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Five Steps to Starting Your Real Estate Business
When the coronavirus made headlines in March, there were a lot of scary predictions about the impact it might have on the housing market. People speculated that both sales and prices would collapse.
But now, as we move into the second half of 2020, the housing market is not only showing signs of a recovery, but it's showing signs of a strong one at that.
After the stock market crash in March, interest rates were cut down twice to combat the economic damage caused by the coronavirus. For prospective homebuyers, that leads to some of the lowest mortgage rates in recent history. According to Freddie Mac, the rate as of August 2020 is 2.96% on a 30-year fixed-rate mortgage, and 2.46% on a 15-year mortgage. To understand how low those numbers really are, the rate on a 30-year fixed-rate mortgage was 3.72% at the start of 2020.
These historically-low mortgage rates are pushing more and more people to invest in real estate. Along with that push comes the need for a real estate agent who can assist both buyers and sellers through that journey.
This is just one of many reasons why there's never been a better time to consider starting your own real estate company. In fact, last year alone, 5.34 million existing homes were sold.
It's no surprise that the Association of Real Estate License Law Officials (ARELLO) estimates there are about two million active real estate licensees in the United States. That growing number makes sense — for many, the real estate industry offers a solid business model with high-income potential and an exciting, on-the-go lifestyle.
If you're ready to start a real estate business, here's everything you need to know to get up-and-running and snag your very first client.
1. Start By Familiarizing Yourself With Legal Requirements
First things first — before you can start a real estate business, you'll need to get a license. Fortunately, there's typically only one exam you need to pass to make that happen. Requirements differ slightly from state to state, so make sure to check your state's regulations and rules. Visit the Association of Real Estate License Law Officials regulatory agency directory for a complete listing of who to contact in your location.
Once you determine your requirements, you'll have to take a pre-licensing course from an accredited real estate licensing school before taking the actual exam. Your precise exam requirements depend on where you live, so check out The Real Estate Prep Guide website to get a better understanding of what you'll need to do to prepare (and to access any study materials you'll need.
Once you pass the exam, congratulations! You're officially ready to start mapping out your real estate business.
2. Do Your Market Research and Determine Your Niche
Remember when we mentioned that there are currently two million active real estate licensees in the United States? Competition can be fierce, which is all the more reason to spend time researching the market. This will help you identify any existing gaps and determine how you can uniquely fill them.
Whether you're interested in selling within a certain price range or prefer selling single-family homes over condos, you'll have a better chance at success if you start with a specific segment. Here are a few niche segments to consider:
- Income properties
- Rental properties
To zero in on the niche that's right for you, start digging into the current market.
How much are homes selling for on average? What features do popular neighborhoods offer that others don't? What kind of population or demographic changes has a neighborhood experienced in the past five years? Are there underserved areas you can tap into?
You can access all of this information and more through some basic online research.
3. Start Building Out Your Budget
Here's more good news about starting a real estate business: you don't need a huge amount of cash to get started. In fact, because you can start this business in the comfort of your own home (and even maintain your current job while doing it), getting started can cost you as little as $1,500-$2,500 up front.
Here are a few upfront and recurring costs you'll need to write into your budget:
- The cost of obtaining and renewing your real estate license. The real estate exam and test can cost you as much as $600. You'll also have to pay regular renewal fees, which can cost as much as $100-$500 a year.
- The cost of your marketing materials. This means a custom-designed logo, business cards, outdoor signage, and a professional real estate website to get started.
- The cost of advertising. Once you create your marketing materials, you'll need help spreading the word. You'll want to allocate some of your budget to paid advertisements, like sponsored Facebook posts or Google Ads. You can always start small here and build up as needed.
- The cost of acquiring and maintaining a physical office. You can eliminate this one as long as you're running the business from your home.
- The cost of recruiting additional real estate agents. This probably won't be an issue when you first start, but it's something you should plan for when you're ready to build your team. You'll also need to budget for their salaries and benefits.
