Starting Your Own Real Estate Investment Company


Examples Of Real Estate Businesses

How To Start A Real Estate Investment Company

Here are 30 potential ideas for starting a real estate business, listed in alphabetical order:

  • App Developer
  • Vacation Rental Host
  • Wholesaler
  • While not everyone who works in one of these 30 different types of real estate businesses becomes an investor, these positions can all provide a launch pad for a career as a real estate investor.

    Earning rental income, profiting from potential appreciation over the long-term, and garnering tax deductions and benefits are just three of the many reasons for investing in real estate.

    Now, lets look at how to start a real estate business.

    Your Agent Recruitment Plan

    Believe it or not, even in crowded cities like New York, recruiting new agents and getting them to stay with you can be a full-time job. How much money, time, and effort do you plan on investing in recruiting new agents? How and where do you plan to recruit?

    As an aside, many new broker-owners are afraid to start a brokerage because they dont think they can woo top talent away from the big players.

    While this is a concern you need to plan ahead to mitigate, dont worry too much about it. You can still build a highly profitable brokerage with a mix of new and mid-level agents.

    How To Start Your Own Private Equity Fund

    Private equity firms have been a historically successful asset class and the field continues to grow as more would-be portfolio managers join the industry. Many investment bankers have made the switch from public to private equity because the latter has significantly outperformed the Standard & Poor’s 500 Index over the last few decades, fueling greater demand for private equity funds from institutional and individual accredited investors. As demand continues to swell for alternative investments in the private equity space, new managers will need to emerge and provide investors with new opportunities to generate alpha.

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    How To Invest In Real Estate Investing Funds

    Investing in a real estate investment fund can be a lucrative business. The limited partners provide the capital and are passive investors who have trusted their sponsors real estate investment offering. The partners receive returns on investments, and the sponsor earns fees, depending on performance.

    However, like any business, this comes with financial risks. To make sure you get the best from investing in a real estate investment fund, here are some key things to consider:

    1. Target Properties

    The first step is to identify the kind of assets the fund you are considering wants to venture into. A suitable property will appreciate and be profitable to the investors. If the fund has been dealing with the same properties for a while, ask for supporting documents on previous performance.

    2. The Sponsor

    You are giving the sponsor your hard-earned money when investing in a real estate investment fund. Therefore, ensure that the funds sponsor is trustworthy, with experience in and knowledge of real estate funds. Also, the management should be transparent about previous ventures and the returns.

    3. Structure of the Fund

    A real estate investment fund can either be an open or closed fund, and the structure determines how investors leave the fund. For open funds, you can opt-out of the fund before the completion of the project. On the other hand, investors cannot leave a closed fund until an agreed-upon time.

    Sell Property On Behalf Of Developers

    How to Start a Real Estate Holding Company or Real Estate LLC

    If you have no money and still looking for opportunities to start your own property estate business, why not start a business selling property on behalf of developers?

    New housing and residential projects keep coming up in the market. You can contact developers and sign a contract to sell their properties for a cut of the sale price.

    Using this strategy, you may opt to advertise and sell the developers properties and earn a commission on each closed deal. The commission or cut may vary from project to project and also depending on the type of property sold.

    Obviously, commissions earned for selling luxury properties is much higher compared to the budget segment properties, so you might want to target the high-end properties.

    You can easily search and find new property developers online or within your local area.

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    Set Up The Llc For Your Real Estate Holdings

    While there are multiple ways to structure a real estate holding company, such as an S corporation, a C corporation, sole proprietorship, or a partnership, an LLC is the most popular entity to use for setting up a real estate holding company. This is because its simple to administer but still gives you all the liability protection and personal separation a corporation can give you.

    Part of this setup process includes choosing a name for your holding company. You also need to register it with your state, register it with the IRS, and receive an employee identification number .

    Keep in mind that the name of your business cant be the same as any other LLC on file in your state. The business name must end in LLC, Limited Liability Company, Ltd, or some variation that shows the type of entity it is. Each state has its own LLC office, and its generally associated with the Secretary of States Office. You can call them, or it may be possible for your lawyer to check online to see if a name is already being used.

    You will then need the following documentation to form an LLC:

    Prepare A Detailed Cost Analysis

    Tough it may be relatively simple to enjoy short-lived profits, developing a viable real estate investing business that can last for the long-term requires additional skill and effort. Whether focusing on apartment buildings or commercial property. Listed below is a detailed cost analysis of starting a small scale real estate investment business.

