A real estate career, over the long term, can be a lucrative small business.
If you want to take the plunge and start your own real estate business instead of just treating real estate as a career, here’s what you need to know.
The real estate market is enormous. There are about 2 million active real estate licensees and over 86,000 real estate brokerage firms in the United States. The median gross income for a real estate licensee is around $42,000.
According to the National Association of Realtors, annual sales have been increasing for more than a decade. And while 2020 and a global pandemic put a lot of pressure on the real estate market, the end of 2020 saw a strong rebound in real estate sales around the country.
Let’s take a look at seven steps you should take to start a real estate business:
>> This is a condensed version of How to Start a Real Estate Business: The Definitive Step-by-Step Guide. Read the full guide to get more actionable insights and resources to help you start your real estate business.
1. Develop and refine your idea
How do your natural strengths differentiate you from the other real estate businesses in the area? Consider the following questions:
- What skills set me apart?
- What is the purpose of my business?
- Who am I providing a service or product to?
- What is the maximum figure I can safely spend on this real estate business?
- Do I need outside capital? How much?
- What kind of work/life balance am I looking to achieve?
- What are my expectations for starting a real estate business?
Competition is hard enough —make it easier to stand out with a specialty when you start a real estate company. Maybe you want to be the area expert in short sales, only focus on rental property management, or perhaps you are the go-to resource for landlord/tenant laws for your state.
It’s important to find a niche. As we emphasize in our definitive guide on how to start a business, choosing a niche will increase your chance of success.
2. Write a business plan
Although a business plan isn’t mandatory, it can help you to crystallize your ideas. A business plan defines your company’s objectives and then provides specific information that shows how your company will reach those goals.
Your business plan doesn’t need to be 100 pages long. 100-page business plans are not standard in the real estate business. Keep your business plan short and concise, and focus on the essential details. There are several great one-page business plan templates you can use.
For actionable insights and free downloadable business plan templates, read this definitive guide on how to write a business plan.
3. Get a real estate license
There are four necessary steps you need to compete to get your real estate license and start working as a real estate professional:
- Take the real estate pre-licensing course for your state. You’ll need to study the topics covered on the exam, including fair housing laws, property ownership types, fiduciary responsibilities, titles, deeds, contracts, and other necessary aspects of real estate law. Every real estate pre-licensing course will cover the rules and regulations for your state, in addition to the federal real estate laws in effect for all 50 states.
- Pass the real estate licensing exam. The exam length varies from about 1.5 hours to 3.5 hours based on the state you’re in. In most states, you must answer 70% to 75% of the questions correctly to pass.
- Submit your real estate license application. Submit your license application to your state’s real estate board as soon as you pass your exam. Your state may require all real estate license applicants to submit their fingerprints for a criminal background check.
- Find a real estate broker. Now that you’ve successfully passed your real estate exam, submitted your application for a license to your state’s real estate department, and paid any necessary fees, you will need to find a broker to work for. Having your license associated with a licensed brokerage is required to start working as a real estate agent.
4. Decide your legal business structure
Most real estate agents operate as self-employed business owners affiliated with a licensed real estate brokerage firm. In this case, agents run their independent businesses but under the supervision of a licensed managing broker.
Opening your brokerage has some similar considerations, but with an expanded focus. In most states, opening your real estate brokerage firm also requires a special type of real estate license. In both cases, you are starting a business.
Brokerage seeking entrepreneurs generally select one of four legal business structures: sole proprietorship, partnership, limited liability company (LLC), or a corporation. Here’s a basic breakdown of each:
- Sole proprietorship – this is the most basic business entity. A sole proprietorship means that one person is solely responsible for a business’ profits and debts.
- Partnership – a partnership is a shared responsibility between two or more people who hold personal liability for a business.
- Limited Liability Company (LLC) – a structure that permits owners, partners, or shareholders to limit personal liability but still includes tax and flexibility benefits associated with a partnership.
- Corporation – this is an entity legally considered separate from its owners. That means that corporations are permitted to own property, be held liable, pay taxes, and enter contracts.
Most real estate agents that work as independent contractors under the umbrella of a real estate brokerage operate as sole proprietors. Additionally, single owner brokerage firms also sole proprietorships.
If you start in business on your own and opt not to incorporate or form an LLC, by default, you are a sole proprietor.
Sole proprietorship and partnerships are the most accessible business forms because they form naturally. You don’t have to declare either one. Once you or you and one more person start selling goods or services, you’re automatically a sole proprietor or partner.
Companies and corporations require more effort to set up, but there are distinct financial and business benefits to each. Consider your future business goals. You want to choose a business structure that can accommodate your real estate business’s growth and expansion.
5. Create a strong brand identity
Real estate agents and brokers often market their services on the strength of their brand and personality. Crafting a memorable brand identity is a crucial element for any real estate professional.
