How to Start a Real Estate Business: A Blueprint for Getting Started
The real estate business offers a variety of options for professionals at any level or stage in their journey. For many, the field offers the opportunity to find new career paths, to start fresh in a new industry or to express an entrepreneurial spirit. If you’ve ever been curious about how to start a real estate business, you’ve come to the right place.
In this guide to getting started, we’ll offer important details about the industry as a whole. We’ll also provide an inside look at the different paths people can take when starting a new career in real estate.
Building a Foundation: Real Estate Business Options
Perhaps you’ve been curious about how people actually make money and find work in the field of real estate. The good news is that there are many different pathways to establishing sustainable and recurring income as a small business owner. Additionally, operating a thriving business doesn’t limit you to becoming a real estate agent.
The section below includes several unique options for starting a real estate business. Although some of these may require special licensing or certification, the possibilities are extensive.
Residential Real Estate Agency
Residential real estate is what most people think of when they hear the term “real estate agent.” That’s partly because so many individuals and families have experience working with a licensed agent when they need to buy or sell a new home.
A residential business is primarily involved in the sale or resale of existing homes and new construction in residential neighborhoods. This includes many different types of structures, including:
- Single-family units
- Vacation homes and rentals
Residential real estate is a popular option for new agents looking to begin a company or to gain experience working with buyers and sellers.
Property Development Company
Property development is another type of real estate business, but it often requires a large sum of money or capital to start. If personal cash assets aren’t available, some company owners turn to crowdfunding as a way to partner with others in a new property development venture.
Property development is also an area of real estate that focuses on repurposing or reimagining land, vacant buildings or existing property. A career in this specific field might require knowledge of renovation, land development, zoning and other construction or financing requirements.
Property Management Company
Property management is a type of real estate that provides support and administrative assistance to landlords and other property owners. However, it’s also possible to self-manage a single property or set of properties without the help of a management company.
To form a property management business, you’ll likely need more than just a realtor license. Having a strong working knowledge of real estate operations, tenant management, maintenance and legal responsibilities is helpful in this line of work. Starting a property management company offers plenty of opportunities for expansion and financial growth.
Commercial Real Estate Agency
If you’ve ever looked at how to get into real estate, you may have run across several options for commercial real estate investment or sales. A commercial real estate agent is similar to a residential agent, except that their listings are mostly focused on retail spaces, work, and office locations, and medical or educational facilities.
The distinguishing factor of these properties is that they are used to produce an income from occupying tenants. To begin a commercial real estate company, make sure you’re well-versed in how the needs and requirements differ from residential properties.
Industrial Real Estate
If you have an interest in large scale manufacturing facilities, warehouses, production or distribution plants, then starting an industrial real estate company could be a good fit. Since these types of properties are zoned differently than traditional real estate properties, an astute industrial real estate business owner is someone with a working knowledge of legal considerations and sales requirements for industrial tenants.
Renovation and House Flipping
Some real estate aficionados with a knack for do-it-yourself work start real estate businesses around the act of “house flipping.” This term is often associated with purchasing old or dilapidated homes and completely refreshing them with new construction and design. This process often requires significant demolition, investment, and collaboration with a certified contractor or construction team.
Flipping homes can be a profitable venture for anyone interested in combining enterprise with home renovation. Additionally, many business-minded home flippers have goals of revitalizing old neighborhoods and communities, which can also lead to positive local impacts.
Examining Real Estate Industry Trends
When answering the question of how to start a real estate company, it’s important to consider the industry as a whole. After all, if you’re taking the leap into any kind of business endeavor, you need to make sure you have the knowledge, research and professional insight to do the work.
The National Association of Realtors is one of the top sources for real estate industry trends and statistics. Currently, there are over 1.3 million licensed real estate agents in the U.S.
Of those individuals:
- 20% have licensure to operate as a real estate broker
- 14% have current broker associate licenses
- 31% hold bachelor’s degrees
- 87% operate as independent contractors within real estate firms
More information can be located on the NAR’s real estate statistics page. These facts and figures illustrate how vast the real estate field is, but they also showcase how much flexibility and potential exists for beginning a new real estate company.
