As per a report by IRS which is done over a period of last five decades. Approx. 70% Americans are from the field of real estate who paid one million dollars or above as income tax returns.
In real estate business, you have to perform certain operations like investment, buying, selling and management of properties of real estate. Real estate is the right to have property, land, building, and air as well as underground land including natural resources.
Steps to start a real estate business:
- Get an overview
- Prepare a Plan
- Recruit a professional business attorney
- Prepare a legal business structure
- Maintain business accounting
- Evaluate your financial condition
- Get a license of real estate business
- Get business insurance
- Understand the numbers
- Get your identity branded
- Make presence on online
- Prepare a selling plan
- Create or join a team
- Expand your business
To start a business, the real estate is among the most promising field in India. It is presumed that Indian economy will reach its destination of USD 1 trillion by the year of 2030 from USD 120 billion in the year of 2017.
This field is growing at the speed of a jet, hence, people from every field is attracted towards this to make a venture of their own.
There was a time when it was not so secure in India to invest in this sector due to its instable market. But, the scenario has changed in current situation and become one of the most profitable and trusted business in the country due to transparency and introduction of REITs, RERA in this field.
It is a good idea for an individual to plan to invest in this field and make a niche for themselves. You need to do some homework before taking any plunge in this field.
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Is it profitable to start real estate business?
This is very simple question to answer- yes, it you able to tackle the assets properly that you have. Most of the entrepreneurs are well experienced and has good business acumen to start a real estate business of their own.
The investors also have the financial ability to invest which is a great advantage to make an entry in this field.
Appreciation is the most general way to earn profit from real estate business. Increment of value of an asset after a certain time is known appreciation.
There are many types of assets such as commercial properties, residential properties and underdeveloped or undeveloped lands. The increase may be due to some reason like lack of supply causes increase of demand.
Profit can be earned in the real estate business by selling the asset when increases its value or through rent or payments that are paid regularly.
Real Estate Industry in India
In India many real estate professionals work for their own firm or is a part of other popular organizations. Professional like builders, architects, engineers, material suppliers, brokers and agents all are responsible for the growth of this industry.
It will be better to start this business in Bangalore, Noida, Ahmedabad, Mumbai and Gurgaon as you will get here some potential customers.
Let’s have a look on the steps that you may follow if you are intended to start real estate business of your own.
Step 1: Get an overview
To make your business successful, you must have in-depth knowledge about the area you want to initiate your real estate business. Know the areas where you want to help people to deal in real estate industry. Your representation in the market is also influence your presence.
Survey on the other realtors and real estate companies in your selected area to get status of competition. Collect information how other competitor planning their business.
Know your natural strengths which makes you different from the existing real estate business competitor. Before starting a business in the area of real estate, select a proper niche which is better for you to compete with others. You may prepare a lots of business but you need to concise your ideas.
If your intention is to become an expert for short sales, then your concentration must be on the rental property management, or you have to go through the laws for landlords/tenants in your state. Select some targeted people to make achievement in this field. Avail the requirements of certain niche’s that will restrain your customers from overspending and underwhelming.
Step 2: Prepare a Plan
The financial and operational goals of your organization are set in your business plan. In your business, it consists objective of your company, business ideas, and other important information that reflects layout of your success.
Do not write long essay of your business plan and try to write gist in very short with some important information. So, try to use a template of one page to display your business planning.
It is found in studies that the business planner who takes 2-3 times more than usual has more chance to fail in the business. Experience of a new entrepreneurs during preparing their business plan will get some invaluable skills. Most of the business plan consists the following information:
1. Summary of Execution: In this section, there consists a summary of the entire business plan and is written at the last. This is the very first part of your business plan which a read will read if they want.
2. Overview of the industry: In this part, one can get a brief idea about your industry. Here, information such as trends in the industry, key players and an estimation of sales in the industry are given focus.
3. Research and Analysis of the Market: Here, you will find for a targeted market for the product and service you provide. It contains geographical location, requirements of customers, segments of market. This shows the knowledge of your understanding about the people or customers you will deal.
4. Survey on competition: Take an in-depth survey about your competitors and what are their strategy to reach its target and also the difference from others strategy.
5. Management Plan: This displays the structure of management and legal advisor. It will also mention the leader of the team and other required staff. To get fund, you have to explain about your advisory board in this section.
6. Financial Plan: This part is all about financial planning. Some important financial documents such as balance sheet, statement of income, and statement of cash flow is mentioned here. In addition to this, you can also mention some other documents related to financial expenditure.
