Interested in learning how to start a real estate business? Now might just be the time. Despite the COVID-19 pandemic, Canada’s housing market has been growing. So, if you’ve been thinking about getting into the property game, it would appear that the market seems to say, “yes!”
Is real estate a profitable business?
The real estate market is a multi-billion dollar industry, so there is absolutely a chance for new businesses to be profitable. But how profitable depends on you and the type of business you run.
Whether you’re interested in investing in property or selling family homes, the real estate industry is filled with opportunity. So, yes, real estate is a profitable business, but it can also be a risk. It’s up to you to make the most of it.
How to start a real estate business
If you’ve settled on starting your new venture in the real estate industry, then it’s time to set up your business. Like any other entrepreneurial endeavor, your real estate business should be established properly beforehand, so managing it is easy when you’re up and running (and to ensure you aren’t breaking any laws).
Decide on the real estate niche you want to work in
Before you can get started as an entrepreneur in real estate, you need to decide what area you want to work in. If you are not qualified to offer professional services in an area like accounting or law, you can probably rule those out. However, there are still plenty of niches to specialize in.
Each niche in the real estate industry will have its own education requirements and different skill sets. For example, if business management is your forte and you have a charming sales personality, then you might want to consider going the extra step from real estate salesperson to broker.
Create a business plan and set some goals
Successful businesses start with a business plan. There are plenty of reasons for having a plan, perhaps the most important of which is it gives you a roadmap. That way you not only know where you’re headed, but can set goals and track your progress.
Your business plan should include:
- An executive summary
- An overview of your business and its structure
- Research into your target market
- What products or services you will offer
- A market analysis or research
- A marketing strategy
- Your business organization and team
- Your financial plan and pricing
Preparing these at the start of your business helps to ensure you’ve put a lot of thought and preparation into your business before you launch. It can also help if you’re planning to secure financing.
Look at the market and competition
Conducting a market analysis is important for every business, big and small. If you don’t know the ins and outs of the market, it’ll likely end up being hard for you to run a successful business.
You want to take some time before you get started to understand the current stage of the market and where it will likely go in the future. Take a look at the competition and see what they’re up to and if there are gaps you and your business might be able to fill.
Having your pulse on the industry before you get started is a great way to ensure that you’re steering your business in the right direction.
Set up your business back end
There is a lot that goes on behind the scenes in any business. Whether you’re running a massive international corporation or a small, local firm, you need to consider how the back end of your business is going to work best for you, and what tools you need to run it.
There’s a lot more to think about than business cards and your website design. How are you going to record expenses, pay bills, and collect money? What does your project management process look like? Who is on your team and what do they need to do their job to the best of their ability? You’ll also want to familiarize yourself with a cap rate calculator too.
You’ll want to set up:
- Small business accounting software
- A project management system
- A client management database
A real estate business with a well-organized and thought-out back end has a much better chance of running smoothly on the client-facing side. You’ll be less likely to miss follow-ups, more likely to catch good leads, and overall have a better chance of success.
Get your finances in order
The reality of running your own business is that you won’t always see great times, financially speaking. Real estate, like many other businesses, has periods of financial highs and lows, and you need to be prepared for them.
Before you open up shop, it’s a good idea to take a look and see how much money you need to cover any lean months your business might see. This also includes your first few months of business, where there might not see as much activity as you’d like.
You want to consider a variety of costs, including:
- Basic costs like phone and internet
- Costs for tools to perform your job and market your services
- Equipment costs or lease
- Employee salary and wages
- Marketing and advertising costs
When you know how much money you need to run your business, then you can compare it to the money you have on hand. This can help you figure out whether you need some financial assistance to get started, and even help determine your pricing.
Get your real estate license (if needed)
You cannot sell another person’s real estate property in Canada as a realtor without a licence. So if you have your heart set on real estate sales or running a brokerage, you’ll first need to obtain your license.
Real estate licenses are governed at a provincial level and the requirements vary. For example, in Alberta it will cost approximately $3,350 and can take up to 18 months to complete the educational course. Once you’ve completed the course, you need to join a licensed brokerage then apply for your license.
In Ontario, you can become a real estate broker or a salesperson. The process can take over a year and when you’ve completed the education, you also find a company to work with and apply for your license.
