Before you start your real estate business, there are a few key areas you need to focus on. You will need to establish if there’s a demand for your real estate business services, look at potential benefits and pitfalls, understand how your business finances might look and ensure everything is in order.
In short, you need a business plan — here’s how to think about your real estate business idea.
1. Analyze Your Real Estate Business Idea to See If It’s a Good One
Think about your real estate business idea, the skills you have and whether you can transform your concept into products and services you can sell. You can start doing this by carrying out a SWOT analysis — look at your strengths, weaknesses, opportunities, and threats.
Strengths — your skills, experience, expertise, insight and anything else that can drive business success. If you’re an excellent negotiator or have a background in real estate, that’s a great start.
Weaknesses — any areas where you lack skills and experience or you believe there may be an internal issue with your real estate business idea, products or services. Take a long hard look at the skills a real estate entrepreneur needs and see if there are any gaps.
Opportunities — areas where your real estate business can grow, get new customers or deliver products and services your clients are likely to need. We covered some of these services above, but there are plenty of other unique opportunities out there.
Threats — external threats from competitors, changing marketplaces, rules and regulations. Your biggest issues are likely to be the current and future state of the real estate marketplace in your area and the number and quality of your competitors.
2. Do Market Research and Validate Your Real Estate Products and Services
Before you launch your real estate business, you need to understand if there’s a demand for what you’re selling. That means carrying out market research and “validating” your products and services. Here’s how to go about it:
Look at who your competitors are in the space — having competitors is a good thing as it shows there’s a market. Find out who the most popular realtors are in your area and see if you can emulate and improve on their services.
Talk to clients — speak with potential customers to understand what they want from your real estate products and services. Find out what they are not getting from other realtors.
Identify your business’s unique selling points (USPs) — these are the area that will set you apart from competitors and encourage customers to come to you. You might have better commissions, a higher-quality service or some other special feature.
Get involved with business communities and discussion groups — ask questions about the local real estate businesses. You can find links to some excellent discussion groups later in the article.
3. Understand Your Real Estate Business Model and Financial Projections
All businesses need a business model — the way you will generate sales, provide services and make money. Think about your business model now, because it’s better to have that in place so you can start acquiring customers and generating revenue from day one.
You will also need to look at financial projections for your real estate business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others?
If you can, try to plan your revenue out for the next month, three months, year and two years. Real estate revenue is highly tied to property prices and interest rates, so you will need to look at macro-economic trends.
4. Write a Business Plan for Your Real Estate Business
Finally, you should put your business plan together. Business plans do vary slightly, but they should cover the following areas:
An executive summary with the most important points from your business plan
Your goals and what you hope to achieve with your real estate business
A description of your business, background information, and context