Subscribe by email. Enter your email address below: The purpose of this article is to serve as a detailed checklist for getting ready, creating and structuring your own real estate business. I will also point out the benefits of detailed planning and management, and the pitfalls for failure to do so. First things first: what is the name of your new company? What type of business entity will you put up? A sole proprietorship is the quickest and easiest; but, it might lack the required asset and liability protection warranted by your business model. My personal favorite has always been the Limited Liability Company (LLC). It's quick, inexpensive, and provides individual shelter.
In addition, in which state will you register to try and do business? Are there any state and/or local licensing requirements? All of these questions should already be answered in your business plan. Some of you may be thinking, "I'm going to acquire foreclosed properties, rehab them, and sell them for a profit. What further explanation or planning do I want?" Well, if that is your mindset, stick with your full-time job. I recommend going online (Google it) and downloading a business plan template to help you with development.
In addition to your business plan, you better have projected financial statements, including a cash flow forecast, projected income statement, and anticipated balance sheet. There are numerous advantages of generating these statements. Clearly depicting your yearly operating expenses let's you recognize the number of real estate transactions you need to successfully complete in order to break even and/or realize a profit. Taking the time and effort to implement these tasks will assist you in overcoming some of the most important impediments when starting your real estate business.
The most common recurring mistake I've seen amateur entrepreneurs commit is quitting their full-time job even before completing their very first real estate deal! Under-capitalization is one of the biggest oversights when starting a new business. If you do attempt to quit your full-time job, make certain that you have enough of a monetary cushion to cover your living expenses for twelve months. Ideally, you want to have a surplus in your bank account in order to fund your business (i.e. - entity formation fees, licensing, marketing expenses).
Finally, will you be self-employed or a business owner? No, they are not the same thing! Being self-employed means when you quit your job, your business stops working. If you're not promoting for leads or answering phones, then no one is. Being a business owner (hiring and maintaining workers) allows the freedom and independence that entice individuals to start their own businesses in the first place. Most amateurs quit their full-time job expecting to start and sustain their own business profitably, while playing golf or going to the beach four days a week. WRONG! The transition from self-employment to business ownership is the toughest obstacle to overcome. It took me almost a year of interviewing hundreds of job candidates, working fourteen hour days, pulling all-nighters, and sacrificing my personal and social life to successfully build and develop each of my businesses to the point where they could all run on "Auto-Pilot."Bear in mind, a business is only as strong as its weakest link.
In addition, in which state will you register to try and do business? Are there any state and/or local licensing requirements? All of these questions should already be answered in your business plan. Some of you may be thinking, "I'm going to acquire foreclosed properties, rehab them, and sell them for a profit. What further explanation or planning do I want?" Well, if that is your mindset, stick with your full-time job. I recommend going online (Google it) and downloading a business plan template to help you with development.
In addition to your business plan, you better have projected financial statements, including a cash flow forecast, projected income statement, and anticipated balance sheet. There are numerous advantages of generating these statements. Clearly depicting your yearly operating expenses let's you recognize the number of real estate transactions you need to successfully complete in order to break even and/or realize a profit. Taking the time and effort to implement these tasks will assist you in overcoming some of the most important impediments when starting your real estate business.
The most common recurring mistake I've seen amateur entrepreneurs commit is quitting their full-time job even before completing their very first real estate deal! Under-capitalization is one of the biggest oversights when starting a new business. If you do attempt to quit your full-time job, make certain that you have enough of a monetary cushion to cover your living expenses for twelve months. Ideally, you want to have a surplus in your bank account in order to fund your business (i.e. - entity formation fees, licensing, marketing expenses).
Finally, will you be self-employed or a business owner? No, they are not the same thing! Being self-employed means when you quit your job, your business stops working. If you're not promoting for leads or answering phones, then no one is. Being a business owner (hiring and maintaining workers) allows the freedom and independence that entice individuals to start their own businesses in the first place. Most amateurs quit their full-time job expecting to start and sustain their own business profitably, while playing golf or going to the beach four days a week. WRONG! The transition from self-employment to business ownership is the toughest obstacle to overcome. It took me almost a year of interviewing hundreds of job candidates, working fourteen hour days, pulling all-nighters, and sacrificing my personal and social life to successfully build and develop each of my businesses to the point where they could all run on "Auto-Pilot."Bear in mind, a business is only as strong as its weakest link.
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Another great article by Robert Lachance Real Estate, Somers & Associates, Realtors This article, Real Estate Business: How To Start One is available for free reprint.
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