How to Start a Real Estate Business

Learning how to start a real estate business can open the door to a dynamic and lucrative career. The real estate industry offers vast opportunities for those looking to invest, whether you aim to become an individual agent or even start your own brokerage. With the right strategies and knowledge, you can unlock significant returns through property transactions, rentals, and investments. The appeal of real estate lies in its potential for steady income, long-term appreciation, and the ability to build wealth with different types of properties.

Initial investments in the real estate business can vary widely. For individual agents, starting costs might be as low as $1,000, covering licensing, marketing, and basic business expenses. On the other hand, establishing a real estate brokerage can require well over $50,000, factoring in office space, staff, and comprehensive marketing efforts. Regardless of the scale, entering the real estate market with a well-thought-out plan and a clear understanding of the industry can lead to substantial financial rewards and personal growth.

In this guide, we’ll walk you through all the essentials to starting your own real estate business, from choosing a business name to registering, getting licenses and permits, and more. Before long, you’ll be running the newest real estate company in town.

Step 1: Create a business plan

Creating a business plan is a crucial first step in starting a real estate business. A well-structured business plan serves as a roadmap, guiding your business decisions and helping you secure funding. It outlines your business goals, strategies, and the steps you need to take to achieve them. Here are the essential components of a business plan tailored for a real estate business:

• Executive Summary: A brief overview of your business concept, goals, and the services you plan to offer. Highlight your unique selling proposition and what sets your business apart from competitors.
• Business Description: Decide whether your focus will be on licensed selling (e.g., becoming a real estate agent or broker) or unlicensed investing (e.g., purchasing and managing rental properties). Describe the nature of your business and its core offerings.
• Market Analysis: Do some market research and analyze your target market, including demographics, economic factors, and competition. Identify trends and opportunities in the local real estate market.
• Business Structure: Define your business structure (sole proprietorship, LLC, corporation) and outline the roles and responsibilities of the management team and staff.
• Core Business Offerings: Identify and describe your primary services, such as residential sales, vacation homes, rental properties, commercial real estate, or property management. Specify any niche markets you plan to target.
• Marketing Strategy: Outline your strategies for attracting clients and generating leads. This could include online marketing, social media, networking, and partnerships with other businesses.
• Financial Plan: Provide detailed financial projections, including startup costs, revenue forecasts, and profitability estimates. Include a budget for marketing, operations, and contingencies.
• “SMART” Goals: Set Specific, Measurable, Attainable, Realistic, and Timely (SMART) goals for your business. Examples include achieving a certain number of sales within the first year, expanding your client base by a specific percentage, or generating a set amount of revenue.

Encouraging the use of SMART goals in your business plan and beyond helps ensure that your objectives are clear and achievable, helping you stay focused and motivated as you build and grow your successful real estate business.

Step 2: Choose a business structure

Choosing the right business structure is a crucial decision when starting a real estate business. The structure you select affects your liability, taxes, and the amount of paperwork your business must handle. It also impacts your ability to raise funds and manage operations. Here’s a brief overview of common business structures:

• Limited Liability Company: Provides liability protection, meaning your personal assets are usually protected from business debts and legal actions. Offers tax flexibility, as profits can be taxed as personal income, avoiding double taxation. See Limited Liability Company definition.
• Sole Proprietorship: Easier and cheaper to set up, with minimal paperwork. However, there is no liability protection, so your personal assets are at risk if your business incurs debts or is sued. For more information please see: What is a Sole Proprietorship?
• Partnership: Similar to a sole proprietorship but with two or more members sharing ownership. Each partner contributes to the business and shares in the profits and losses. Personal liability still applies. See partnership definition.
• Corporation definition: Offer strong liability protection and the ability to raise money by selling stock. However, corporations are more complex to set up and maintain, involving more paperwork and being subject to double taxation, where profits are taxed at both the corporate and personal levels.

If you’re unsure which business structure would be best for your real estate business, it’s wise to consult with a business attorney. They can provide guidance tailored to your specific situation, helping you make an informed decision that aligns with your goals and protects your interests.

Step 3: Determine your business costs

Determining your business costs is a critical step in planning your real estate business. Start by identifying your fixed costs, such as insurance, rent, and utilities, which are recurring expenses that remain relatively constant. Next, account for ongoing expenses like payroll, taxes, and legal fees, which vary depending on the size and operations of your business. Additionally, consider one-time costs, including equipment, furniture, and vehicles, which are necessary for setting up your office and operations. 

Understanding these costs helps you create a comprehensive budget and financial plan. Don’t forget to explore tax breaks and grants that can alleviate some of these expenses, providing financial relief and aiding in your business’s growth.

Securing funding to cover these costs can come from various sources. You can bootstrap or use your personal savings, of course. But there are also government assistance programs, such as SBA loans, which offer favorable terms for small businesses. Business credit cards can provide quick access to funds, but they should be used cautiously due to high interest rates. Traditional loans from banks or the Small Business Administration (SBA) are another option, providing substantial capital with structured repayment plans. Additionally, consider seeking investments from friends and family who are willing to support your venture. 