Step 3: Recruit a professional business attorney
There are many lawyers who are well-experienced in their field. Be aware when you are hiring a lawyers and some difficult negotiations. Consider their ideas to overcome the situations. Do not make money as your criteria to hire a lawyer.
It is found that lawyers with less fee is much experienced as you needed. Initially, they may work good but at the time of critical situation, you need a professional lawyer.
Make sure that the lawyer you are hiring is familiar with the field of real estate business. And know ins and outs of this field. They lawyer must also have the ability to represent various agents or brokers.
The perfect time to contact a lawyer is at the time of start-up of your business. It will be very helpful for you to take help to prepare the structure of your business and fixed the dividend, in case of partnership business. They provide you the protection and flexibility to move forward towards your goal.
Step 4: Prepare a legal business structure
Most of the agents in this field has own affiliated real estate business with license and they work in their own business. They work independently in their business with a licensed broker who manage and supervise him.
To start brokerage, has the same regulations with the emphasis of some additional matters. Almost in every state a special type of license in real estate business is very important to set-up a real estate brokerage of your own.
Most of the entrepreneurs who wants brokerage choose any one kind of business structure among four types such as limited liability company (LLC), sole proprietorship, a corporation and partnership. We have discussed hare about these in brief of each kind:
Limited Liability Company (LLC): This is one kind of business structure where shareholders, owners and partners has personal liability with limitations but they are not exempted from tax and other benefits that are related to the partner.
Sole proprietorship: This is the most common type of business entity where only one person is fully liable for all type of profit and debt.
Corporation: Legally, this is different from the owner of the business. Here, permission is provided to the corporations to buy property, be responsible, liable for tax, and also do contracts.
Partnership: In a partnership firm where responsibilities are shared between the partners who has their own liability for their business.
In case, you have not select any type of business structure, then automatically it will be work as a sole proprietorship. Out of four basic type of business structure Sole proprietorship and partnerships are very common as they do not require any extra formalities.
According to the type of your business and service, it will automatically be declared as either Sole proprietorship or partnerships.
Step 5: Maintain business accounting
Business accounting is a way to maintain information related to finance, its records, interprets, organization and various information. With the help of this account, you are able to do analysis on the condition of your business and take necessary steps to improve it.
Bookkeeping is also important where you can keep record in the storage of your organization and can be retrieve when necessary.
Don’t be confused with the business accounting and bookkeeping as these has different purposes. In bookkeeping, general financial information and record are kept, on the other hand, collect information are used for analysis, prepare business strategy, and to make planning for tax.
You can hire a bookkeeper to fulfil your requirements with very less expensive. A bookkeeper charge on hourly basis and keep all the information recorded, make payment of all bills, track invoicing as well as receivables.
Step 6: Evaluate your financial condition
Financial information of an organization is used by the business finance and help you to handle your fund and various business operations and make decent profit out of it. In case of real estate investors, you must do things in proper order.
You must understand about the numbers and how to use your funds in your business. Try to avoid overspending and be careful at the time of set up of your business.
Spend your funds only on those items that are very essential for your business otherwise, it will affect your business. Accounting system and bookkeeping method will help you a lot to track expenditure. You will get all the financial information such as income, profit, loss, expenses, etc.
Step 7: Get a license of real estate business
Every new individual or organization need to have license before starting any operation in this business. You will be able to deal in the residential real estate using your license.
You will get a license of real estate by simply following four simple steps such as take admission for the pre-licensing course of real estate, qualify the licensing examination, apply for real estate license and hire a real estate broker.
Take admission for the pre-licensing course of real estate: This is the first step to get license for real estate. You will learn various topics in this course such as types of property ownership, fair housing laws, contracts, titles, fiduciary responsibilities, deeds and many more important topics related to this field. For every estate, rules and regulations of that state is covered.
Qualify the licensing examination: Generally, duration of these examinations are 1.5 hours to 3.5 hours. Most of the examination have multiple choice questions.
Apply for real estate license: Apply for real estate license after successfully passed the qualifying examination. Pay all the payments if applicable.
Hire a real estate broker: Now, this is the time to hire a real estate broker who will help you to operate your business. Your license must be associated with real estate brokerage license. This decision is very tough and requires very in-depth thinking.
Step 8: Get business insurance
It will not be easy for you to claim incur if you don’t have insurance of your real estate business. You will get incur covering damage of property, theft and for other activities. This is necessary to your organization to protect you and your business.