Your brand identity represents how people know you and your business. It affects how customers perceive your reputation or the reputation of your company.
Ask yourself these essential questions:
- What identity/personality do I want my real estate brand to project?
- Who will want my products or services?
- What can clients get from my services that they can’t get anywhere else?
- What can clients get from working with me that they can’t get anywhere else?
- What are my brand values?
- What is the most critical part of my customers’ experience?
Your answers to these questions (and others like them) will build the core of your brand. All of your future branding and rebranding decisions should expand on these ideas. Your business name, logo, and website should all grow from the concepts you laid out here.
Far too many real estate companies have identical logos. Be sure your real estate logo is unique. And don’t forget about real estate signage. Leave dull signs to others and instead, get real estate signs that sell.
Whenever you make personal appearances, be sure to carry business cards and brochures for people who want to learn more about your services. Before you decide that you should delay building a strong brand identity for your real estate business because you might not have a considerable budget, rethink that plan.
The truth is that you don’t have to spend thousands of dollars on building a strong brand identity. Here are a few pricing guides that can help you identify the sweet spot for pricing:
- How much should a logo design cost?
- How much does a business card cost?
- How much should a brochure design cost?
- How much does website design cost?
The above guides cover free, cheap, affordable, and expensive options. You’ll find a price point that will fit your budget, regardless of the size of your budget.
6. Build an online presence
Customers choose real estate services based on the brand, the real estate professional behind the brand, and that person’s reputation. Your website is often the first contact point between you and potential clients. Make that first impression a good one with a well-designed site.
According to a study on homebuyers, 90% start their search online, and 40% contact a real estate agent after researching the web. You must be on the Internet to compete in the real estate market.
Ensure that your website design truly embodies your real estate brand. Visitors should understand who you are, the services you offer, and your qualifications and reputation.
Your real estate website design and marketing copy should project your personal or broker’s brand voice and identity. Here are some suggestions:
- If you work as a real estate agent, include a photo and bio. Homebuyers want to know the person behind the site.
- Be authentic and avoid marketing “happy talk.” Speak the same language as your customers.
- Include high-quality examples of sales you’ve closed, and make sure to include social proof wherever possible.
- Give site visitors an easy way to get in contact with you.
7. Grow your business
Getting started can feel daunting, especially if you’re fresh from earning your real estate sales agent or broker’s license. Where to begin?
An essential marketing tool in any real estate professional’s toolkit is networking. Consider a targeted approach to find people at networking events that can help you realize your goals and build your sphere of influence based on those connections. You want to build a diverse network of individuals and businesses who can provide advice, assistance, sales leads, or help you “level up.”
Set up a CRM
Real estate businesses run on relationships. How well you track these connections and manage your contacts can dramatically affect how successful your business is and how quickly you grow your business. What you need is a customer relationship management system, or CRM.
CRM gives you the ability to shape the customer experience and optimize your interactions, so you’re always ready for that next lead.
Contact your leads
Once you start tracking your leads in a CRM, it’s time to reach out and engage with them. Studies show that the longer a lead sits unanswered, the lower the possibility that it can be converted into a sale: from 80% if you reach out immediately to 20-35% if you wait 30 minutes or more.
Before you contact a lead, however, do some research. Look at their prior real estate transactions. Have some questions ready and be prepared to answer some, too. Have answers to some of the common questions written down, and above all, be positive and have an open mind.
The focus is on quality instead of quantity. Spend the time to create a rapport with potential clients and talk to them as if you were talking to a friend. You are there to help.
Ask for Referrals
Referrals are a significant source of leads for real estate businesses. Once you’ve established a successful relationship with a customer, don’t feel shy asking for a referral.
Often if you do your job well, there’s no added effort required to get a referral. People are generally happy to share with others a positive experience they had working with someone. Reciprocity is a core principle of marketing psychology and is a powerful tool. A brief reminder at the end of doing business with a customer can help nudge someone who might otherwise forget.
In addition to friends and family, business associates, and people in your social and professional networks can help expand your pool of referrers.
When asking for a referral, don’t beat around the bush. A straightforward request like, “I would appreciate your help in growing my business. Would you feel comfortable leaving me a review or referring anyone you know that needs my services to me?”
There’s a lot to think about when you’re starting your own real estate business.
But with these insights, you have a proven plan that shows you how to start your own real estate business.
Ross Kimbarovsky is founder and CEO at crowdspring, where more than 220,000 experienced freelancers help agencies, small businesses, entrepreneurs, and non-profits with high-quality custom logo design, web design, graphic design, product design, and company naming services. Ross mentors entrepreneurs through TechStars and Founder Institute, was honored as one of Techweek100′s top technology leaders and business visionaries, and enjoys wearing shorts to work after a successful 13-year career as a trial lawyer. Ross has founded numerous other startups, including Startup Foundry, Quickly Legal, and Respect.