How To Start A Real Estate Business In 2022: The Definitive Guide

Starting and operating a real estate business is not that easy. This business is different from other conventional businesses. You will need knowledge, skill, and experience to run this business. Moreover, there are different types of real estate businesses available in this industry. So, you have to pick the type that suits you the most. Moreover, you have to do conduct in-depth research to set your business goals as well as organize your finance to successfully start the real estate business.

Key Takeaways

• A real estate business is a type of business that deals with buying, selling, or renting real estate
• Starting a real estate business is not easy but with the right preparation, it will be worth it to start a real estate business
• According to the U.S. Census Bureau, 822,000 newly constructed homes were sold in 2020, so it suggest how big the real estate industry is in the USA
• In order to open a real estate company you have to form a Real Estate LLC

What Is A Real Estate Business?

The main business policy of real estate business is to buy, sell, rent, manage, or invest in real estate properties. According to the Law Insider – 

“Real Estate Business means homebuilding, housing construction, real estate development or construction and the sale of homes and related real estate activities, including the provision of mortgage financing or title insurance.”

Starting a real estate business is not easy but with the right preparation, it will be worth it to start a real estate business. If you want to have a stress-free career then you should consider starting a real estate investing business to achieve your personal financial goals.

Is A Real Estate Business Profitable?

Simply, a real estate business is definitely profitable if you are able to handle your assets intelligently. Martin Orefice, Founder of Rent to Own Labs says – 

“Entrepreneurs have the necessary experience and basic business acumen to kickstart their own real estate business; plus, they have the financial capital to invest, which is a huge advantage when stepping into the real estate business.”

The real estate market is enormous. Below are some key statistics about the real estate industry that you should know – 

1. 5.64 million existing homes were sold in 2020, according to data from the National Association of REALTORS

2. 822,000 newly constructed homes were sold in 2020, according to the U.S. Census Bureau.

3. The Association of Real Estate License Law Officials (ARELLO) estimates that there are over 3 million active real estate licensees in the United States

4. There are 106,548 real estate brokerage firms operating in the United States

5. 5.9 million commercial buildings in the United States in 2018, comprising 97.0 billion square feet of floor space

6. According to the 2018 American Community Survey, there are approximately 119.7 million occupied housing units in the United States

7. According to the Federal Reserve’s Survey of Consumer Finances, 64.9% of families owned their primary residence

8. 68% percent of REALTORS® are licensed as sales agents, 20% hold broker licenses, and 13% hold broker associate licenses

9. The median gross income of REALTORS® was $43,330 in 2020, a decrease from $49,700 in 2019  

*Source: https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics

Steps To Start A Real Estate Business In 2022

Before starting a real estate business in 2022, you should be cautioned that owning a real estate company is no easy feat. Just like starting any business, you will need an executable business plan and proper finance, before actually jumping into the real estate business. Below are the detailed steps to start a real estate business.

1. Choose The Right Real Estate Business

There are a number of different real estate careers available that you can pursue. You can start a real estate business that might focus on real estate investing or property management, or you can become a real estate broker or real estate agent. What type of real estate business you choose to pursue will determine whether you need a real estate license to operate or not. Consider the following questions when starting your real estate business. These questions will help you decide what type of real estate business will suit you.

1. What skills set you apart?

2. What is the purpose of your business?

3. To whom do you provide a service or product?

4. What is the maximum figure you can safely spend on this real estate business?

5. Do you need outside capital? How much?

6. What kind of work/life balance you are looking to achieve?

7. What are your expectations for starting a real estate business?

While starting a real estate business you have the option to choose from different niches. They are – 

1. Residential real estate

2. Resort and vacation homes

3. Income properties 

4. Condos

5. Commercially zoned real estate properties

6. Property management

7. Rental Property

Moreover, you should also decide if you want to be a listing agent or only represent real estate buyers.

2. Set Your Business Goals

Before jumping into the real estate business, you should take time to evaluate and prioritize your plans for the future. It means you should think through your personal, professional, and financial goals because these goals will influence how you start and build your real estate investing business. Make step by step business plan for five, ten, and fifteen years. Then plan and implement more immediate steps to help you get here. Business goals not only help the businessmen stay focused, but they also help them take action.