    • Lease $2500
    • Management team $15, 000

    Total = $542,700

    The cost of starting a real estate business might be big but its profit when managed well can be overwhelming. From the well researched cost analysis above it will cost a staggering $500,000+ to start a small scale real estate investment, showing how intense and rich the industry is!

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    He Who Has A Why Can Suffer Any How Friedrich Nietzsche

    Study after study has shown that in order to be successful at a difficult task, your goals need to be concrete rather than wishful thinking. So if you want to have the motivation to get you well out of your comfort zone every day, you need to figure out what you want in as much detail as possible. Once you have your target, youll be surprised at how much energy you have to actually get there.

    How To Do Real Estate Investment Analysis

    How To Start A Real Estate Investment Company

    I started after college as a commercial real estate analyst and still do freelance analysis for a few property developers. Finding good real estate investments isnt like researching stocks but thats a good thing.

    Where investors scramble for a couple percent extra return on stocks versus the market, put together a solid process for real estate investment analysis and you can easily make double-digit returns each year.

    Direct real estate investment is far from a passive income strategy though it can be a great business and can boost your returns through sweat equity. Investing indirectly in REITs removes a lot of the management hassles but also reduces the returns. Investing in crowdfunding real estate can be a happy medium with great returns but managed properties.

    Real estate analysis starts with researching the market, the city or region where the property is located. A lot of this is going to be included in the investment proposal on real estate crowdfunding sites but make sure you double-check the numbers.

    Once youve found a couple of good markets for investment, you can start looking at individual property. Again, most real estate crowdfunding deals will have detailed analysis in the documents but someone in your real estate investment group should be tasked with checking the numbers.

    At minimum, start with an estimate of rental income over the next three to five years. Are the developers estimates for vacancy and lease losses similar to your market research?

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    Finding Investment Property For Sale

    Finding real estate investment property alone will take weeks of online searching, site visits and negotiation. I used to spend a couple hours a week talking to different real estate agents and brokers just sourcing deals.

    The internet and real estate crowdfunding has made the process a lot easier. I would suggest assigning each person in your real estate investment group a different website to follow for deals unless they have another specific talent like legal or investment analysis.

    On Streitwise, you find the investment offers by clicking Explore Investments. Investments are either Preferred Equity, Equity or Debt.

    Each investment offers detailed information on the property, financials, a market summary, overview and management as well as a download of documents. Most investments come with all the analysis youll need to make your decision but make sure you back it up with some of your own research.

    Can You Start Your Own Real Estate Investment Fund

    Yes, you can create your own real estate investment fund. To begin with, you must get a lawyerspecifically, a securities lawyer. This is a lawyer specialized in creating private investment offerings and handling legal issues related to the investment.

    If you pass the law requirements, you will be the general partner, also known as the sponsor. You will then ask investors, or limited partners, to invest in the fund and provide capital. The accumulated funds are then used to purchase real estate property.

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    Real Estate Holding Company Vs Other Legal Entities

    Business owners are aware of the vast amount of legal entities they may structure their companies under. While more recognizable than the average legal entity, an LLC for real estate investment is but one of several options. In fact, due to their recognizable nature, most business owners choose an LLC structure because they are unfamiliar with the many legal nuances associated with other options. Others assume LLCs are the best way to go. In reality, no one entity encompasses or covers the needs of every business. While most real estate investors favor LLCs, there are other options available. Corporations and partnerships, while different in their own right, share many similarities. The following is a breakdown of other legal entities:

    Choose A Real Estate Investing Strategy

    How To Start A Real Estate Investing Business

    After researching the basics of real estate investing, the next step would be choosing a real estate investment strategy. When starting a real estate investment business, these are the most common rental strategies:

    1- Long-term or traditional buy and hold. This strategy, as the name implies, involves buying an investment property with the aim of renting it out for a long period until it is sold again. Profits are made after subtracting costs from monthly collected rent.

    2- Short-term or Airbnb rentals. Unlike the first strategy, a short-term rental is rented out for short periods, a maximum of 6 months. Tenants of short-term rentals pay per night of stay.

    Location is the most important word in real estate. The location of the investment property decides whether you should opt for a long-term or a short-term rental strategy.

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    Working With A Realtor

    When youre starting out as a real estate investment business, you will be at a large disadvantage if you are not familiar with the real estate market where you will be operating. Unless you have a partner who is experienced in this industry, it may help to work with a realtor. A realtor can help you understand what properties are available and give you sound advice on what areas are growing in demand. They also can help with the contracts you will need in some statesalthough you may be better off using a qualified real estate lawyer when negotiating contracts for the purpose of investing.

