Starting a real estate business can be one of the most profitable and daunting tasks a small business person can do. However, if you take the right steps and make the right decisions, starting a real estate business can be a rewarding venture. This article will discuss several things such as how to choose a funding source, create a business plan or even register a company by choosing the best office location or opening the right bank account. This article will guide you through the right steps of starting your real estate company.
Choose a Funding Source
Before you start your real estate company, you need to choose the funding source. For many investors, at least a portion of the seed funding for your business is going to have to come out of your pocket. This means that you should start saving in advance and putting money away every single month if you have a normal day job so that you can make a large initial investment into your company.
Additional funding for your real estate company can also come from a loan. The Small Business Administration or local governments offer many loans to new companies; you may be eligible to apply for a grant or loan from them if you qualify. Banks will also offer loans to small business owners, but you have to watch the interest-rate that you are offered because you do not want to run your business into the ground by taking on too much debt. It may also be possible to ask for a loan from your family members and try to get a low interest-rate because you know them.
The smartest way to raise capital for your new real estate company is to use equity financing. This will involve you issuing shares if you are a corporation or units if you are a limited liability company in exchange for capital. In this arrangement, you would be selling an ownership percentage in your business for the purpose of taking on investors. While this can be a great avenue to fund your business, but you have to be careful as not to sell too much interest because you want to maintain a majority share of ownership in the company that you start. If you take on investors, then you need to have a clear business plan that lays out exactly what will their money be used for and when do they expect to return on investment.
Create a Business Plan
Having a solid business plan for your real estate company can give your company direction, give confidence to potential investors, and tell any bank you speak with exactly what your company will be doing. Your business plan should contain a three-year projection of your company's revenue and expenses. The plan should indicate the time where your company will break even and include a three-year a projected balance sheet that starts at company formation.
The business plan should give a detailed overview of all costs and how investor funds will be used to meet the objectives outlined in the plan. Your business plan should also specify what type of insurance that company will have as any business who deals with real estate should have insurance on the properties in case of damage.
Your business plan can also contain a specific set of objectives with deadlines that your company intends to accomplish and the specific person that will be in charge of handling those objectives. It should also contain a marketing plan that explains the use of your website and an advertising budget for how you will promote your properties. If you are bundling properties and selling investments related to their ownership, then you should make sure your business plan explains how your buyers will be able to maximize any potential investment that they place with your company.
The plan should also contain details on whether you are a long-term investment company or short-term investment property. You should specify what types of property your business intends to hold and the ones you plan to collect rent from. It should also discuss what properties that you plan to buy, do repairs to, and then flip once they have increased in value. Make sure your plan discusses the parameters for the type of properties you buy and whether or not you will buy it foreclosure auctions or if you will only purchase from former homeowners who have maintained their property well. The same goes for if you are investing in commercial real estate such as office buildings. These would likely be more long-term investments that you would collect rent from.
Register a Company
At company formation, you can choose from a variety of legal entities. You should consider forming yourself as a limited liability corporation. These entities allow for you to have an operating agreement (Articles of Association, By-Laws or Company Constitution documents) which specify in detail the relationship between you and the other partners in the business and make it easy to sell percentages of your company to investors. You could also form yourself as a partnership. Your real estate business can also be formed as a corporation which would allow you to sell stocks in your business. Regardless of which entity you choose, you should speak with a CPA (Certified Public Accountant) to go over the tax ramifications of putting money into and taking money out of the business.
Starting Business can assist you with forming a company. We offer many packages with advantages that can help maximize your company’s potential. Please take some time to review our website for the different types of company formation packages that we offer for company formation.
Choose an Office Location
Real estate is all about location, location, location. Your choice for where you open an office for you real estate business is based on the same principle. You want to match the location of your office with the type of real estate that you are investing in. Your office sends a message to any investors or clients about who you are and the quality of your work. If your office is messy and in a bad location then they may associate that with the properties that you are selling them. That is why you need to pick an office in a location that matches the quality of the properties you're selling and the way you market your properties. If necessary, you could also employ the use of shared offices with the receptionist so that you can save on overhead costs.
Open a Bank Account
To handle the different financing that your real estate company will have, you need to have the proper bank accounts. Starting Business can assist you with setting up your bank accounts in different ways in various countries to help maximize the utility of your company's money. Please take a moment to review the website and the different options that we offer.
Depending on your financing structure, it may be advisable for you to have multiple bank accounts for the purpose of separating your operating account from a trust account. You may also need a separate account which is specifically designated to withdraw salaries and expenses. Make sure to choose bank accounts that maximize reward points, interest, and protect your money and every legal way possible.
Create a Website
Any great real estate company has to have a great website. These days, the overwhelming majority of customers are doing research online before they make a purchase. That is why a website can assist you in the selling process or drive traffic to your site to increase your sales.
Your website should contain detailed descriptions of your properties along with price and options that allow a potential buyer to sign up to view the property. It should also contain high-resolution images of all the properties that you are offering to lure customers in once they visit the site. Your website should match the level of quality and care that you show to your properties so that your investors and potential clients have a good impression of you from the beginning.
Having good employees by your side can strengthen your real estate business. From the start, you should consider working directly with the real estate agent so that you can quickly acquire the properties that you would like to either sell or hold for the long term. The real estate agent or broker is someone that you can hire in-house and make an employee, or you could have him as an independent contractor for when you want to exchange title of property.
When you are meeting with clients or acquiring new property, you do not want to have to be dealing with administrative tasks. That is why it may be advisable to hire an office manager who can keep track of billing, answer phone calls, and schedule your appointments. You could also use an executive assistant for the same type of tasks. If you are maintaining properties that need fixing, then you may need to hire a maintenance worker or contractor to visit your properties to perform any needed repairs. You should also have a CPA and a lawyer on retainer to deal with any tax or legal issues you run into.
Business Plan for Real Estate Company
A Business Plan is a formal document that is used to outline all the aspects of a business. This template is intended for a real estate company sales office .