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How to Start a Real Estate Business

Brian O'Connor

Contributing Writer at Fundera
Brian writes about finance, business strategy, and digital marketing. He has worked at Morgan Stanley, Foreign Affairs magazine, Student Loan Hero, and as a partner of a small consulting firm, too. Combined, these experiences allow him to offer a unique perspective on the challenges small business owners face.
Editorial Note: Fundera exists to help you make better business decisions. That’s why we make sure our editorial integrity isn’t influenced by our own business. The opinions, analyses, reviews, or recommendations in this article are those of our editorial team alone.

Real estate is an industry that gets consistent attention as a lucrative, exciting work opportunity. Best of all, by working in real estate, you’re able to cash in on a product that is almost always in demand, as people need homes and commercial space in just about any economic environment. Plus, real estate can bring in some serious cash, depending on the opportunities in your area and overall industry conditions.

Learning how to start a real estate business is relatively straightforward, depending on the kind of real estate operation you plan to run (as well as any state or local laws you have to be aware of–more on that later). Many of the basic tenets of starting a small business apply when you start a real estate business as well, which means there are plenty of resources out there to help you along the way.

Whether you’re trying to find out how to start a real estate business as your first entrepreneurial endeavor, or want to start a real estate business after being in the small business game for a while, there are a couple of foundational tasks to take on before you can turn into the next greatest real estate mogul. Here’s everything you need to know to get off the ground.

How to Start a Real Estate Business in 6 Steps

Step 1: Write a Business Plan

The first thing any aspiring entrepreneur needs to do is come up with a bang-up business plan. This is true whether you’re working out how to start a real estate business, a hot dog stand, or a commercial spaceflight operation. Every good company begins with a business plan at its base, as it helps keep your sights on the fundamental objectives that come along with your new venture.

Your business plan should be a tool to manage and expand your business. You’ll continue to make changes to your plan as your business establishes itself, which makes it all the more important to put in a solid effort with your first iteration of the draft onward. Use your business plan as a blueprint in the beginning, and as a roadmap as your company grows.

Starting your real estate business with a solid business plan in place doesn’t just serve you as a thought exercise, either. Nearly every prospective lender will want to see your business plan before giving you the money you need to borrow. The more convincing and detailed your real estate business plan is, the more likely you are to present yourself as a strong loan candidate.

Make sure your business plan includes the following sections:

  1. Mission Statement: A one-paragraph explanation of your business and its goals.
  2. General Company Information: State the name and roles of all founders, the number of employees you plan to have, and any existing (or prospective) business locations.
  3. Highlights: Provide examples of any financial growth you have seen since the start of your company, including graphs and charts if possible. This could include financial highlights or important business milestones. Consider this part of the summary as proof why you are going to succeed. Bear in mind, though, that you may not have any numbers to provide if you are a startup or early-stage/pre-revenue company. Bear in mind, though, that you may not have any numbers to provide if you are a startup or early-stage/pre-revenue company.
  4. Products and Services: Present a brief summary of what you are selling and to whom you’re selling it. Describe your plans for your company’s goods or services if you don’t already have a product ready to go.
  5. Financial Information: Financial Information: Include your funding objectives at the end of your executive overview if you are searching for company financing. Make sure that any ongoing conversations with banks or lenders is included.
  6. Your plans for the future: Detail where you intend your company to go in the future, as this helps you (and your potential lenders) plan for the future.

Remember what Shakespeare said: brevity is the soul of wit. Keep your business plan short and sweet, or risk getting stuck in the details. Worse yet, get ready to shove your magnum opus in a drawer, never to be seen again.

Download our free business plan template, if you need a structured format.

Step 2: Understand Your Market and Competition

If you haven’t already sized up your market as part of your early-stage research before looking into how to start a real estate business, now is a perfect time to do so. You’ll want to know what your operating area’s real estate market looks like before diving in: the old cliche that real estate is all about location, location, location absolutely applies in this regard. One town or city’s real estate boom is different than a potential bust market only a few miles down the road. The strongest investments in real estate happens in towns with up-and-coming districts and neighborhoods. These allow would-be investors to buy low and sell high as neighborhood values increase. You’ll need to size up your market opportunity before diving in headfirst.

The challenge of working in a hot real estate market is that you’re more likely to face some considerable competition. People tend to fish where the fish are, which means that your biggest sales opportunities may sit within a region that has high market saturation. Your best asset here is to do tons of research on existing players in the real estate space near you. Analyze their strategies, buying tactics, and year-on-year growth. If there is a market opportunity that seems underserved by your would-be competitors, that’s likely the best place for you to start looking for an opportunity.

how to start a real estate business

Step 3: Register Your Business

You’ve drafted a killer business plan, done extensive research on the local real estate market, and sized up your competition in the space. If you’ve gotten this far, you’ve taken care of a considerable chunk of the work that goes into starting a real estate business. But you’re not done there, unfortunately. Now the real fun begins.

Well, perhaps our definition of fun is a little less conventional than most. The real work when you start a real estate business begins with registering your business. You’ll need to file with your local, state, and federal bodies in order to conduct work legally. Banks and lenders will also want to see your business registration before they even consider giving you a loan.

Thankfully, registering a business isn’t overly difficult. Depending on what kind of business entity you choose for your real estate business, the process can be as simple as filing a few documents with your local municipality and paying a filing fee. Smaller, less-complicated business entities like Limited Liability Corporations can be a breeze to file. More complicated businesses, as you might expect, require additional legwork.

