The real estate industry primarily involves buying and selling properties to earn a considerable profit margin. Real estate entrepreneurs also profit in the sector via wholesaling, property management, and joint ventures. At a glance, the real estate concept looks simple, but the field has its challenges, risks, and financial implications. Being a successful real estate entrepreneur requires practical knowledge. This article explores what a real estate entrepreneur is and how to become one.
What is a real estate entrepreneur?
Real estate entrepreneurs are investors who recognize and take advantage of investment opportunities by buying and selling properties. Generally, real estate investors are classified into active and passive investors depending on their mode of operation. Active real estate entrepreneurs finance the acquisition of properties and sometimes renovate these properties and get them ready for sale.
Meanwhile, passive real estate entrepreneurs take a more subtle approach. They work closely with real estate firms and agents to manage properties for active investors. Passive real estate investors also monitor the market, analyzing the best time to buy and sell properties, comparing property values, and reviewing real estate listings.
Related: What is the difference between an entrepreneur and a business person?
How to become a real estate entrepreneur
Pursuing a career in the real estate industry to become a real estate entrepreneur is noble. But, it comes with its risks and challenges. To become a real estate entrepreneur, there’s the need for a high tolerance for risk, self-motivation, and creative thinking. Here are proven steps that simplify how to become a real estate entrepreneur:
Understand the basics
The first step to becoming a real estate entrepreneur is learning the real estate business fundamentals. While a formal education is not a requirement in the real estate industry, you can still decide to earn a college degree. Although, it might be challenging to find a course that primarily focuses on real estate. As such, opting for programs focused on business would suffice. Enter a program focusing on the buying and selling process, insights into flipping, and proper definitions of business terms. On the other hand, if you prefer the informal path, registering for online courses organized by industry professionals is a decent way to learn the basics. Take courses on real estate terminologies, financing options, laws, and market trends.
Get a license
The criteria for getting a license are often strict and may vary from state to state. The basic includes a minimum age of 18, graduating high school, undergoing more than 40 hours of training, and completing a licensing exam. Most states typically charge an application fee, an examination fee, and costs for your pre-licensing course when you apply for a real estate license. Your state of residence and your chosen course provider affects the total costs. Total charges often vary between $400 and $700.
Properly research the state-specific licensing criteria for real estate agents before enrolling in the requisite classes and exams. The real estate licensing exams can be rigorous, often requiring the completion of around 110 questions within a strict time limit of 150 minutes or a similar duration. So, ensure you prepare.
Develop a business plan
The next stage is to create a business plan that defines your aims and goals for a successful career after learning the fundamentals and obtaining your real estate industry certification. Drafting a business plan that details your investment objectives is helpful because, as a novice, the real estate market can be challenging. The operating model of the company, short- and long-term goals, and plans to reach those goals make up the structure of a business plan. A business plan helps you focus on the main objective without getting distracted when business is not going smoothly.
Be aware of the risks
As lucrative as real estate management, it comes with risks, and the possibility of taking a huge loss is real. These losses can be in the form of volatile market conditions or tenant issues. So, before venturing into the real estate business, taking note of these risks is essential to tackle them appropriately. By identifying these risks, entrepreneurs can make conscious decisions about what properties to buy, when, and how to protect their investments. Some common risks entrepreneurs face in the real estate business include the following:
- Market risk: Market volatility often affects the value of real estate properties. Property value increases or decreases due to changes in the real estate market.
- Tenant risk: Tenants sometimes cause problems for real estate entrepreneurs through property damage or non-payment of rent.
- Liability risk: Entrepreneurs can be held accountable for injuries sustained by employees when working on a property.
Establish a network
Real estate entrepreneurs can form cordial relationships with contractors, investors, money lenders, and agents. Establishing a robust and powerful network can help entrepreneurs easily identify opportunities, get finance, and smoothly close deals. Building an effective network around you guarantees success in the real estate business. Luckily for newbie real estate investors, networking with professionals and building a real estate team is relatively easy in this technologically advanced era. You may find and connect with other professionals in various online real estate-focused groups, industry events, and your local community. You may also use social media and online directories to connect with these professionals.
Be keen to learn
The real estate sector is constantly evolving. Therefore, stay informed of the most recent advances and be open to learning new techniques. Study the most recent information about the real estate industry, regardless of whether you have a college degree or are routinely enrolling in new online courses. The more information you have, the better you can make conscious choices about essential business decisions.
Having a mentor is an excellent way to stay current and learn about the latest real estate development. A mentor can be anyone with enough experience and proven success in the real estate business who can offer advice and guidance. Asking friends and business colleagues about various mentorships is an excellent way to find a suitable mentor.
Buy your initial investment
After doing comprehensive research and deep market analysis, securing the necessary finances, and finding a promising property, it’s time to make your first real estate investment. Remember that most real estate investments are one-time investments. Evaluate the market, overall economy, real estate laws, and demographic trends before making your first purchase. After making your first purchase, you may refine your objectives, buy more properties and push for more success while increasing your revenue streams.
