How to Start My Own Real Estate Business

Thursday, April 3, 2014

How to Start My Own Real Estate Business

Anyone who enjoys selling real estate may also enjoy owning a brokerage. With multiple agents splitting their commissions with you, owning your own brokerage makes it easier to ride out fluctuations in the market, an appealing benefit of brokerage ownership. Of course, as a broker you will also take on supervisory duties that you don't have as an agent, and you will also have to carry the overhead of running an office. But if you enjoy mentoring and have cash-flow management skills, the rewards can be great, psychologically and financially.

Step 1

Save up enough money to cover your start-up costs, which will include renting or buying space, office equipment, logo design, an office sign, yard signs, website design, insurance. You also need to set aside enough funds to cover operating expenses for at least three to four months, advises Tom Pleimling, broker-owner of Tom Pleimling Realty in Alexandria, Virginia. Operating expenses will include rent, advertising, dues, online fees, utilities and other miscellaneous items.

Step 2

Learn what broker-licensing requirements are in your state, and obtain your real estate broker's license. In most states you must take a state-approved course, be 21 years old and have practiced real estate as a salesperson for two years.

Step 3

Choose a location for your office. Consider zoning restrictions, visibility and parking for your agents and clients, as well as square footage.

Step 4

Set up a professional-looking website, and employ a service which allows you to display all the listings in the Multiple Listing Service as well as your own. Approximately 80 percent of home shoppers now begin their home search online, according to a Forbes.com article titled "How To Run A Real Estate Brokerage: Technology," which cites a REAL Trends and Harris Interactive survey.

Step 5

Buy errors and omissions insurance. As a broker, you legally take on vicarious liability for the actions of your agents. Errors and omissions insurance will cover you in the event that an unhappy client sues the brokerage.

Step 6

Develop an independent contractor agreement that outlines your expectations of agent behavior and includes provisions for commission splits with individual agents. As independent contractors, you cannot require office time of agents, but you can expect that they will adhere to a code of ethics, and you can also describe your policies on the use of office space and when agents may take unsolicited incoming calls.

Step 7

Equip your office. Essentials will include waiting area and conference room furniture, a reception desk and chair, fax, copier, phone system and at least one office computer. As independent contractors, agents can provide their own individual computers. If you provide desks for agents, you may choose to charge them a desk fee to offset operating costs.

Step 8

Recruit agents. Established agents will have a following that will benefit you. New agents might bring a lot of energy and excitement to your brokerage, but you must carefully train them to ensure that they not make legal mistakes. They may also need sales training.

Step 9

Develop clientèle. Each agent you take in will probably bring some clients. But in addition, advertise your brokerage in newspapers, real estate publications, and on television and radio. Realtor.org also recommends conducting an office open-house, sending direct mail and raising your profile through publicity. Publicity might include sponsoring a charitable function or a Little League baseball team, for example. In addition, consider hiring a search-engine optimization company to boost your website's visibility in the search engines.

Things Needed

Tip

To maintain your profit margin, consider charging agents an office fee for the use of the copier and fax. Agents can also contribute to the cost of errors and omissions insurance.

Warning

Don't skimp on professional help. Have a lawyer look over all your independent contractor agreement, contracts and addenda..

References (5)

Resources

Realtor Mag: 5 Tips for Selecting the Right E&O Carrier

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1 comment:

AnonymousApril 5, 2014 at 2:14 PM
Terrific content, Appreciate it.

My web-site public liability and indemnity insurance
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Easy Tips and Ideas to Start Business

Although anyone can start a business, many people fail because of a bad product or improper research. If you want to start your own business, you can improve your chances for success before you even begin. In order to make your business successful, start strong and make sure that your idea will hold out for the long haul.

Have a Good Product

Ensure that you plan to sell something useful. Although you may think that your product is important or special, that doesn't mean the general public will agree. Ask friends, family and strangers what they think of your product. If they don't seem that interested, ask them why. With their suggestions, you can either improve the product or scrap the idea completely. According to Brad Sugars of Entrepreneur magazine, most small businesses fail because they sold a product that didn't have an adequate market. This also applies to small businesses that provide a service. A lawn-care business might be useful for part of the year in a northern state, but it is in-demand year-round in the south. Consider whether people will actually want to use your service and get constructive advice from those not afraid to give their opinion.

Research Local Businesses

Research local companies before starting up your own business. This will not only give you an idea of the amount of competition you will have, but it will also help you price your product or service. If you're looking to start a wedding photography business, you may find during your research that the market is over-saturated in your area. If not over-saturated, you should contact each business and ask them for a price list. Alter your prices so you can stay competitive with the competition in town. Researching similar local businesses will also help you decide where to locate your business location. Try not to start up a store or office close to another business of your type. If your small business is located away from similar business types, this will cause locals to choose you over businesses that are farther away from where they live.

Get Professional Advice

You may know someone who has started their own successful business. Ask him for advice and listen to his stories of how he started his company. You may gain useful advice on the good and bad ways to start a business. Local entrepreneurs can also introduce you to local product providers or advertisers that you may not have met without their help. Accept any advice with open arms, especially if the advice is coming from someone successful in the area.

How to Calculate Business Start Up Costs

Starting a business in no easy endeavor. It takes a great deal of research, perseverance and hard work. While sweat equity will make your small business more successful, you will most likely need real capital to get the business started. Before you start raising capital and/or investing your own funds, the first thing you need to do is determine the total start-up costs.

Step 1

Determine your costs of sales. For most small businesses this means inventory, the cost of raw materials, manufacturing equipment, shipping, packaging, and warehousing. However, not all businesses sell products. In this case, the cost of sales is primarily the direct labor involved in making the sale. For example, to open a small shoe business entails purchasing enough inventory ($10,000) to stock the store.

Step 2

Determine professional fees. Planning your business structure, i.e., limited liability corporation or general partnership, means hiring an attorney. There may also be the need to pay an attorney for help with establishing trademarks, copyrights, and patents. In this scenario, that puts total professional fees at an estimated $20,000.

Step 3

Determine technology costs. Technology can greatly reduce the cost of labor for small business if used effectively. Most small businesses require computers, printers, cell phones, website development, Internet access, software applications, information security, data storage, and outsourced information technology (IT) consulting. If the cost of technology is $10,000 to start, add an additional $5,000 a year for maintenance (hint: maintenance is not included in start-up costs).

Step 4

Determine administrative costs. This varies with business types and may include items such as business insurance, office supplies, product packaging, parking, rent, express shipping, desks, chairs, fax machines, phones, or anything else necessary to operate the business daily. A good estimate for start-up administrative costs would be $5,000 for the first six months.

Step 5

Determine initial sales and marketing costs. Now that you have your product, you need to let folks know about it. Sales and marketing costs generally include marketing materials for presentations, printing stationery, business cards, advertising, trade show events, and public relations. These initial sales and marketing costs can add up to $3,000.

Step 6

Determine the wages and benefits needed to secure a staff. This includes employee salaries, benefits, workers compensation, and payroll taxes. Let's put the cost of wages and benefits estimated at $20,000 for the first three months of business.

Step 7

Add all costs associated with starting the business for a total. Be sure to only include business start-up costs that will be incurred in the first three to six months of operations. For this example, the calculation is: $10,000 + $20,000 + $10,000 + $5,000 + $3,000 + $20,000 = $68,000.

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Thursday, April 3, 2014