Real estate can be an extremely profitable venture. People love to invest in property, and there is no doubt that there is a lot of money to be made in it. But if you make bad calls, there is also a lot of money to be lost in it! There are plenty of tales of people who invested in property and ended up broke. One notable case in the United Kingdom involved the Premier league soccer player Lee Hendrie, who went from earning millions a year at the height of his sporting career, to filing for bankruptcy. All because he made bad property investments.
So when you start your real estate business, ensure that you don’t make these five rookie errors.
1. No Business Plan
When starting a new business, it is natural for an entrepreneur to want to get his or her hands dirty as quickly as possible. Everyone wants to get on with the process of attracting customers, making sales, and ultimately making money. However, without a proper plan, you can be almost entirely certain that your real estate business will fail.
Your business plan helps decide and define where you are going, how you are getting there, and what it’s going to take in order for you to do so. So here are six things that should be included in every good business plan.
- You need to outline your key goals. What do you want out of your business? Set yourself realistic and measurable targets.
- Outline any services that you provide, and keep these specific. Remember the old mantra that jack of all trades is master of none. Specialize in, for example, residential or commercial.
- Define the specific market or demographic that you are targeting. Outline this clearly and carefully consider how you will target this niche.
- Carefully budget your business. Write down every conceivable expense, and work out how much money you need to make to break even. Overestimate your expenses if possible, in order to provide yourself with the worst case scenario.
- Work out how you are going to pay for your budget in the early days of the business. Cash flow is always an issue for new real estate companies, and you should definitely bear this in mind.
- Finally, it is important to have a stringent marketing plan, so make sure that this is outlined clearly in your business plan.
2. Not Hiring the Best Closing Team
In real estate, your success will be defined by the people that you surround yourself with. Great business people are smart enough to hire people who are smarter than they are. Poor entrepreneurs are scared of people who are smarter than they are. Hire the best closing team that you possibly can, and pay them well. Make them feel valued, as they will ultimately play a major role in the success, or otherwise, of your business.
3. Not Arming Yourself with the Key Tools of the Trade
Getting started as a real estate agent is expensive. Do not underestimate this for one minute. And once you get the business off the ground, you can be certain that you will run into yet more expenses. But it would be wrong to cut corners and not arm yourself with the requisite and important tools of the trade, as you can rest assured that your competitors will be doing so.
Critical aspects of a real estate business includes an MLS Access subscription, a mobile phone with a huge amount of free minutes and texts, a mobile computer, which can be a laptop or tablet in this day and age, and a real estate-friendly car; ie. something durable that can rack up the mileage.
Don’t think that you will get by without these things, let alone be a success, because you certainly will not. These are absolutely key tools of the trade, and will be worth their weight in gold if your business becomes a success.
4. Under Spending on Marketing
It’s always tempting to cut corners on marketing. Unfortunately, this can also cost far more money than it ultimately saves. Any good businessperson will tell you that the amount of money you make will correlate very closely to how wisely you spend money on marketing. Choosing the right brokerage can gain you some excellent inbound leads, but you cannot rely on this alone. An effective personal marketing campaign that creates a compelling brand for your business should be considered essential.
5. Choosing the Wrong Broker … and Having the Wrong Motivations for Doing So
Finally, your broker will be an absolutely key part of your organization. So choosing the right one is essential. Unfortunately, many businesses make huge errors in judgment in this department, and ultimately opt for completely the wrong broker for their company.
An absolutely key and critical concern for new real estate businesses with regard to brokers is what they will offer you as a new agent. Do they have incoming leads? Do they have an effective training program? What is their retention level and average sales price? Do they encourage their agents to promote themselves?
Hiring the right broker can absolutely make your business, so ensure that you give it your due attention.