A huge amount of money is involved in this business which must be protected with insurance.
Step 9: Understand the numbers
The real estate business face lots of difficulties and is concurrent with the current situation of the economy. You must be prepared in advance for unexpected loss. You should also have the knowledge how to overcome these situations.
Prepare a better plan to spend on life insurance and on health and make sure that you have included the vacation of unpaid in your estimated budget. Every person wants to take break for a while and you have to consider that in the budget you have prepared.
If you want to launch your own brokerage, though you have got license recently, you have to spend some fund as business cost are:
- Expense on your own branding i.e. to prepare logo, making of business card, and to set up website on real estate.
- To get license or for permit fees.
- For advertisement where you need to use some tools to do marketing on online platform.
- In case, you have taken room to set up office, then you have to make some deposit and pay rent for that.
- There is some basic requirement for an office such as telephone, internet services, and others and you must spend fund for it.
- Payment for all the employees working under your organization.
Calculate all the expenditure you have to do and check whether your fund is enough and make changes if required.
Step 10: Get your identity branded
Prepare an attractive identity of your brand is very important for real estate business. Through your brand, it is perceived that how much popular to the people. It also measures the reputation of your organization. So, a strong branding is very important to compete with other.
Branding of your company consists name of your business, logo of the company, design of the real estate business. Make sure that your logo must be unique from the other organization.
And remember about the signage of the real estate. Don’t use simple signs like others and get attractive real estate sign instead of it.
Every time you intended to visit any place, take your business card with you to aware people about your services. Try to update your services on online platform regularly.
Think twice if you want to delay for your real estate branding identity as you don’t have sufficient fund. But the reality is that you don’t need to spend much from your fund for that.
Step 11: Make presence on online
As per a survey on the homebuyers, it is found that around 90% of them search their requirements on online platform and out of them approximately 45% contact the real estate agent.
Don’t take the online presence as secondary option, take it as primary, so, you can able to compete with the other successful real estate business.
People always try to choose branded real estate services, working personnel behind the real estate brand, and their reputation. So, your website on real estate is the primary option for a people to contact you. Try your best to make first impression with the best effort.
Make sure that your real estate brand is represented properly in your website. It must be easy to access and language used should very simple. Provide details about your organization, your services, qualification, along with your reputation. Through online platform, reach your word and real estate business to the people.
Step 12: Prepare a selling plan
When you are totally ready to start your real estate business with well-planning will be beneficial for you saves valuable time, pressure and fund in your long journey. Your planning and strategy will represent real present brand and help to spread your brand to the mass people.
Before preparing your sales planning, ensure that you have good understanding about your selection and take into consideration of your best side.
Real estate business is considered as a personal as well as intimate services, so it will be more effective to use the methods that are easily applied.
In this area, your designed website will be working as catalyst which will be based on how your customer response to your services.
The quicker your response to the customers the better will be the relationship with your customers. It will save time for both the customers and owner which is a perfect matching.
All of these efforts help you to move on to the next part which is selling plan. You should visit to your customers to fulfil their demand and any type of conditions.
The motive lies behind this step is to convince people to deal with you. Here, your previous experience in this is very important irrespective of your product and services.
The best thing of this part is the result that you will get in the form of customer review. In addition to this, you can also provide post-sale customer care which makes your company better than other.
Step 13: Create or join a team
In the field of real estate business, franchise brokerage, is of its first kind. These franchise brokerage works under the various national companies. These national companies allow the franchise brokerage to utilize the name of the company, strategy of business and branding.
In return, the large companies will get a certain percentage at the end of every successful deal.
It is found that most of them are independent and must follow the rules and regulations of the corporate’s office.
Working as a franchise brokerage will be beneficial for you and resources will be provided to you by the large companies.
Step 14: Expand your business
The most important and essential part of marketing strategy is networking. Establishment of trust and good connection with clients is important but you should remember about the quality not quantity.
Take a targeted area and approach it towards people in the online platform. You can use various platform of individuals and take some assistance, advice, and influence people with their connections.
Relationship is also one of the criteria to run real estate business successfully. How expert you are to utilize your connections and contacts and also how quick you are in the development may affect your business.
Customer relationship management system or CRM is a very useful tool to manage your connections in various platforms. It is very uncertain that from where your next referral will come.
With the help of CRM, you will be able to organize the experience of the customers and also be optimistic from your connections.
With this article, we are trying to help you understand the real estate business step by step and will help you to set-up of your own business.
