The global pandemic saw record-low mortgage rates send the real estate market into a frenzy. While many have long predicted a slowdown, it still shows no sign of abating. So how can you benefit from this exciting market?
One way is to begin your own real estate journey. Read on as we give our essential guide on how to start a real estate business.
1. Set Your Goals
There are several methods and paths you can take when working in real estate. To ensure you take the right one, it helps to visualize your goals over the coming years.
Break these down into five, ten, and fifteen-year plans. Setting goals for each stage will help you retain focus and even help you make important decisions.
Make sure any targets you set sit within the SMART framework. These are targets that are specific, measurable, attainable, realistic, and timely. You may relate them to finances accumulated or properties purchased, or assign certain career goals to them.
2. Look at Career Paths
When people think of real estate careers, they immediately conjure up ideas of owning multiple properties. For many people, this is the dream and the path they will take. Yet there are other real estate jobs that you can follow or do alongside building a property empire, including the following:
- Appraiser
- Broker
- Construction contractor
- Real estate photography
- Hard money lender
- Home inspector
- Real estate agent
- Web or app developer
Unless you have endless amounts of capital, building a real estate portfolio takes time. Pursuing one of these paths lets you work in the business while you slowly accumulate property.
3. Research Business Structures
When setting up your business, you need to consider how your legal entity is formed. Each will have a different impact on the tax and legal considerations your company operates under:
- Sole Proprietorship
- Corporation
- Partnership
- Limited Liability Company
- S Corporations
It may help to get professional assistance when deciding on this. A certified public accountant or business attorney is the most logical option. Following this, you may need to choose a company name and apply for an employer identification number or incorporate your business.
4. Create a Business Plan
Now that you have your goals and path, it is time to make a plan. Starting a business without one is not impossible, but a thorough plan has several advantages. Not only does it keep you on track but it can also help if you need to seek financing.
Knowing how to write a business plan can fill a whole blog in itself. However, when doing one that concentrates on real estate, there are a few additional factors to consider.
Make sure the plan aligns with your goals. If you have set your five, ten, and fifteen-year goals, say how you will achieve them in the plan. This may also help you work out if they are measurable or achievable.
At this point, you may also begin to consider who else you will need in your journey. If you are hiring staff or outsourcing activities, then make sure you are specific about them and how much they will cost. All of this should be in your plan.
5. Organize Your Finances
Even if you don’t need money to begin, getting your finances in order can help in several ways. You may need financing later down the line, and a good financial history will mean better rates and a higher chance of being accepted.
Start by getting a copy of your credit report. Check where you can make improvements and see if any mistakes are on the report. After this, work on paying off debts and getting your debt-to-income ratio as low as possible.
Then begin to research lending options, even if you don’t yet need them. There are financial institutions, government mortgage loans, or private money lenders for you to look into.
6. Accounting and Bookkeeping
Having an efficient system for accounting and bookkeeping is going to make your job much easier. They are important for tax filing purposes and will help you keep track of the business’s cash flow.
A bookkeeper and an accountant are two separate entities, and you will need both. The bookkeeper is in charge of keeping the business organized. They will prepare bills and financials ready to be handed to the accountant.
In the early days, you can do this yourself. But as the business grows and more income streams begin, it will be harder to keep hold of. A bookkeeper frees you to do other jobs.
An accountant will process the rest of your money for tax purposes. As they are up to date on legislation, having one to do so will prevent you from making costly mistakes.
7. Build a Website
Most customers of a real estate business will make their initial searches online. Even if you have done all the networking and local marketing you can, most of your trade will come from digital paths. That is why it pays to have a great website with time and money invested into it.
The type of business you have will dictate how sophisticated it needs to be. Real estate photographers may just need a website that hosts images. However, a listings website will need multiple functions and search options.
Once you have a website, it pays to invest in search engine optimization. This is the process in which you tweak your website to gain organic traffic from search engines. Outsourcing this to a third party is a wise decision, as it can require time, effort, and specialist knowledge.
Starting Your Real Estate Business
Now you know how to start a real estate business, begin planning. Think about your strategy and path. Then organize your finances and business structure.
If you found this article informative, we have many more. Covering topics ranging from careers to finance, we can help you get the most from your wealth in the coming year.