Each funding option has its pros and cons, so it’s essential to evaluate them carefully and choose the one that best aligns with your business needs and financial situation. What works for one business owner won’t be a great fit for another, so take your time evaluating what will be best for you and your real estate broker business.

Step 4: Pick a business name

Choosing the right name for your real estate business is a critical step in establishing your brand identity. Your business name should be understandable, memorable, and unique, reflecting the professionalism and trustworthiness of your services (see business name definition). A well-chosen name can make a lasting impression on potential clients and set you apart from competitors. Think about your target customers and the message you want to convey to them, and aim for a name that’s easy to pronounce and spell.

Once you have a few name ideas, check their availability. Start by conducting a free LLC name search tool to help ensure the name isn’t already in use by another business. Perform a trademark search to confirm that the name is not protected under trademark law, either. Last but not least, check the availability of the domain name for your business website and secure relevant social media handles. Ideally, you want these to match so customers can find you online. 

After verifying availability for your business name, you can proceed to registration.

Step 5: Register your real estate business and get licenses

Registering your real estate business and obtaining the necessary licenses is crucial for legal compliance and smooth operations. If you’ve decided to operate as an LLC or corporation (recommended), then filing your Articles of Organization (see definition) or Articles of Incorporation (see definition) is the first place you’ll want to start. This step formalizes your business and provides legal protection for your personal assets.

Next, obtain an employer identification number (EIN) from the IRS. This unique identifier is required for certain tax purposes, opening a business bank account, and hiring employees. If you plan to sell properties yourself, you must also get a real estate license, which typically involves completing pre-licensing courses, passing an exam, and fulfilling continuing education requirements.

There’s also a good chance you’ll need a general business license from your state or county; our business license report can help determine the licenses you’ll need. Getting business insurance is also a great step to protect yourself. Finally, open a business bank account (which will likely require your EIN) so you can keep your personal and business finances separate. Not only is this essential for maintaining your asset protections, but it’s also helpful for financial management and simpler tax preparation.

Step 6: Market your business

Marketing your real estate business effectively is essential for attracting clients and establishing a strong brand presence. Start by designing a professional logo and creating consistent branding to use across all your marketing materials, from business cards to online profiles. A cohesive brand identity helps build recognition and trust with potential clients.

Developing a robust online presence is crucial in today’s digital world. Create a professional website optimized with SEO to help your site rank well in search engine results, making it easier for clients to find you. Utilize social media platforms like Facebook, Instagram, and LinkedIn to reach your target market, share valuable content, and engage with potential clients. 

Additionally, sign up for a Google Business Profile and local directories to enhance your visibility in local searches and attract clients in your area. Local marketing is also important; partner with local businesses for joint marketing opportunities, such as co-hosting events or cross-promoting services. This approach helps you tap into established networks and expand your reach within the community.

Real Estate Business Profits Potential

The time it takes to start generating a profit in a real estate business can vary based on your role and market conditions. Working as a licensed real estate agent, you can expect an initial time investment to obtain your real estate license, which includes coursework and passing a licensing exam. Once licensed, your profits will come from sales commissions, which can start relatively quickly if you can secure clients and close deals. It may take several months to a year to build a steady income stream, depending on your market and networking efforts.

For real estate investors, the path to profitability often requires a more substantial financial investment. Profits are typically generated through buying, renovating, and selling properties at a higher price or through rental income. This approach can yield significant returns, but it also involves risks and the need for careful financial planning.

The timeline for profit can vary greatly; some investors see returns within a few months, while others may need a few years to recoup their initial investments. The benefits of both paths include flexible hours and the ability to set your own schedule, providing the freedom to balance work with personal commitments.

Next Steps

In this guide, we’ve mostly covered what to do to get started as a real estate business. But what do you need to do after you’re up and running? To help build your long-term success, it’s essential to focus on continual learning and improving. Do your best to stay updated on local real estate trends, regulatory changes, and even new technologies that can help your business. 

When possible, head to industry conferences and join professional organizations so you can network with other real estate professionals, gaining insights and building relationships. These connections can help you generate new leads, stay informed, and even build friendships that make your business even more rewarding. 

By committing to lifelong learning and professional development, you can adapt to market changes, improve your skills, and position your business for long-term success.

Recommended articles:

• How to Start a Home Renovating Business from Scratch
• How to Launch a Digitalized Real Estate Business
• The Crucial Steps You’ll Need Take to Start a Business
• How to Start a Property Management Business in California
• Tips on How to Start Your Own Business
• How to Start a Sole Proprietorship

Let us help you start a real estate business today!

Starting a real estate business can feel like an overwhelming prospect, but it doesn’t have to be a solo effort. Here at ZenBusiness, we specialize in the “red tape” side of business. Whether you need help starting your real estate company as an LLC or corporation, maintaining a registered agent, or something else, we’ve got you covered. Let us handle the paperwork so you can focus on your passions: showcasing real estate properties and building your successful business.