Is Real Estate a Lucrative Business Opportunity?
Profitability is often one of the first things that people consider when launching a new enterprise. In real estate, the different areas outlined above may sometimes dictate how lucrative a business opportunity truly is. For instance, large industrial sales may earn more profit than a residential home sale, but that doesn’t mean that one is a better business option.
When starting a business, it’s also important to know that financial success can occur as a result of several unique benefits in real estate. These include:
- Relatively low startup costs and investments (for average agents)
- Access to investment opportunities that don’t require lengthy credit history
- Constant ability to grow, secure new clients or expand property holdings
12 Practical Steps for Starting a Real Estate Business
Now that we’ve set the foundation for how to begin a real estate business, you may be wondering what steps you actually need to take in order to launch your personal brand and make sure you find work.
In the list below, we’ll describe how you can get started in the business of real estate with a practical, easy-to-follow plan of action.
1. Define Specific Career Goals
For anyone looking to start a new business, you need to make sure you take the time to define your career goal. While this is vital in all fields, it’s especially valuable in real estate. Since there are so many pathways to take, it’s important to take the time to think critically about what you want and need to accomplish in business. Only then can you begin to strategize to make sure your real estate dreams come to life.
When defining your specific real estate career goals, ask yourself the following questions:
- What type of real estate business am I most drawn to?
- What type of income or profit goals do I want to achieve in the short term?
- What personal investments am I willing or able to make?
- Am I missing anything I need to pursue to start the type of real estate business I want?
Asking these questions not only allows you to get very specific, but it also provides an opportunity to be honest. Owning a business can be rewarding, but it does require sacrifice, time and hard work. Don’t be ashamed to fine-tune or adjust your goals based on the genuine responses to these and other discovery questions that you take time to consider.
2. Research the Marketplace
Smart business owners understand the importance of taking the time to research the market for ideas, inspiration and validation. Although it’s likely that the first few years in business will include experimentation and error, the more you know about the feasibility of your idea, the more aligned you are to find success.
When researching a real estate business idea, break it down into specific components such as:
- Niche and type of real estate opportunity (e.g., residential, commercial, etc.)
- Amount of capital or investment needed to start
- Actions of established agents and investors in the area
- Health and overall status of the local real estate market
- Important trends in buying and selling
- Median home and land values versus actual sales prices
Additionally, how many competing real estate businesses are there in a given area? Will the competition be high or low? Taking the time to find these factors and many others can help you determine the trajectory of a new business both in the early days, and also in the years that follow.
3. Pursue Required Education
For many people, real estate businesses are appealing because there are no limits when it comes to who can start one! College degrees aren’t required, and some seasoned professionals make the leap to real estate after long careers in other industries.
Although real estate offers many work possibilities, having the right education can place new business owners on the fast track to find more positive experiences. Additionally, many states mandate certain coursework for new agents before they jump into the world of buying and selling. Taking the time for an educational journey in real estate could include:
- In-class or online instruction and coursework
- Exam preparation for licensing tests
- Post-licensing courses based on state of residence
- Continuing education requirements
Fortunately, modern real estate education providers have risen to meet the demands of busy adults and entrepreneurs. With more flexible and online options than ever before, securing the necessary education doesn’t have to be a roadblock to starting a new business.
4. Obtain the Appropriate Licensure
Although licensure requirements vary by location, you may be hard pressed to find a state that has no requirements for starting a real estate venture. Baseline requirements in most locations include being at least 18 years old and having a high school diploma or GED (graduate equivalency degree).
As mentioned above, educational coursework is often the first step to getting a real estate license. No matter what kind of real estate business you want to start, sitting for an official licensure test requires prep work. Even after receiving a passing score on a licensing test, be aware of any follow-up steps that are legally required in each state, including:
- Filing an official real estate application (associated cost is $50-$250)
- Submitting to a background check, if required
- Finding a sponsoring brokerage for at least 2-3 years
- Pursuing continuing education
- Keeping the license up-to-date with renewals and additional testing
5. Finalize the Legal Aspects of Your Business
Once you’ve tackled education and licensing, it’s time to get the right legal elements in place. For most beginners, filing as a self-employed individual is a popular choice. Although agents may be affiliated with a local firm or brokerage company, income from commissions and sales is considered self-employment income.
