Becoming a broker gives you more independence, earning potential, and leadership opportunities. In addition, you can open your own brokerage. Here are some tips on how to start a real estate business.
Benefits of Starting a Real Estate Business
Some real estate agents never earn their broker license and are happy to work under a supervising broker their entire career. Others may earn their broker license but never open their own brokerage. However, there are benefits to starting a real estate business.
1. Independence
Starting a real estate business allows you to be your own boss and take control of your professional destiny. Having your own brokerage will enable you to make decisions that shape the direction of your business.
2. Income potential
You’ll have increased earning potential when real estate agents work under you. You’ll still be able to earn commissions on the sales you oversee. In addition, you’ll receive a share of the commissions earned by other agents.
3. Tax advantages
There may be tax advantages associated with owning and operating a real estate business. Talk with your tax consultant to learn more.
4. Leadership opportunities
Some real estate agents start their own businesses to share their wealth of knowledge with beginning agents. Consider opening a brokerage so you can focus on mentoring instead of dealing daily with clients.
You may want to start your own real estate business because it is a personal goal. Maybe you’ve always wanted to be a business owner, and this is your opportunity to make that happen. Regardless of your reasoning, here are some tips on how to start a real estate business. But first, let’s examine the costs.
How Much Does it Cost to Start a Real Estate Business?
The costs of starting a real estate business can vary widely. Here’s a general overview of potential expenses you may encounter when starting a real estate business.
Education and licensing
If you don’t have your broker’s license, earning it should be the first thing on your to-do list. There are costs involved with this process. You’ll need to take pre-licensing coursework, pass a broker exam, and pay for application fees.
Business registration fees
You may have to pay legal fees to register your business and obtain the necessary licenses.
Office space
Renting or leasing office space can be a significant expense. Costs will depend on the office location, size, and amenities. You may also purchase office furniture and equipment such as printers, copiers, and office supplies. Of course, budget for utilities and internet.
Technology
Working as a real estate broker requires constant access to technology. You may need to invest in computers or smartphones. In addition, you will need access to real estate software for accounting, transaction management, and customer relationship management.
Marketing and advertising
Budget for marketing materials, signs, business cards, and advertising. You may also need to pay someone to create and manage your business website and social media pages.
Insurance
Real estate agents typically must pay for their own health insurance coverage. As a business owner, you must also pay for business insurance and (if applicable) errors and omissions insurance.
Professional fees
Some real estate brokerages hire accountants, attorneys, and business or marketing consultants.
Association membership and dues
You must budget for local and national real estate association dues and membership fees. In addition, you will need to pay for MLS access.
Employee costs
While most real estate agents work on commission, you may pay for some of their operating or educational expenses. In addition, you may hire an office manager or other employees to oversee day-to-day operations or assist your agents.
Unfortunately, assigning an exact amount for real estate brokerage start-up costs is difficult. Some brokers work without an office, so their start-up costs are minimal. Others may jump in with both feet to establish dominance in the community. However, this method may require a significant financial investment.
6 Steps to Start a Real Estate Business
It may be easy to become overwhelmed when starting any type of business. Focus on the following six steps to get up and running.
1. Conduct market research.
Market research provides valuable insights and information that can guide your business decisions and improve your chances of success.
With market research, you’ll be able to do the following:
• Understand your community’s real estate needs needs
• Assess demand for another brokerage in your community
• Analyze your competitors’ strengths, weaknesses, and market position
• Identify and mitigate risks
By thoroughly researching your target community, you may be able to spot underserved areas or populations and form your niche or focus based on this research.
2. Create a business plan.
Formally outline your business goals, target markets, marketing strategy, and financial prospects in your comprehensive business plan. This plan will serve as a roadmap for your brokerage and should be reviewed regularly.
3. Choose a legal structure for your brokerage and complete registrations.
You may need the help of a business lawyer and tax professional for legal considerations and registrations for your sole proprietorship, partnership, LLC, or corporation. Your brokerage must be registered and licensed with the appropriate state and local authorities. It may take time for the wheels of government to turn, so don’t delay completing this paperwork.
4. Fund your real estate business.
Determine how you will finance your brokerage. This may involve personal savings, loans, or investors. Create a budget to estimate your start-up costs and ongoing expenses.
Keep in mind that some brokerages start small and build their business gradually. Recruiting real estate agents and establishing client relationships may take time. Once you have a regular income, you may open an office.
5. Build your brand and market your business.
Select a unique and memorable name for your brokerage. Consider your target market and create marketing materials, including a logo. In addition to establishing a design, consider the message you want to share with potential clients to help you stand apart from your competition.
6. Build your real estate team.
If you plan to have agents working under your brokerage, recruit and train them. Ensure they are licensed and understand the policies and procedures of your brokerage. Do what you can to support them in their careers so they can contribute to their own success – in addition to your company’s success.
Remember, starting a real estate brokerage requires careful planning. However, even after it’s off the ground, you must regularly monitor your brokerage’s performance and adjust your strategies as needed. Here are some additional tips for success.
Tips to Make Your Real Estate Business a Success
Starting a real estate brokerage differs from starting another type of business because real estate brokers must have experience in the industry. However, that doesn’t mean that every brokerage will be successful.
Here are some tips to make your real estate business a success.
1. Stay up to date on industry trends and regulations.
You already know how important it is to stay current on your local real estate market. However, as a broker with your own business, it will also be up to you to keep current on industry trends and regulations.
Stay current on national, state, and local real estate news by subscribing to industry publications. Pay attention to any notices from your state’s licensing agency to ensure you and your team members follow state and local laws and regulations.
Pro Tip: Stay informed about real estate industry news by subscribing to the Real Estate Career Hub.
2. Network with other real estate professionals.
It’s hard to be an introverted business owner – especially in real estate. Real estate involves building relationships with clients, other professionals, and community members. Networking can lead to valuable partnerships, referrals, and business opportunities.
So, attend local events, join real estate and community associations, have an active social media presence, and join networking groups. Also, consider hosting workshops and seminars and collaborating with local businesses.
3. Build a strong reputation.
A positive reputation is crucial in the real estate industry for several reasons. It not only helps you attract clients – but it’s also essential when building relationships with other agents.
Here are some of the reasons that building a solid reputation is vital.
- Real estate transactions involve significant financial and emotional investments. Clients want to work with agents they can trust.
- Satisfied clients are more likely to refer friends, family, and colleagues to you – and give you repeat business.
- A positive reputation will set you apart from other real estate brokers in the area.
- A strong reputation can enhance your negotiation power with other agents.
Plus – if your name is on your company, you want to protect your reputation in the community for yourself and others with the same name.
We know there’s a lot to consider when starting a real estate business. Take one step at a time and focus on providing quality service.
Is it time to earn your broker’s license? Colibri Real Estate may be able to help. We offer broker pre-licensing education for many states, AND we provide quality continuing education courses to help you and your agents stay licensed and learn how to provide top-tier service to your clients.
When it’s time to upgrade your license, put your trust in Colibri Real Estate.