Remember, real estate sales tend to ebb and flow with the economy. That means you need to also prepare for the ups and downs of inconsistent revenue. Make sure you're building up your savings as you get your business ramped up so you have a safety net to fall back on. As a general rule, you should set aside at least six months of expenses to keep yourself protected.
4. Choose Your Business Structure
The process of actually forming your business structure isn't all that hard — especially when you have third-party experts who can walk you through the requirements and paperwork at each step.
Many new real estate businesses often opt to set up an LLC. This is because an LLC provides personal asset protection, shielding new business owners from being personally liable for business debts. LLCs also aren't beholden to the same strict recordkeeping requirements and formalities as corporations.
To get started, you'll need to set up an LLC for your new real estate business. Your first step? Settling on the official name of your brand new business. But before you get too attached to your dream business name, confirm that your name isn't already registered. You can easily check online to see if it's available.
5. Refine Your Brand and Start Spreading the Word
With thousands of real estate businesses competing for the same clients, crafting a memorable brand identity is vital. To determine your unique brand positioning, start by asking yourself these questions:
- What is the most important part of your customers' experience?
- What personality do you want your real estate brand to project?
- Who's your audience?
- What are you giving clients that they can't get from anyone else?
Answering these questions will help you establish a clear identity for your business and inform future marketing campaigns.
Your next step is building an online presence. This is one of the most critical steps in getting your business noticed. That's because a whopping 90% of prospective homebuyers turn to the internet to begin their search. Another 40% find their go-to real estate agent online.
As you're building out your website, make sure you include some key elements that prospects will look for, including your own personal bio, authentic language (no buzzwords or jargon — speak the same language as your customers), glowing testimonials (if you have them), and, of course, an easy way for site visitors to get in contact with you.
After you create that foundation for your real estate business, it's time to start marketing yourself. No matter what kind of sales goals you set, the most important thing you need to know here is that it's the one part of your business that should never stop. You'll need to update your social accounts frequently, consistently send emails to your prospects, and commit to key dates for any direct mail. All of this helps you stay top-of-mind for prospective buyers.
To do this, train your brain on how to always think strategically and proactively about what's happening (or will be happening) in your market. Then, get ready to show prospective leads something of value. Maybe a new home in a hot market is just about to go up for sale. Or maybe you have insight on a new up-and-coming neighborhood. Whatever it is you want to get across, here are a few methods to help you get started.
Social media is probably your most accessible marketing tool — it's an entirely free way to spread the word about your business, and your entire prospective client base already lives there.
Don't be afraid to get personal and show followers who you are. After all, if they become your client, they'll be spending a lot of time with you, so an emotional connection goes a long way. You can also post about recently closed sales to show you've been busy keeping clients happy.
As you start collecting contact information from interested homebuyers, emails can help you get in front of them fast. Consider using emails to show off recently closed sales. Send a digest highlighting new homes on the market that you're particularly excited about. You can even use emails to create a sense of urgency by showcasing limited time offers.
In a world where (almost) everything has gone digital, direct mail still plays a vital role in marketing. Consider sending hand-written letters to potential leads and new clients. It's an easy way to add a more personal touch to your marketing — and in a sea of generic promotional emails, that's what can help you stand out.
Networking is a helpful tool, no matter what industry you're in. But in real estate it's invaluable. Getting started doesn't have to be intimidating. Look for real estate groups on Facebook, look for professional groups on LinkedIn and introduce yourself, or check out Meetup.com for real estate events in your area.
If you're lucky enough to have a strong network already, take advantage of it. Don't be afraid to ask the people you already know about opportunities to help.
Let us know if you need help starting your real estate business!
By reading this article, you've already taken your first step toward starting your real estate business. While you dive into real estate licensing courses and market research, let the business experts at Swyft Filings handle the details of starting your LLC. That frees up more time for you to nail down the perfect brand identity — not wasting your valuable time on paperwork.