Legalizing your business structure is mostly a matter of how an individual or company files and pays taxes. This is an important step to take before any business activity occurs. Most businesses choose one of four primary legal setups to get started.
- Sole proprietorship. In a sole proprietorship, all business profits belong to the owner as an individual. Many independent real estate agents begin as sole proprietors. Although this structure brings flexibility, sole proprietors must be willing to accept all debts and losses from the business.
- Partnership. There are two types of partnerships: general and limited. The differences are in how the responsibility or share of the partnership is divided. In the real estate market, partnerships allow several individuals to pool resources and assets in order to make a bigger investment.
- Corporation. Becoming a legal corporation is helpful when a business owner wants to distinguish personal and company assets. In terms of taxation, business income is separate from personal income, which can protect employees and other members.
- Limited Liability Company (LLC). LLCs allow for legal separation between business and personal assets while allowing businesses to take advantage of the benefits in partnerships. In terms of real estate, LLCs may be suited to larger development or property management companies.
6. Create a Business Plan
When starting a real estate company, crafting a tangible business plan for future success is vital. In fact, statistical evidence supports the need for a workable business plan.
A study by the Harvard Business Review illustrated that spending about three months on a firm business plan increased profitability by roughly 12%. While it may not seem like a large number, those types of gains can completely change the trajectory and profitability of a new business.
When considering how to start a real estate business plan, take the following factors into account:
- Specific business goals (measurable and actionable)
- Strategies for achieving those goals
- Stakeholders and beneficiaries to provide accountability
- Statement of mission or purpose
- Method of conducting everyday business
Partnering with a Brokerage
Part of your real estate business plan should involve how you plan to sell or invest. As mentioned previously, many states require new real estate agents to work under the umbrella of an established brokerage for a set period of time.
Although it may seem disappointing to share commissions or abide by certain office policies, working with a brokerage provides important benefits when starting a business. You may find these perks include national brand recognition, access to resources, the trust of customers and potential clients, and loyalty.
On the bright side, most new agents and sellers have a choice when it comes to which brokerage they want to work with. Always choose a brokerage that aligns with your personal business values, and offers positive opportunities for growth and advancement.
7. Brush up on Marketing and Branding
Recognition comes as a result of professional branding and innovative marketing. If you’re not a guru, there’s no need to panic. Learning a few marketing basics is fairly simple to get your message to potential clients.
One of the most important things about marketing is consistency. No matter which platforms you use to develop a business (e.g., social media), curate a consistent look, feel and voice across each one. This includes using professional imagery and proofreading your messaging.
Beyond making things look a certain way, proactive marketing efforts are key. With so many existing options for real estate, you may find it difficult to get your message to potential clients without outreach on social media or traditional media.
Define Your Target Market
Although a target market is useful for many different kinds of business endeavors, it can especially help blossoming real estate businesses. In real estate, a target market includes:
- The definition of an ideal buyer
- The definition of an ideal seller
- A flexible yet solid definition of an ideal transaction
- The characteristics of a good business deal
In real estate, knowing who to reach and how to speak to them can help new small business owners define a niche and get success more quickly.
8. Set a Budget and Financial Plan
Whether or not you plan to invest in properties, parcels or land, opening a real estate business of any kind comes with certain expenses. For many real estate agents, these costs may be minimal when compared to the larger investments of brokers or property developers.
Including financial information and goals within a business plan can help keep spending in check. Taking responsibility for bookkeeping and budgeting can provide a more accurate picture of profits, losses and recurring expenses.
Since real estate accounting can be complex, it’s important to have an accounting software system that allows you to plan, see and track financial data easily. With the right tools in place, even tedious tasks like invoicing get more streamlined.
What Kinds of Expenses Should You Anticipate?
Most of the expenses associated with a new real estate business are practical in nature and are required to get started. These might include:
- Classes and real estate training
- Exam prep and licensing fees
- Brokerage fees
- Association dues
- Marketing expenses (e.g., advertising, signage, etc.)
