How To Start a Real Estate Business

Find out what makes your market unique or challenging. Know what might appeal to prospective clients. For example, are any new companies moving into town, like a new hospital?

Research area schools, businesses, medical facilities, and community services. Potential clients will want to know specific information about the community.

In addition, learn about the real estate industry in your area. For example:

• Are there too many buyer's agents or seller's agents?
• What is the median home price?
• Are homes selling above or below the asking rate?
• Are there any problems with properties in your area, such as homes failing inspection due to termites, radon, or other issues?

The better you know your real estate market, the better prepared you will be. Clients also appreciate knowledgeable and experienced agents.

To get your real estate license, you must:

• Complete a pre-licensing course
• Pass a written exam
• Apply to your state board of real estate licenses

Each state has specific procedures for issuing real estate licenses. For example, California requires you to complete three college-level real estate courses and pass a written exam. In Florida, you must take 63 hours of a pre-license course and pass a written exam. However, Florida waives the course requirement if you hold a four-year degree or higher in real estate.

Real estate license exams generally cover the basics of:

• Real estate law
• Negotiations
• Closings
• Ethics

Each state has its own exam.

If you want to sell property in multiple states, you must obtain a real estate license in each state where you plan to do business.

Most states require agents to work under a licensed broker. Brokers typically work in a real estate agency or brokerage firm and manage a team of real estate agents.

Your broker supervises your transactions and is responsible for your actions. In exchange for their supervision, you pay the broker fees or a percentage of your commissions on sales. Working under the right broker for your business can significantly impact your chance at success. Choose wisely — consider commission structures, professional support, marketing resources, and reviews.

Your broker should also serve as your industry mentor and be your go-to for coaching and support.

All Realtors are real estate agents, but not all real estate agents are Realtors.

Realtors are members of the professional organization National Association of Realtors (NAR). NAR has additional professional responsibilities beyond what state licensing laws require. NAR members also must meet a strict code of ethics and professional standards.

NAR members have access to business tools such as:

• Market research
• Industry data and statistics
• A national database of properties and foreclosures
• Educational programs
• Networking opportunities

As a licensed real estate agent, you are not required to join NAR to practice real estate in your state. However, NAR membership can enhance your credibility and professional reputation.

Mapping out your business plan will help you define your goals and identify potential challenges.

An important part of your business planning is establishing your niche. Do you want to work with residential homebuyers and sellers? Or do you prefer to help corporate clients looking for commercial properties? Some agents specialize in particular areas, like military relocation. Others focus on land deals, rural property, or farmland.

Your business plan should address the following areas:

• Defining your target market
• Identifying your customer
• Crafting a marketing strategy
• Estimating your costs for marketing and business setup or startup costs
• Determining what you need to earn in commissions to turn a profit

Most real estate agents structure their business as a corporation or limited liability corporation (LLC). Both legal structures protect your personal assets from your business's debts and liabilities if a buyer or seller sues your business.

For example, if a homebuyer discovers mold in their home and sues you for failing to disclose a material defect about the property, your personal assets are not at risk in the lawsuit.

Corporations and LLCs also give you tax advantages. Both business entities keep your personal finances separate from your business activity.

As a self-employed business owner, you can avoid double taxation by electing Subchapter S status. This means your income is not taxed at the corporate level and again as personal income. As an S corporation or LLC, you file a Schedule K-1 with your income and expenses in your personal tax return.

Some independent real estate agents choose to structure as a sole proprietorship. Sole proprietorships are the simplest entity to set up but do not provide personal liability protection. A sole proprietorship is a pass-through entity for tax purposes. This means your business profits are not separate and pass through to your individual income tax.

A sole proprietorship is the default legal entity for your business if you do not choose another type of business structure.

If you structure your business as a corporation or LLC, you must get an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The IRS uses your EIN for identification and tax purposes. You will need an EIN before you can open a business bank account. You can get your EIN instantly and at no cost by applying on the official IRS website.

If you structure your business as a sole proprietorship, you will use your Social Security number instead of an EIN.

In addition to the real estate license issued by your state, you may need other state or local business licenses and permits to operate your real estate business. Check with your jurisdiction's department of commerce or business agencies for specific requirements.

For example, you may need a zoning permit if you have a storefront for your real estate agency.

Along with business licenses, you may want to determine what business insurance you need. For example, if you operate a storefront you may want insurance for personal injury and property damage.

As a real estate professional, you sell yourself to potential buyers and sellers of properties. An effective marketing plan is critical for meeting your objectives and growing your business.

Your target audience should inform your marketing strategy. Knowing who your target market is and what their preferences are will help you position your messaging and choose the best channels to reach them.

Start with a website about your services. You will also want to develop a strong social media presence. Post consistently on Facebook and Instagram and optimize your LinkedIn profile. You can even leverage keywords on your LinkedIn profile to help drive traffic to your page. This is a great way to build your brand, attract new clients, and generate referrals.

Other effective digital strategies include online advertising, search engine optimization (SEO), and email marketing.

Traditional methods like direct mail, word-of-mouth, and print advertisements can also be effective. Encourage new homeowners and sellers to leave you a business review after working with you. In addition, take an active part in your community. Think of sponsorships, community events, and other grassroots methods that help you build relationships with potential clients.

You'll also need to promote the properties you are listing. Use social media and online platforms to highlight homes on the market and provide information about your community. Host both in-person open houses and virtual tours.

Hopefully, your marketing strategy is effective in building your business and client list. Consider investing in customer relationship management (CRM) software to help you manage client information, emails, and follow-ups.

Many issues can arise between a buyer and a seller before closing the deal. Besides ensuring your transaction goes smoothly, a real estate attorney:

• Resolves conflicts
• Reviews contracts
• Checks titles
• Records deeds

Some states require using a real estate lawyer to buy a property. Regardless, have working relationships with a few local attorneys to recommend to your clients.