The exact process for you to become a real estate agent will depend on where you want to practice, so look at the requirements in your own jurisdiction:
- British Columbia
- New Brunswick
- Newfoundland and Labrador
- Northwest Territories
- Nova Scotia
Obtain any other required licence
Even if you have no plans to become a real estate agent or broker, you may still have to obtain a licence for your real estate business. Licences for businesses are dictated by the provincial or federal government, so check with your jurisdiction to see what you need to operate.
Make your business official
It’s possible you may need to make your new business official before you obtain any licences, though that really depends on the rules of your local jurisdiction. But regardless of whether you make your business official before or after, it needs to be done.
Using a service like Ownr can make the process quick and easy (and you can do it in your PJs without leaving home)—all you need is a great business name to get started. But you’ll need to first figure out what type of business you can and want to run, as some jurisdictions in Canada require brokers or agents to remain sole proprietors and not corporations.
Real estate business ideas
When most people think about the real estate industry, they tend to think of realtors—those who list your house, help you find a buyer, and get a cut of the profit when it sells. While that is a valid business opportunity in the real estate industry, it’s not the only one.
Those in real estate development either buy a property or work with landowners to develop a plan for what to build. Some developers specialize in developing new land or empty space, while others focus on revitalizing already-built spaces.
Once a development project is done, developers often make money by selling the property to someone who can put it into operation. In other cases, a developer might manage the property on their own to bring in cash flow.
Real estate agents
Real estate agents are professionals authorized to sell and market real estate on behalf of buyers. They can work in commercial or residential real estate, and have to obtain a licence to be able to do so.
Agents make their money primarily through sales commissions. They are responsible for drumming up clients who are ready to sell their property, or finding prospective buyers for a property. Agents also help buyers with the sales process alongside other professionals, like real estate lawyers.
Real estate brokers
Real estate brokers are similar to agents, but have additional education and experience. While the requirements vary by jurisdiction, real estate brokers are more experienced agents and tend to oversee newer ones. Real estate brokers are also able to work for themselves or as part of a larger group.
The additional education that brokers receive focuses on other aspects of the real estate industry, like finance, appraisals, and property management. Brokers in Ontario have to take a real estate broker course that focuses on starting and managing real estate brokerages.
In the real estate industry, property managers oversee the day-to-day operations of a particular property. For example, a property manager for a residential rental property will screen tenants, arrange for repairs, and oversee the rent collection process.
Property managers can be hired in-house or they can be a third party. The owner of the property either pays the manager a salary (if they work in-house), or a flat fee or percentage of the rent collected from the property.
You can also be your own property manager if you are managing your own spaces. Individuals who own and lease vacation rentals is a popular practice..
Lenders make funds available to a person or a business with the expectation that those funds will eventually be paid back, usually with interest. They can be a single person, a private or public group of people, or a financial institution like a bank.
Real estate investing is simply investing in real estate. As a business, it covers individuals or real estate companies that purchase, own, manage, rent, or sell properties. There are plenty of ways an individual or company can become a real estate investor, from flipping houses and renting a vacation property to leasing commercial properties.
Other professional services
Similar to other industries, professionals like accountants and lawyers can specialize in real estate. These individuals tend to specialize and build their practice in one particular area, in this case real estate, or several closely related areas.
How much money do you need to start a real estate business?
There is no set amount when it comes to start-up costs for a real estate business. The cost varies widely based on the type of work you want to do or investment you want to make in the industry.
For example, U.S. site Placester estimates that you’ll need at least $10,000 to start a real estate brokerage, and Investopedia says that you’re looking at $5,000 or more to participate in an investment partnership or pool in the industry.
Ultimately, your startup costs will depend on both what you want to do and what you want to get out of it. Deciding which aspect of the real estate business you want to be in, setting some goals, and creating a business plan will ultimately determine your upfront and ongoing costs.
Build a marketing strategy
A marketing strategy is a must-have for all types of businesses. It helps determine how you’re going to drum up new business and reach your target audience.
While some of the work you do in marketing can take place online, buying and selling property still tends to happen in-person, especially in hot markets. So traditional advertising and marketing techniques like bus benches, billboards, and TV ads are not off the table.
However, it’s important to note that some creative real estate brokers have established an online presence by creating and maintaining active social media accounts. So your best bet is to curate a strategy that focuses both on and offline marketing.
