How to Start a Real Estate Business

Real estate has always been seen as a worthwhile investment. Whether you’re purchasing a property to live in or are hoping to become a landlord, property values tend to increase, allowing you to make a return on your investment.

If you’re serious about a real estate business and creating wealth, it’s time to start planning. Starting any business is exciting and challenging, it’s essential you first understand the fundamentals.

The real estate market in Canada is expected to be worth US$8.47 trillion by the end of 2024. Estimates suggest that landlords collect over $110 million annually, which is rising.

In short, you have a lot of competition. Fortunately, approximately one-third of Canadians rent their home. That makes this an attractive market.

You’ll need to focus on a specific niche to make a success of your real estate business:

• Building property to rent

• Renovating rental properties

• Flipping

• Long-term rentals

• Vacation rentals

• The luxury market

• Become a real estate agent

Every niche has its own advantages and disadvantages. Consider which one appeals carefully. It should be part of your entrepreneurial startup plan.

When purchasing a property, such as a duplex, to live in and rent, you’re going to need to stay local. However, you’ll still need to consider the exact location, closer to amenities is generally a popular option.

If you are ready to create real wealth via a real estate business then you need to be thinking bigger. Consider looking at lots for sale that will allow you to create multiple residential rentals. Or, you can renovate existing buildings to maximize rental returns.

In this instance, you don’t need to stay local. When choosing a location it’s a good idea to look at costs versus returns.

You may want to look at getting a property in Calgary, where there are plenty of interesting and affordable opportunities. For example, it’s possible to pick up an apartment building in Calgary which is already split into two duplexes for approximately $1 million. The existing rent, before you make improvements and increase it, is $60,000 a year. Enough to pay your business mortgage off in 15-20 years.

In contrast, an existing four-apartment building in Toronto will cost you over $4 million. Deciding a location involves looking at the niche you’re trying to occupy, your available funds, and which location can offer you the best options for your money.

You’ll likely need finance to help you purchase your first, and subsequent, properties. There are many options when searching for commercial finance. It’s still possible to approach banks for commercial loans.

Other options include private investors, independent loan companies, or even a raid on your pension fund. You may even qualify for a government loan.

Before you can approach any financial institution or individual, you need to have a financial plan. It should accurately portray the purchase costs, build or renovation costs, ongoing costs, and expected returns. These facts, showing the potential for a profit, will help investors see that you have a solid business proposal.

You should check the local laws regarding building permissions and if there are any restrictions that could affect your investment. This is important regardless of where you are purchasing, it’s unlikely you already know all the regulations.

This is also the stage where you make sure you have all the necessary licenses and certificates to purchase, renovate, or build property and then sell or rent it.

While checking local laws, it’s worth looking at recent and upcoming lawsuits. Events such as the NAR lawsuit can have a direct effect on the real estate industry, you need to be aware of what may change before it happens.

Networking is important in any business. It’s the simplest way to find new opportunities, get advice when you need it, and build a support network.

A great place to start is to attend industry events and join commercial real estate organizations.

With your plan and financial backers ready, you’re now going to need to find the right property to start what will hopefully become a real estate empire.

Remember, flexibility is essential regarding location and even the type of building you choose. It’s essential to look at every opportunity strictly in business terms. Allowing your heart to make the decision is often a recipe for additional financial costs.

Many people dream of becoming a real estate mogul, but few take the leap. The good news is that it’s possible to build a real estate empire and establish wealth. However, you need to start on the right footing and realize that it’s going to take hard work to succeed.