Before you decide on which business entity you need to establish for your company, be sure to do your homework thoroughly. Real estate is an expensive (and potentially risky) business, which means that the business entity you choose should provide you with liability coverage and other professional protections in the event that a deal goes sour.

If you’re not sure how to register your real estate business, or want a little help determining which business entity makes the most sense for your company, don’t hesitate to reach out to a lawyer and a business accountant. These two professionals can help you determine your options, walk you through the pros and cons of each, and will help file your documents on your behalf as well.

Step 4: Take Care of the Essentials

Once you’ve registered your business, you’ll have to tackle a few more tasks to get your business up and running. Most of these to-do items relate to the day-to-day operations of your company, such as picking a business checking account, getting the proper licenses and insurance plans to keep your company in good operating order.

These little tasks can seem daunting when they’re lumped together, but the reality is that each of them are fairly painless to complete. So long as you know what to look for, at least. By determining your needs and options ahead of time, you can save yourself a ton of legwork (and agony!) when it comes time to secure the best small business bank account, find excellent business insurance, or get the best-in-class accounting solutions ready to roll.

Open a Business Bank Account

Everything related to your small business’s finances begins with a business checking account. Without a business checking account, you’ll substantially limit the kind of opportunities that would otherwise be available to you. That means no small business loans, no separation of personal and business finances, and a generally unhappy tax season for everyone involved.

There are a ton of great small business bank account options for real estate companies, which means that  the decision-making process becomes substantially easier. You’ll want to look at accounts that offer you tons of flexibility–be it through online and mobile banking, dedicated customer service phone support, or through an extensive ATM network that lets you do your business banking in between site visits.

When looking for the best business banks, you will also want to pay particular attention to bank accounts that offer the right balance of features vs. maintenance fees. The best thing you can do when comparing accounts is deciding what kind of support you need on a monthly basis. If you need tons of free transfers, cash deposits, or other banking features, be prepared to keep a high balance in your account. Otherwise, you could end up paying a pretty penny to keep the account open when another account option would be a better choice.

Find Business Insurance

Business insurance is a must-have in the real estate business. With money on the line, liabilities become all the more critical to watch out for and plan against in the case of an unforeseen event. And, in most cases, you’re required to have business insurance and licensure in order to work within certain portions of the real estate business–particularly if your company handles building or renovations.

Business insurance is a great thing for just about any business to have. You’ll get protection against lawsuits, damages, and other unfortunate realities that may come up during the course of your company’s operations. General liability coverage helps protect you in the event of a slip and fall or injury at one of your offices or properties. Other insurance options, such as business auto insurance, can help you reduce your liability in case of an auto accident involving you or your employees.

Lastly, if your real estate company operates commercial or residential spaces, you’ll also want to make sure you’re protected by the appropriate insurance plans for these lines of business too. Commercial real estate insurance safeguards you against unforeseen accidents at a property you own, such as an electrical outage or fire that forces your tenants to close temporarily.

Establish Accounting

With your bank account and insurance policies lined up, you’ve almost got all of your back-office, administrative work completed. The one remaining piece of the puzzle is choosing an accounting platform. There are tons of options out there–some are high-powered apps that can help you manage complex financial records, while others are free (or nearly free) and are a great fit for companies that are just starting out (or don’t need a ton of features).

On the higher end of the spectrum are accounting apps like QuickBooks, which offers tons of different versions catering to companies of different sizes and industries. On the lower-cost end is Zoho Books, which offers essential accounting features but with less user-friendly design elements. Last but not least are free accounting platforms, such as Akaunting or PayPie, that give small companies the basics for balancing their books.

how to start a real estate business

Step 5: Set Up Your HQ

You’ll need office space to set up your real estate business (after all, how can you run a real estate business without some real estate of your own?). Finding office space should hopefully be a painless process if you have a keen eye for picking the right spot at the right price. You’ll be a natural at this if real estate is in your blood, and the right location will help you get things started on the right foot with your company.

Your office should match the branding and general aesthetic you want for your business. Real estate is an inherently optics-driven industry, and appearances take on particular importance with regard to how new and existing clients perceive your operation. Don’t be afraid to invest in your space and decor, as it could reap dividends for you down the line.

Step 6: Seek Business Financing

Speaking of investments, it’s great to think about your financial requirements during the early days of your business. Even if you don’t need small business financing right away, it’s helpful to think about future needs so you can better prepare for them ahead of time. The better prepared you are to go out and get a loan, the more likely your odds of success become.

Put your best foot forward in front of investors and lenders by keeping your books in immaculate shape, taking steps to establish or improve your company’s credit score, and by using things like business credit cards smartly. The more you can do to build up a financial track record for your company, the more lenders are likely to look at your company favorably.

The Bottom Line on Starting a Real Estate Business

Starting a real estate business can be a challenging, exciting new opportunity for budding entrepreneurs to enter a fast-paced, high-reward industry with room for growth. By planning ahead, making smart decisions, and preparing for the right kind of business launch, budding real estate mavens can get into the business and prime themselves to succeed.

Brian O'Connor

Contributing Writer at Fundera
Brian writes about finance, business strategy, and digital marketing. He has worked at Morgan Stanley, Foreign Affairs magazine, Student Loan Hero, and as a partner of a small consulting firm, too. Combined, these experiences allow him to offer a unique perspective on the challenges small business owners face.

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