Home Is Where the Cash Is: Building Your Real Estate Business from the Ground Up

Business.com / Industry / Last Modified: February 22, 2017

As the financial crisis fades into the rearview mirror, many entrepreneurs might be encouraged to get back into the real estate game.

As the financial crisis fades into the rearview mirror, many entrepreneurs might be encouraged to get back into the real estate game.

In many regions across the country, real estate sales and prices are on the rise.

While real estate investing is cyclical in nature, achieving success depends upon a number of factors.  

First you must understand the basic fundamentals of real estate, know your market, and anticipate what other investors and homebuyers seek.

Owning Your Own Agency

The real estate business offers opportunities to acquire wealth, and owning a brokerage is one way to manage the risk of market fluctuations.

At the same time, there are responsibilities like assuming managerial duties and the overhead costs of running an office.

If you are new to the real estate game, it is essential to leverage your previous experience and tap your career and educational achievements.

In so doing you will be better able to plan and execute your business strategy.

Related Article: What Real Estate Websites Can Teach Your Business About SEO & Social Media

Relationship Building

Any successful business endeavor depends on building relationships, whether with your business partners, clients or employees.

If there are other investors involved in the business, it is essential to define these relationships by having a written agreement that specifies the role and responsibilities of each individual, methods for resolving disputes, and exit strategies like buy/sell provisions. 

Moreover, attracting clients often depends upon the skills of sales agents. While finding salespeople is relatively easy, retaining them is another matter.

In addition to providing them with leads, competitive commission structures and benefits, it is essential to develop a positive business culture where employees' contributions are valued.

Finally, in the course of conducting business, it is crucial to develop relationships with real estate attorneys who are familiar with the local markets and who can handle the complexities of contracts of sale, title searches, arranging for financing, and conducting closings.

The Real Estate Game

If your goal is to get rich quick, think again. You may be familiar with late night infomercials trying to convince you that it is possible to get rich by flipping houses with no money down.

Don't believe the hype. The fact is that learning how to build a real estate business is not easy.

In the long run, however, the potential financial rewards are huge. Ultimately making money in real estate requires knowing the location, history and future of a particular market.

Having a successful real estate business is about staying ahead of the competition.

This is a matter of doing some homework by studying pricing trends, selecting desirable locations, understanding the tax implications, ascertaining school rankings, and foreseeing the expansion of nearby markets.

The Right Price

By studying pricing trends, the savvy entrepreneur will be able to perceive the fair market value for properties and differentiate a good investment opportunity from an overpriced property.

This means studying the current trends in a number of markets to determine where prices are accelerating more quickly. An area with lower prices often provides better long-term rewards.

Related Article: Warning: These Real Estate Marketing Strategies Are So Effective, They're Addictive

Location, Location, Location

At the risk of stating the obvious, real estate is all about the location. This means investing not only in currently desirable markets, but up-and-coming areas as well.

One way to determine the prospects of a market is to look for the development of new infrastructure, particularly roads and schools.

These are usually good indicators that a community is poised for growth.

Other signs of growth include land clearing, surveying and new construction, and roadway improvements designed for increased traffic flow.

Death and Taxes

Avoiding taxes, like death, is not realistic. That being said, there are ways for an entrepreneur to minimize the tax consequences of real estate investing.

A town with lower property taxes will typically be more in demand, and properties can be bought and sold more quickly based on this demand.

Getting a handle on the tax structure of a particular area not only requires obtaining information from the local tax assessor, but also foreseeing if a reassessment is on the horizon.

Taxes tend to rise in areas that are becoming crowded, where schools are filled to capacity, and roadways need improvement.

Teach Your Children

Parents who are looking to buy a home are invariably concerned about the quality of education in a community.

This means that you need to be familiar with the school rankings associated with the market. Schools are typically ranked by the students' performances in math and English by district; the current controversy over Common Core notwithstanding.

In short, new home buyers want access to quality education for their children and will be more inclined to buy a home in communities with higher rankings.

Up the Road Apiece

Another key to achieving success in the real estate game is to know what's happening on the outskirts of town.

As the prices of properties downtown escalate, some homebuyers may be priced out of the market and will look to surrounding areas that may be poised for future growth.

Some typical signs of growth include areas where major train stops or bus routes are being planned.

Related Article: 5 Emerging Business Trends You Should Know About

The Bottom Line

In the end, building a successful real estate business means being in the game for the long haul.

As an owner, it is essential to learn about industry trends concerning market prices and future development and to be patient as you execute your plan.

By having a talented team around you, you can navigate the ups and downs of the real estate cycle and reap the long-term financial rewards.

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