- Business expenses (including travel costs)
- Post-licensure coursework
Since many of these expenses are tax deductible, always keep accurate files and records in order to save money at tax time.
Separate Business and Personal Bank Accounts
A business checking account is useful not only for protecting personal financial information, but also for tracking business spending. Depending on the legal structure, separate accounts may be required for accurate reporting and payment processing.
9. Connect and Network Locally
One of the most important things you’ll accomplish in the business of real estate is connecting with and getting to know the community. Although this has notable professional incentives, it’s also a great way to build relationships and have a positive influence.
Building a Website and Web Presence
Setting up a real estate website is another way to advertise. While there may be a few initial startup costs, websites help support the professional look and brand of a business. Additionally, websites provide the perfect avenue to get data on leads and prospects.
10. Set Your Sales Plan
Establishing a sales plan is important regardless of your specific business niche. There should be tangible numbers and details associated with things like:
- How many clients, buyers, or tenants are required at a given time
- How much to charge buyers in terms of commission
- How to create a recurring referral process for new clients and properties
Traditionally, real estate agents can expect to earn about five to six percent on the total sale of a home price, with more expensive commercial properties averaging between one and two percent. Keep in mind that brokerage fees and dues can impact the effectiveness of a sales plan.
This step doesn’t just apply to agents. Many other types of real estate businesses, including property development teams and property management companies, need reliable sales plans to get work. A continuous cycle of incoming business is crucial for sustainability.
Lead Generation Tactics for Real Estate Businesses
Once you’ve settled on a specific real estate business and sales plan, you must also be prepared to get new leads. There are plenty of resources and strategies for attracting new customers, but some of the most popular are:
- Personal referrals and recommendations
- Localized search engine optimization (SEO)
- Local advertising and marketing
- Social media campaigns
- Physical open house events
- Participation in community events
11. Join National Associations
Professional memberships and affiliations are crucial when starting a new real estate business. Potential buyers and clients may look for specific certifications when deciding whether or not to do business with a particular agent or brokerage firm.
Real estate associations are available to both residential and commercial business owners. Be sure to check out:
- National Association of Realtors (NAR)
- Society of Industrial and Office Realtors
- National Association of Real Estate Advisors
- National Association of Residential Property Managers (NARPM)
- Commercial Real Estate Women (CREW Network)
- National Multifamily Housing Council
This list is just the tip of the iceberg for professional real estate organizations that can help grow and support a new business. When researching new opportunities, look for areas of expertise or geographical regions for associations that cater to certain markets.
12. Scale Your Real Estate Business
Once your business is in motion, finding a cadence for growth is key. The first years in business are often full of trial, error and mistakes, but wise business owners continually reevaluate to get ahead.
This endurance is especially valuable in real estate, a field in which outside trends and market fluctuations can easily influence overall success. Business expansion depends on the ability of each proprietor or company to innovate, adapt and aim for new goals.
Find a Mentor to Reach Your Full Potential
One of the best ways to continue growing a real estate business is to find a mentor. A professional business mentor should have several years of experience in the field and can provide a truthful outside perspective.
Mentors also provide encouragement in the early years of growth and development, setting you up with practical tools and wisdom for future success.
Helpful Resources to Get Started
Starting a real estate business requires determination, passion and perseverance. Despite these personal characteristics, it’s perfectly OK to require outside help. The following resources are some of the most trusted within real estate and can provide professional insight, news and perspective when you need guidance.
- The National Association of Realtors, a professional network for real estate agents
- Inman, award-winning news and journalism for real estate professionals
- Keller Williams Outfront Magazine, current insight from a leading national brokerage
- New York Times Real Estate, real estate news with a global perspective
While there’s no one-size-fits-all approach to developing an enduring real estate career, the steps outlined in this guide serve as a practical blueprint to get started on the journey.
To own a truly successful real estate business, the most important qualities are commitment, endurance and service. When you pair these characteristics with a practical plan of action, the roadmap to business growth becomes much easier.