    In addition, a realtor can take on some of the tasks you may have less experience with, such as finding renters or helping you resell after flipping. A long-term relationship with a realtor you trust may be beneficial for your investment company, but it will depend on how you are investingand how hands-on you plan to be during acquisition of properties.

    As A Business How Do You Finance The Purchase Of These Homes

    To start out, most people use money partners. I have the knowledge and the connections, I do the negotiating and footwork, my partner has the money and credit. Or, you can find other investors that want to buy the property that you find, or they will “hard money” lend you what you need for a short term. After a while, if you market and build up your business as they teach, you create a stream of income that gives you the money you need.

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    Why Do You Even Want Your Own Real Estate Business

    If youre going to bring your A-game and function at your best every single day, youre going to need motivation. I hate to say it, but unless youre Lex Luthor, money wont be enough. After all, youre living comfortably now, right? Do you really think youll be able to wake up ready to go every single morning if all youre after is money?

    Choose A Business Structure

    How To Start A Real Estate Business Today | Guide For RE Investors

    All U.S. businesses must be registered with the IRS, which offers several company structures. Choose a business structure with the best legal and tax setup for your situation. Real estate professionals generally run their businesses as small companies, so theyre registered as either:

    • LLCs , which offer liability protection and tax flexibility
    • Sole proprietorships, which are easier and cheaper to set up but dont offer the same protection

    Since youll target high-dollar transactions in a market where emotions can run deep, the liability protection of an LLC bears strong consideration. This structure shields your personal assets in the event of a lawsuit. It also avoids the double taxation of a corporation structure.

    You can file for an LLC online, but first decide if youll sell as a licensed real estate broker or as an investor. That decision determines which kind of business license you may need.

    Real estate investing can be expensive, since inventory costs are high. By contrast, becoming a licensed agent costs less. As you calculate small business costs, consider the following:

    • Fixed costs
    • Ongoing expenses
    • One-time costs

    Be sure to check for tax breaks and local grants to offset costs associated with starting your real estate business.

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    Conduct An Investment Property Analysis

    An important step before starting a real estate investment business is to evaluate the performance of the property itself should it be rented out using any of the discussed rental strategies. The easiest way to perform an investment property analysis is using an investment property calculator also known as a rental property calculator.

    Mashvisors own rental property calculator is a tool every real estate investor should use if they want to make money fast in real estate. All you have to do is enter in how much down payment you are going to pay and the financing method. Thanks to thousands of inputs, data analytics provides you with important real estate metrics such as the expected rental income, cap rate, and cash on cash return. Furthermore, the calculator will advise you as to which rental strategy is more favored for the investment property.

    To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.

    How Can I Start My Own Real Estate Business With No Money

    5 Ways to Begin Investing In Real Estate with Little or No Money Buy a home as a primary residence. Buy a duplex, and live in one unit while you rent out the other one. Create a Home Equity Line of Credit on your primary residence or another investment property. Ask the seller to pay your closing costs.

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    What Is A Real Estate Holding Company

    A real estate holding company is a legal entity designed to protect business owners from the risks that come with owning investment properties. Real estate holding companies, also known as limited liability companies , do not participate in business operations themselves but own different assets. The purpose of this structure is to essentially prevent business owners from being personally responsible for debts or other liabilities incurred by the entity, thus the name limited liability.

    Although the enactment of LLCs can be traced back to the 1970s, real estate investors have largely begun to take an interest in the past decades benefits. They are now often used as a tool to reduce personal exposure to monetary and legal risk. Through a holding company, owning investment properties is also known to create significant tax benefits, and ease of administration when compared to other legal entities.

    While real estate holding companies are not the only way to protect a business, most investors find the benefits to be the most accommodating. In other words, if you want to learn how to start your own business, it could not hurt to look into forming one for your protection.

    Do You Have Enough Savings To Live For At Least A Year With No Income

    How to Start Your Own Real Estate Business

    This is an important one. Even if you have the perfect plan and the money in the bank to make it work, you can never really predict success in your first year. The market might shift, the economy might tank, or your partners might abandon you. That means you need to mitigate the risk of going bankrupt by having enough savings to last you for at least a year without income. Like Warren Buffet said, Dont risk what you have and need for what you dont have and dont need.

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