Financial and Operational goals of your business

What is a real estate business?

A real estate business deals with the buying, selling, management, operation, or investment of land and buildings. Real estate can also include natural resources below or above the land, such as crops, minerals, or water. If you want to take the plunge and start your own successful real estate business instead of just treating real estate as a career while working for someone else, there is a lot to consider. Here’s everything you need to know to plan, start, and grow a successful real estate business – we include all the essential insights and steps to help you get started.

How to Start a Real Estate Business in 13 Steps - The Definitive Guide

• Develop and refine your idea
• Write a business plan
• Hire an experienced business attorney
• Decide your legal business structure
• Set up accounting and bookkeeping
• Assess your finances
• Get a license
• Purchase business insurance
• Crunch the numbers
• Create a strong brand identity

Is a real estate business profitable?

The real estate market is enormous. For example, here are the relevant statistics you should know for the residential real estate market:

5.34 million existing and 667,000 new homes were sold in 2018, according to the National Association of Realtors.

The Association of Real Estate License Law Officials (ARELLO) estimates about 2 million active real estate licensees in the United States. Nearly 1,400,000 of them are active members of The National Association of Realtors (NAR).

According to NAR, the typical realtor is a 54-year-old white female who attended college and is a homeowner.

According to NAR, Realtors’ median gross income was $41,800 in 2018 (an increase of several thousand compared to 2017).

Over 86,000 real estate brokerage firms operating in the U.S. (based on the most recent census numbers from the 2012 and 2007 economic censuses). 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 (2020 data will be available towards the end of January 2021, and we’ll update the numbers at that time).

Find a niche for your real estate business

When starting a real estate business, consider what specific niche is right for your real estate company to give yourself a leg up on the competition. You may have many business ideas, but it’s important to narrow your ideas. Do you want to sell to a particular group or segment of the population? Or perhaps you want to concentrate within a specific area of the city or specialize in buying and selling condos? 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. You’ll have a better chance at success if you get started with a specific target audience.

STEP 2 Write a business plan

A business plan is a document that outlines the financial and operational goals of your business. The business plan takes your business ideas, defines your company’s objectives, and provides specific information that shows how your company will reach those goals. Your business plan doesn’t need to be 100 pages long. In fact, 100-page business plans are not common in the real estate business. Keep your business plan short and concise, and focus on the essential details. In fact, there are several great one-page business plan templates you can use. Studies show that entrepreneurs who take the time to write a business plan are 2.5 times more likely to follow through and get their business off the ground. The work that goes into creating a business plan also helps new entrepreneurs build skills that will be invaluable later.

A traditional business plan has the following sections:

• An executive summary. This section summaries the entire business plan, so it is generally written last. Anyone reading your business plan will read this first, so it’s an important element.
• An industry overview. This section of the business plan gives a brief overview of your business’s industry sector. It includes key players, industry trends, and estimates of industry sales.
• Market research and analysis. This looks at the target market for your product or service. It has a breakdown of your market segments, their geographic location, and what their needs are. This section shows anyone reading that you have a thorough understanding of the people you plan to sell to or serve.
• Competitive analysis. Who are your direct and indirect competitors? How do they currently meet your target market needs, and how will you differentiate your product or services?
• Sales and marketing plan. What is your unique selling proposition? What is your value proposition? How are you going to promote your business and persuade your target audience to buy? What are your marketing strategies? This section goes into detail on questions like these.
• Management plan. This section outlines your legal and management structure. It shows who your leadership team is and what your staffing needs will be. If you plan to seek funding, you should describe your advisory board here, as well.
• Operating plan. Your business location, facilities, equipment, and what kind of employees you’ll need are in this section. Any suppliers, manufacturing processes, and any other operating details also appear here.
• Financial plan. This section is for all things financial. There are three key financial documents of any business that go here: an income statement, a balance sheet, and a cash flow statement. And, you’ll want to include your anticipated startup costs and any non-standard business models you plan to pursue. This is especially important if you’re talking to a real estate investor about investing in your real estate business.

Appendices and Exhibits. Any information that helps support your business idea goes here, including target market studies, legal agreements, photos of your products, and more.

Do market research

When starting a real estate business and before you dive into your business plan, you should understand the real estate market you’re entering. Business planning and market research help you to build a more successful real estate business.

Who are your direct competitors? Who are the top real estate sales agents working in your target niche? What makes them stand out from the rest of the competition?

When you get started, a lot of the work to come relies on information gleaned from market research. Even if you think that the information you know about the industry is common sense, don’t skip this step. You will need the data from your market research to make informed decisions. You’ll need to undertake the two major market research types when starting a real estate business: primary and secondary.

STEP 3 Hire an experienced business attorney

We’ve met and have sat across the table from many lawyers who are deal-killers. Overzealous and often inexperienced, they focus on the wrong issues and forget that their client needs the deal to move forward. When you talk with lawyers you’re considering hiring, ask them about one or two complicated negotiations and how they overcame obstacles. Don’t make price your main criteria for hiring a lawyer. Often, the least expensive lawyers are also less experienced – especially in the areas where you may need help. Paying a cheaper hourly rate might feel good initially, but in the end, you may end up paying far more than if you hired an experienced (more expensive) lawyer in the first place. Ensure your business lawyer is familiar with the real estate business’s peculiarities and has experience representing other agents or brokers.

Typically, the best time to start a relationship with a lawyer is before you start your real estate business. A good lawyer will help you find the right business structure for the business – and split ownership interests if you have co-founders – in ways that will protect everyone and give you flexibility going forward.

Courtesy: real estate business in Pakistan