you are great with words, become a real estate agent or broker.
Do Your Research
How to be successful in real estate depends on research.
- Conduct in-depth research: Research the marketplace you plan to establish your business. Look outside your current location, as well as a few miles down the road.
- Another piece of real estate advice is to look at home values and rental prices. And researching the neighborhood can be helpful. Look at what type of neighborhood amenities exist (grocery stores, fitness centers, schools, and kindergartens).
- Look up your competitors; have a chat with them, and see what makes them stand out from the crowd. You may even find a mentor who would be willing to get you into the world of real estate.
The more research you do before your real estate development business plan, the more informed decisions you’ll make.
Decide on Business Structure
Choosing the proper business structure can be a bit overwhelming, especially for first-timers diving into the waters of the real estate business. Consider the following business structures:
One of the most straightforward business structures on a real estate business includes a sole proprietorship. It’s easy to start, with no paperwork required. You simply begin conducting business. But this business structure is not a legal entity, e.g., if someone sues you for damages to a property, you’re held personally responsible. Additionally, because it’s a sole proprietorship, your personal assets are not protected, meaning that if some unexpected debts occur, the assets you own can be vulnerable to cover legal costs.
When looking at how to start a real estate investment company or any real estate business, think of creating a partnership. This type of business structure is where the company’s responsibility is shared among the owners (at least two). Both partners hold personal liability for the business.
Limited Liability Company (LLC)
Another popular way on how to get into real estate is forming an LLC, which is probably the best business structure to start your real estate business not only because it’s a hybrid structure that functions as a corporation and partnership but also because it offers liability protection. But not everything related to this business structure is beneficial—the fee for forming an LLC varies from $50.00 to $500.00, depending on the state.
Assess Your Finances
When you begin a real estate business, you need to assess your finances. It’s essential to understand your financial goals, how you will fund your business, and how you’ll develop it. But not everyone entering the real estate business has a tremendous amount of money.
One of the best real estate tips is not to overspend. Instead, try buying solely the things you need for your business at a lower price, and once you get a list of clients, you can spend a bit more.
Make a Business Plan
Becoming successful in the real estate business requires making things happen. Even though having a business plan isn’t mandatory, it’s highly recommended. Writing a business plan is a crucial step toward success. Such a real estate development business plan can serve as a guideline for your investing career. Many entrepreneurs tend to write shorter, one-page business plans.
A traditional real estate investment business plan includes such sections as an executive summary, industry overview, and marketing plan. A concise, one-page business plan grabs the reader’s attention.
Set Up Accounting and Bookkeeping
When choosing to start a real estate business, you need to understand the business’s cash flow. Therefore, keeping track of your finances is a must. If you want to know how to be successful in real estate, think about setting up accounting and bookkeeping.
People tend to confuse the terms bookkeeping and accounting. Bookkeeping is used to record, organize, and store financial information related to the business. At the same time, accounting is used for analysis, tax planning, and business strategy. And because the IRS requires all companies to keep track of their books and financial records, you’ll need someone who can take care of the books. Online bookkeeping solutions and accounting services help business owners manage their bookkeeping and payroll.
Plan Your Marketing Strategy
Having a successful real estate business equals an effective marketing strategy. When thinking of how to get started in real estate, consider adopting a unique value proposition (UVP)—a statement that tells your potential clients how they’ll benefit from your services and what makes you different from the competition. Then, think of your logo, core values, and how you can promote your business through various outlets.
Find and Nurture Leads
Once you’ve established all of the steps above, you’re ready to obtain client leads. Client leads are people who are willing to sell their property or hire you to manage their property. How to get clients in real estate depends on your strategy.
An excellent way to keep track of your leads is to use the Customer Relationship Management (CRM) system, business software that makes finding leads and nurturing relationships easier. With the help of this great CRM software, you can manage and track all marketing campaigns and leads in one place.
How to start a real estate investment business also includes not being discouraged. If you find it challenging to convert a client on your first try, persuade them by sending occasional marketing emails. Agents can also find both sellers and buyers in designated areas by utilizing lead generation companies.
|NOTE: Studies show that 2.5% of entrepreneurs who have a business plan are more likely to quickly start their businesses than those who didn’t have a real estate business plan.
Benefits of Starting a Real Estate Business
Getting into real estate allows you to make sizable profits on a property you buy or invest in. Some of the many benefits of a real estate owner include:
While thinking of how to start a real estate investment business, one must consider the most significant benefit of the company: being your own boss. This means having complete control of investment strategies, successes, and failures. You’re in charge of choosing which property to invest in, who will manage and maintain the property, and to whom you’ll rent out the property.
When you invest in stocks or shares, there is a risk that you’ll end up losing your money. But with real estate, that risk is diminished because you’re making your future by steadily building a real estate portfolio. Once you’ve got a grasp on how to get into real estate, you’ll be set for life, and the fortune you can make could be passed to future generations.
The chances of taking out a loan to invest in real estate are high. While you pay off the loan—with the same fixed-mortgage rate each year—the value of the property you bought increases.
|NOTE: Paying off your debts and selecting reliable tenants who meet the rent requirements can secure early retirement.
Even though entering the real estate market might seem difficult at first, following the real estate tips in this article can ease the process. Make sure you define your goals, develop a great marketing strategy, and keep in mind all the benefits you receive from your business.
Yes. The real estate business is profitable, primarily through appreciation, which increases assets (residential properties, commercial properties, undeveloped land) in value over time.
If you’re wondering about starting a real estate business, you need to follow several steps. First, decide on a business structure and type, produce a good business plan and marketing strategy, assess your finances, and nurture leads.
Anyone who wishes to enter the real estate market can do it. There are various strategies on how to start a real estate business with no money. First, begin with property management since you don’t need money to become a property manager, and then work your way up.