3. Conduct In-Depth Research

A successful business plan can successfully be implemented through in-depth research. identifying a specific niche, market area, and potential competitors. There are lots of strategies available that you can focus on to establish your real estate business. You can start your real estate business by wholesaling and it will allow you to learn the ropes before purchasing properties. Moreover, depending on your business goal, you can implement buy-and-hold strategies as well. Moreover, you should also research your market area. Orefice says – 

“A good understanding of the market is important to close better deals, I wish I knew this earlier because I often made random investments that resulted in losses, and it took me considerable time to bounce back to normal. With proper research about the market, one can make informed decisions and close better deals.”

Make sure you research neighborhood amenities, median home values, and rental prices as well as research outside your current location. The more research you can do the more prepared you will be for the real estate business.

4. Organize Your Finances

The next step to the real estate plan is organizing the finance. This is a very important step because it can make or break your business. When you start a real estate business, organizing your finance is very important. Organizing finance includes tracking your sales and commissions as well as business expenses. Some common real estate business expenses are – 

1. Office space

2. Phone service

3. Website design or hosting

4. Marketing

5. Licenses to legally operate your business in your city or county

6. Software or online programs

7. Business equipment  

Organizing your finance will help you determine how you’re going to fund your new business and how you’ll grow it. If you don’t organize your finance then you will have a tough time establishing the real estate business. Make sure you don’t overspend and remain extra careful to conserve your funds for future uses.

5. Create Your Company

Once you have managed the finance, the next step is to create the company. If you want to become a realtor or broker then you have to find a brokerage to work with after getting your license. You can opt for a smaller local real estate brokerage or a larger national brokerage. You should try to choose a broker that offers support and guidance for new agents. On the other hand, if you want to become a real estate investor or property manager then you have to establish the company first. There are lots of entity structures available that you can choose from and each entity offers certain preferential tax treatment based on the type of business you are planning to start. If you are new in this industry then you can consult with an experienced licensed professional like real estate and contract law attorney or accountant to gather experience. You can easily register the company yourself in your state’s Division of Corporations for a fee. You’ll need to know:

1. The business address that includes P.O. Box, home address, or office space

2. The name of your company

3. The managing members or managing managers

While opening the business, you should pick a business name that clearly tells clients what your company does as well as present the company in a professional manner. Once you register the business you have to request an employer identification number (EIN) from the IRS to file taxes for the company.

6. Form A Real Estate LLC

Next, you have to form a real estate LLC. Usually, the LLC protects business costs from interfering with an investor’s personal finances. It allows the investors to purchase and own real estate without involving personal liability. Each state has its own fees and regulations associated with establishing an LLC but the overall process is the same. In order to form a real estate LLC, you should – 

1. Confirm the regulations in your state

2. Choose a unique business name

3. File an Article of Organization with your state

4. Create an operating agreement for the business

5. Publish an intent to file

6. Apply for a tax identification number through the IRS      

7. Get a Real Estate License

If you are planning to open your real estate business in New York, California, Texas, Illinois, or another state then you will need the appropriate license for your real estate business. You must have a real estate license before you can start working as an official Realtor. In order to get a real estate license, you have to – 

1. Take the real estate pre-licensing course for your state

2. Pass the real estate licensing exam

3. Submit your real estate license application

4. Find a real estate broker to work for 

On the other hand, if you want to get a broker license then – 

1. You will need a real estate license

2. Must have at least 2 to 4 years of experience in real estate

3. Must complete 45 hours to 90 hours pre-licensing education

4. Take the broker licensing exam and pass the exam

5. Finally, apply for the broker license and you might have to pay a fee of $150 to $200, depending on which state you live in 

Final Thoughts

These are some common steps that you have to go through if you want to start a real estate business. Starting a real estate business might sound overwhelming but with this guide, you have a proven step-by-step plan on your hand. Make sure you follow the above steps to open your own real estate business and become a real estate professional!

References:

1. https://www.fortunebuilders.com/a-beginners-guide-to-starting-a-real-estate-business/
2. https://learn.roofstock.com/blog/real-estate-business

Last Updated on October 28, 2022 by Magalie D.