In 2023, the global commercial real estate market size was valued at $7.2 trillion, and it’s expected to reach $9.91 trillion by 2033. There’s clearly money to be made in this industry, and it’s not too late for you to get in on the action.
What’s great about real estate is that you don’t necessarily need an education to get started. As long as you’re business-savvy, you can make it big.
Now you’re thinking about how to start a real estate investment company, and you need some help. If you read on, you’ll find all the vital steps you need to take.
Define Your Business Goals
In the introduction, we gave you a statistic, but that’s based on commercial real estate. The fact is, real estate is much bigger than that, so you’ll have to first determine your niche. Here are your choices:
- Residential
- Commercial
- Rental properties
- House flipping
- Real estate development
- Real estate investment trusts (REITs)
After deciding on your niche, you’ll need to define your business goals, both in the short term and long term. Some examples include:
- Achieve a specific cash flower from rental properties
- Build a diversified portfolio within 5-10 years
- Establish a strong market presence in a particular region
Conduct Market Research
As you might’ve already guessed, real estate markets are very specific to certain regions. This means that market research is vital as a first step to success.
First, you should assess the demand. Analyze the local demographics, income levels, and population growth. All this information can help you predict the demand for properties.
In addition, you should perform a competitor analysis. Study other investors or companies in your area. What makes them successful, and what gaps can you fill?
Lastly, look at the economic indicators. Track interest rates, employment trends, and real estate price cycles to get deeper insight into the market.
Create a Business Plan
Creating a business plan is beneficial since it’ll act as a blueprint for your company. It’s also useful if you need funding, as investors and lenders are more inclined to give you money if you can prove your business will be profitable.
Start it with an executive summary. This should outline your mission, vision, and unique value proposition.
Now take the information you gathered from your market research. Present data supporting your target market and its potential.
The next step is outlining an operations plan. This should include property acquisition, maintenance, and tenant management strategies.
Speaking of strategies, you’ll need to list exit strategies too. Unfortunately, even the best of companies can fail, so you have to be prepared. Plan for how you’ll liquidate assets when necessary.
The last part of your business plan should be your financial projections. Forecast costs and revenue for the first 3-5 years so you have something to aim for.
Choose a Business Structure
There are several business structures you can choose from. Most entrepreneurs pick limited liability companies (LLCs) since they protect personal assets. LLCs also provide pass-through taxation, which means that the business doesn’t pay taxes on the entity level.
If you’re pooling resources with others, then partnerships can be ideal. There are both pros and cons to forming a limited partnership, so make sure you understand them before proceeding.
Another popular business structure type is corporations; you can choose between S-corp or C-corp. This entity type is more suitable for larger companies with multiple stakeholders.
Earlier, we mentioned REITs. Although the T stands for “trust,” you don’t have to register it as such. You can opt for a partnership, LLC, or corporation if you wish.
Pro Tip: Many real estate investors choose to create a new LLC for each development or property they acquire. This strategy isolates each investment, limiting liability to that specific project. In the event of financial or legal issues, this approach helps shield your other properties and personal assets from being affected.
Register Your Business
Once you’ve chosen a business structure, you can go ahead with registering your property investment company. Make sure to choose a name that reflects your goals, as that’ll represent you properly.
You can always file registration documents with your state or country by yourself, but there are companies that can do that for you. For example, we at Business Anywhere offer a free business registration service where you only pay the state fees!
You should then obtain the licenses and permits required for any real estate investing in your area. Plus, get general liability insurance and any specific coverage for properties to protect your investments.
Secure Funding
You’ve got to spend money to make money, and that certainly applies to property investment.
Many entrepreneurs go the route of traditional loans. Check with banks and credit unions since they offer mortgages for investment properties. There are also hard money loans (short-term loans) that are often used for flipping houses.
You can also try private investors. To do this, you’ll have to build relationships with wealthy individuals looking for passive returns.
A less traditional path is to use crowdfunding. Platforms like Fundrise or RealtyMogul can connect you with investors who have capital.
Assemble Your Team
It’s practically impossible to run a real estate business alone. Here are some professionals who you’ll likely need assistance from:
- Real estate agents (to find properties and negotiate deals)
- Contractors (to handle renovations and maintenance)
Property managers (to manage tenants and oversee maintenance) - Accountants (to manage finances and taxes)
- Attorneys (to draft contracts and ensure compliance with laws)
Develop a Network
In addition to your team, you’ll need a network of reliable professionals. Find agents, lenders, and other investors at industry events.
You can further your connections by joining real estate investor meetups or professional associations. Also, widen the net even more by using online platforms like LinkedIn and BiggerPockets.
Establish Your Investment Strategy
Real estate can be complicated and there’s no surefire way to make money. However, there are a few investment strategies that may work for you.
Many entrepreneurs use the buy-and-hold method. This focuses on acquiring rental properties for consistent cash flow. If you want a safe bet, this is it.
Another commonly used strategy is fix-and-flip. Here, you buy undervalued properties, renovate them, and sell for a profit. As you might’ve guessed, this takes much more effort.
A similar strategy is BRRRR. This stands for Buy, Rehab, Rent, Refinance, Repeat.
If you don’t want to deal with directly owning property, then consider wholesaling. You’ll act as an intermediary between sellers and buyers.
Whatever you choose, make sure to diversify across different property types. This will mitigate risk and protect your investments.
Invest in Technology and Tools
When you start a real estate investment company, it can become harder and harder to keep track of your properties as you acquire more. However, investing in technology and tools can ease your burden.
With property management software like Buildium or AppFolio, you can do the following:
- Track rent payments
- Manage tenants
- Schedule maintenance
If you want to make wise investments without complicated calculations, then use deal analysis software. Useful tools here include DealMachine and Mashvisor.
And don’t forget to have an online presence. Create a website that clearly lists your services and available properties, and use search engine optimization (SEO) and social media for marketing.
Acquire Your First Property
Now for the exciting part—acquiring your first property!
Make sure you do your due diligence. Research the property’s history, condition, and neighborhood. Then, calculate repair costs and potential rental income (if applicable).
You should also review the title records. This can help you avoid legal issues in the future.
Once you’ve found a suitable place, you can work with an agent or use negotiation tactics to get the best price. From there, you can finalize the funding arrangements and close the deal.
As your profits grow, use the money to acquire more properties or upgrade existing ones. Don’t forget to build relationships with tenants, buyers, and investors to ensure ongoing success.
Know How to Start a Real Estate Investment Company
Now that you know how to start a real estate investment company, you have all the information you need to be successful.
There’s always a niche to fill somewhere, so it’s up to you to find it. Afterward, it’ll take perseverance and smarts to turn your business into a profitable one. With everything you’ve learned here, it’ll definitely be possible.
Sign up with Business Anywhere today to use our free business registration service. We can be your registered agent at affordable prices too.
