Are you focusing on starting a real estate business? The formation of a real estate agency has many attractions. Indeed, it is not only a flourishing activity that has recorded record sales since 2016 with more than 850,000 transactions but also a sector offering significant growth prospects. However, it requires being framed since its creation to ensure a sound legal and financial structure. This article creates a better understanding of how to start a real estate business.
Open a real estate agency: a project to mature
You can imagine: Starting a real estate agency cannot be improvised. The steps to achieve this are numerous, complex and time-consuming. You will have to take many steps to declare your activity, create your structure, choose a legal form, obtain a real estate business card, take out mandatory guarantees, and finally find the premises for your agency. And this will only be the first part of the case!
The first step, however, involves no moving, no steps, and no file to complete. And yet, it is essential, since it consists of asking you the right question: why do you want to open a real estate agency?
Why start a real estate business?
Ask yourself what motivates you in this project. The desire to become a business owner? To become self-employed after years of wage-earning? The desire to become an independent professional, manage your schedule and choose your projects? The feeling that you have to answer a request for which there is no offer yet?
Everything about how to open a real estate business
Entrepreneurs of two types enter the real estate business: – the former is aimed at creating a serious and stable business at the cost of hard work, and the latter is aimed at getting quick profits at any cost, they then make up the remaining 80%, which fail in the first year of their lives.
So, effectively, how to open a real estate business? First of all, from the premises under the office of your company. The location of the future office does not play a special role, it can be both in the center ($ 50 per 1 sq. M) and in the sleeping area, which is much cheaper (from $ 20 per 1 sq. M). The only recommendation is better if the office is located in a walkable building, such as a shopping center or office building. The area of the premises is calculated based on the number of employees in the company. For 3-4 people at the initial stage, a room of 20 square meters is quite suitable. The room itself must be zoned so that it is possible to conduct negotiations with several clients at once.
Office space selection
For starting a real estate business, it is advisable to choose an office in the central part of the city (if the agency will be engaged in the rental and sale of real estate throughout the city) or in the area where the activity will be directly carried out. The most optimal solution is an office on the ground floor with a separate entrance on the red line. The second option is an office in a large business center. An office may consist of several separate rooms. The first room is a customer waiting room and reception, the second is a place where real estate agents are located. Separately, a manager’s office should be organized, which can be combined with a place for paperwork if the lawyer is coming. If the lawyer works in the state on an ongoing basis, you need to provide another office where he will work and execute the transaction.
Office furniture can be purchased the cheapest – tables and chairs. To work, you need a phone and a computer, which at first two employees can share. It is better to have two phones — one for incoming calls, the other for outgoing calls. Later it will be necessary to purchase a telephone exchange.
The next important stage in understanding how to open a real estate business is the selection of personnel. Get ready for the fact that getting an experienced realtor in a start-up company is unrealistic. Most likely, not beginners without experience will come to you, and you will have to train them. The main thing is to pay attention to the decency of the applicant, his personal charm, sociability. You will teach the rest of the wisdom and intricacies of the profession yourself. Often, agencies send their specialists to courses at the regional association of realtors. But after passing the theory, future specialists learn everything in practice under the supervision of an experienced realtor.
Another promising source for recruiting agents is former customers. Often, they make good specialists. Firstly, they already have experience in real estate transactions, and secondly, if they are involved in this area, that means they also have abilities.
Salaries to agents are paid according to the piecework scheme – a percentage of the profits received by the agency. Moreover, the larger the agency, the lower the percentage. Newcomers to the market have to pay up to 70% of the agent’s revenue.
It is worth worrying about the so-called scammers who get jobs in real estate agencies just to pump out information and databases. Therefore, care must be taken in advance to protect information from such scammers.
Another type of unscrupulous employees is those who make “left deals” bypassing the agency. In addition, there are cases of fraud with the client’s money, which can irrevocably destroy the reputation of your business.
Additional Resources & Marketing
In addition to agents, you need a room cleaner and a lawyer. The lawyer at the initial stage cannot be kept in the estate, and if necessary, call on transactions, which so far will be few.
And, finally, the most important stage, where and how to start a new and unknown agency to look for customers.
A key factor in the success of starting a real estate business in the market is its reputation. To strengthen the image, you can apply for entry into the regional association of realtors.
It’s good to place outdoor advertising, at least in your area where the agency is located. The advertising budget is between $300 and $1,000 per month. But experienced realtors unanimously call “word of mouth” the most effective channel of promotion, i.e. positive feedback from former customers who recommend your agency to all your acquaintances and friends. Therefore, the most important thing is the high quality of customer service and ensuring legal cleanliness and security of transactions.
To summarize, it turns out that to open your own real estate agency you will need an initial capital of $6,000. Revenues can be planned based on the fact that 4 agents bring you a profit per month from 4000 to 6000 dollars (1000-1500 dollars per agent). Excluding agency fees, we get the amount from 2000 to 4000 dollars. Monthly expenses (including rent) can be about $1,000, total net profit from $1,000 to $3,000. The payback period is from 2 months to 2 years depending on how you will run the agency.