How to Start a Real Estate Business | Steps, Requirements, Risks and Rewards

If you don't mind the work and responsibility that come with building your own business, the real estate industry might be the perfect investment vehicle for you. Learning how to start a real estate business can seem daunting, but it's easier than you might think.

However, you'll need to follow state and local regulations for both your real estate sales and management activities. If you meet all the requirements and pass various exams, you can apply for a federal real estate license. You can bypass the broker's exam and become a real estate agent or associate broker if you prefer.

What Is Real Estate Business?

A real estate business is a company registered with the state or local government that buys and sells properties for profit. Real estate brokers aren't employees of the real estate businesses they represent. Instead, they are self-employed entrepreneurs who run their own real estate companies and have real estate agents working under them.

Anyone can start an individual real estate company. However, becoming exclusive real estate agents for just one brokerage is challenging. An alternative is to create a real estate office with many real estate agents who share the responsibilities and profits.

To meet all the business formation legal requirements, you can pick trusted and affordable formations services and registered agents services that can help you with starting up and running your real estate business from a legal perspective.

Hand holding little houses

What Do You Need?

To learn how to start your own real estate career, you'll need several things:

  • A home office or other space where you can conduct business.
  • A solid business structure.
  • The proper licenses and certifications, if required, in your area.
  • Working capital to purchase inventory.
  • A website that the target market will find when they search for real estate services providers in your area.

What Are the Costs Associated With Starting a Real Estate Business?

You'll need to budget several thousand dollars (or more) for startup costs depending on how much inventory you'll need to purchase. You may have to purchase both retail and investment properties - on a related note, for starting a small business with minimal startup fees, see our 'How to Start a Delivery Business' post. Here are the general startup costs for starting an individual real estate business:

  • Around $5000 website design and marketing tools
  • Around $2,500-$10,000 for licensing fees
  • Around $1,500-$3,000 for inventory (residential properties)
  • Related expenses, such as insurance, will also apply.

What Will You Sell?

Woman givig keys to another woman

There are two categories of real estate inventory:

  1. Residential, which includes single-family homes, townhouses, condominiums, or co-ops.
  2. Investment property that you'll sell to investors who plan to rent out the buildings for profit.

Before starting a real estate business, determine which type of inventory you'll buy and sell. It's because different licenses are required for each category.

How Long Will It Take?

Once you're ready to start your business, it's time to learn how to create a real estate business plan and develop a marketing strategy. These processes could take several weeks or months, depending on your industry experience and expertise. Once these steps are complete, you can look for tenants or buyers.

You may be wondering how long it will take to build a real estate business entity and become a broker. The process can vary depending on your education, industry experience, and the products you'll offer. Generally, the federal licensing course takes around six months from start to finish. You may also have to wait several weeks to take the required real estate exam.

What Is the Best Way to Start a Real Estate Business?

If you don't have any prior experience in real estate, this is a great way to learn how to start real estate brokerages from the ground up. You'll be able to gain practical knowledge and apply what you've learned as you begin your first projects.

If you already have some experience in real estate, you might want to consider going straight for the broker's license rather than starting as a real estate agent. This business strategy allows you to jump right into managing construction and properties instead of learning how to sell homes and other properties.

Man showing a couple a house

What Are the Qualifications Needed to Start a Real Estate Business?

There are no formal educational requirements to be a real estate investor. However, you will need to acquire the proper licenses and certifications in your state before you can begin conducting business activities. Some of these include:

Real estate salesperson (entry-level)

Real estate broker or associate broker (more advanced position)

Property manager (experienced real estate agent)

If you're interested in becoming a property manager, you must also pass the National Association of Residential Property Managers exam. This certification will help your business attract potential buyers or tenants looking for professional property management services.

What Are the Legal Requirements to Start a Real Estate Business?

In general, you'll need to follow local and state laws for real estate sales before starting a new business. These include:

  • Local ordinances
  • State laws
  • Licensing requirements
  • Certification standards

You might also want to consult an attorney concerning the laws governing your business within specific regions of your state or county.

attorney


How Will I Market My Real Estate Business?

Local listings, property management websites, and classified ads are the most effective way to market your real estate business to your target audience. Most real estate agents have an official business website with property listings so potential buyers can find homes for sale or lease online.

You can hire a marketing agency to help you develop a social media strategy for your small business. Social media platforms are also helpful tools for doing real estate market research and finding out what other real estate businesses are doing.

Whether you're looking for business ideas or want to start a real estate business, you can find the training and licensing necessary to begin selling properties. This is a good career choice if you're interested in real estate investing but don't have any previous experience in this industry.

Customer Relationship Management System

Customer relationship management (CRM) is a technology seasoned realtors use for customer service, sales lead tracking, and campaign management.

There are many CRM systems available. Some of the most popular ones include:

Zoho srm logo
  • Zoho CRM
  • Salesforce
  • HubSpot CRM
  • Oracle Eloqua

Is Real Estate Business Profitable?

The real estate business is profitable, but it comes with many risks. The laws of supply and demand determine the prices of properties. Economic factors such as unemployment rates can also affect property value in certain regions.

Rental property rates for commercial or residential units are also dependent on local laws and regulations, so you need to be aware of how these factors affect your business.

When you decide to own a real estate business, make sure you have the financial means to weather difficult times. To lessen risks, diversify your investment portfolio by investing in different properties or seek out partners who can help with the management aspect of the business.

The real estate law, policies, and other aspects might differ in each country. Therefore, it's advisable for real estate investors to look up the rules of doing business in their area to ensure that they comply with all legalities before they invest.

Houses on coins

Partnership or Sole Proprietorship?

Investing in real estate is a good option for those with limited capital but want to earn money in the shortest possible time. However, you can also lessen risks by investing with partners or associates rather than alone.

Suppose your investment is a success and generates high returns. As a real estate professional, you may consider expanding and bringing in more partners to help manage and grow your company, especially when you need extra capital for future investments.

When it comes to real estate brokerage, for example, you'll be required to pass a state exam before you can receive a real estate broker's license. In addition, some states require commercial brokers to have 2 years of experience in this field.

You also need marketing strategies to attract potential buyers and sellers.

Real Estate Investments vs. Real Estate Business

Many people own properties, but the difference is how they run their business. If you want to make money from your real estate investments, you need to know how the process works and what makes a good investment.

You can purchase a property with the intention of reselling it for a higher cost in the future, but prices are often dictated by supply and demand in that particular area. If you want to make a profit from your investments, it's best to buy in areas where there is a high demand for the type of property you are selling.

There are many ways that you can invest in real estate properties. Some new business owners might pool their money to purchase a larger place where they pay someone to manage it for them. You can also hire someone to maintain the property if you don't have the time or excess funds to do so yourself.

Land, luxury homes, and multi-family units are just some of the properties people invest in when they want to make money from their real estate investments. The key is in buying at a low price and then selling it for a much higher cost to someone who can afford it.


The Bottom Line of Starting a Real Estate Business

For most people, learning to start a real estate business is an impossible task without help. That's why you should consider hiring a franchise company that can offer you real estate education and support. Here are some reasons: You'll receive in-depth industry training, including licensing courses and hands-on, practical experience. And the hard work needed? Well, that's up to you!

In addition, you'll get all the resources and tools you need to have a successful real estate business. For example, you'll have an entire website and database of potential clients.

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