Create a website
Your website is the online storefront of your business, which is why, no matter what industry you’re in, it’s important you have one. While you can’t necessarily shop online and purchase a brand new house, 16 per cent of Canadians said they used the web to lend them a hand in their search.
There are plenty of website builders that make the process of creating an online presence all on your own a piece of cake (or at least manageable and cheaper than hiring someone else to do it for you).
When it comes to building a website for your real estate business, you want to make sure that you give prospective clients:
- An idea of who you are
- Insight into what you do
- An easy way to contact you
A well-executed website can often lighten the load when it comes to prospecting for leads. But it’s a long-term game, so it’s good to get started building your website early on in your business.
Start prospecting for leads
It’s not just the frontiersmen and women in the gold rush that need to prospect; if you’re in real estate, you will too. Much of the industry, especially on the broker side of things, is a numbers game. You need to actively prospect for new leads so you can get a continuous flow of business.
It’s pertinent to point out that if you’re building a real estate career in the selling industry, you’ll need to be comfortable with making cold calls to drum up business. And while the need to cold call can lessen over time once you build a solid foundation, you’ll probably do a lot of this in the first few years.
Essential tools for your real estate business
While it’s really the work you put into running your business that will make all the difference, the right tools can make your job a lot easier. There are a ton of different apps and services you could use, but we have narrowed down five tools that you’ll want to pay attention to:
There is a lot of cold-calling in real estate, especially if you’re a real estate agent or broker trying to drum up property to sell and prospective buyers to sell to. That means that one of your most valuable tools is going to be a customer relationship management system or CRM.
CRMs help ensure you stay on top of your daily tasks and priorities, so that nothing important gets overlooked. A well-kept CRM can help improve customer service and satisfaction, increase your sales, and even market your products and services better.
Lead generation tool
Leads math is pretty simple—more leads means more opportunities to make a sale. So, a good tactic to add to your sales and marketing strategy is to get as many leads as possible, which makes a lead generation tool valuable to have in your arsenal.
You can find leads from a variety of sources, including your website, social media, or past clients. Alternatively, a tool like Zillow Premier Agent will help you grow leads as well!
Email marketing tool
Email marketing plays a vital role in modern business. Not everyone is ready to buy or otherwise take action the first time they come across you or your services, and staying in touch is a great way to stay top of mind with prospective clients.
You can collect emails on your website and through in-person contacts, then pass along information that’s relevant to them like listings, market trends, and tips and tricks for selling and/or buying property).
You can start email marketing for free using MailerLite or ConvertKit. The best email marketing strategies see you in your contacts’ inboxes frequently enough to be remembered, but not so much as to be annoying. One email per week or bi-weekly is a good starting point.
Content marketing tools
The amount you use social media and other types of content marketing depends on which real estate industry niche you decide to go into. But chances are you’ll engage in some social media. That means having the right tools for the job.
There are plenty of free tools out there to help you design graphics, edit videos, and make your photos look magazine-worthy. You can also make posting on social media easier by using a scheduling tool, like Later or Buffer. And you can use a tool like Canva for free (though they do have a paid version) to create your own unforgettable TikTok and Instagram videos.
Whatever content marketing strategy you decide to use, make sure that you have the best tools to get the job done.
Transaction management tool
There are a lot of things to stay on top of for a single transaction, which means if your businesses revenue depends on completing transactions, a transaction management tool is a valuable resource.
What you need in a transaction management tool depends on your business, but some popular ones in the real estate industry include Brokermint, Folio and Qualia. Don’t be afraid to shop around before committing to something.
Scaling your real estate business
How you scale your business depends both on your overall goals and how well you build trust with your customers and clients. If you’re focused on the property management side of things, scaling could mean acquiring more properties to rent out, while someone in sales is going to focus on building their customers and getting solid referrals.
Regardless of the type of business you want to scale, the internal practices you use to iron out the kinks and provide a great customer experience will be an essential part of that growth. Much of the industry, especially on the sales side, is grown through referrals. This means providing a share-worthy experience is crucial.
Is real estate right for you?
Running a real estate business can be rewarding. Whether you’re interested in investment properties, buying and selling real estate, or anything in between, there’s a seemingly unlimited potential to grow.
If you’re ready to discover your calling in the industry and it’s time to make it official, Ownr has the tools you need!
This article offers general information only, is current as of the date of publication, and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Ventures Inc. or its affiliates.