Has the idea of becoming a real estate agent always sounded enticing? There are many people who agree with you as there are about 1.36 million active members of the National Association of Realtors.
If you want to join them, the first thing you need to do is come up with a real estate business plan. This will help you get organized and stay motivated and focused on your goal.
Creating your plan doesn't have to be a big scary thing. We've created this easy to follow guide to walk you through creating your own plan.
Admit You Need a Plan
We get it, you are excited and want to get started selling homes and making money. Take a pause and admit that jumping in without a plan isn't a smart idea.
Having a business plan will help you stay focused on where you are going. Your plan will act as a roadmap to your success to help keep you focused on the priority tasks.
Four Steps to Creating Your Guide
Keep in mind as you create your plan that it isn't set in stone. You will find that you need to adjust and tweak as you learn and your business grows.
Living Document
Think of your plan is a living document that you adjust as you become a more experienced agent. For example, you may start out thinking that cold calling and mailings are how you intend to get leads. Through trial and error, you might realize that Facebook and Google Ads are a more cost-effective method.
You Don't Know Everything
Don't feel pressure to know the right answer when creating your first business plan. Have confidence in the decisions you make and commit to them. If you find that your chosen method doesn't work, that isn't a failure. You have simply succeeded in finding a way that doesn't work and have the opportunity to try something new.
Hold Yourself Accountable
Without anything set in writing, you don't have anything to hold yourself accountable. This will help you stay focused when you get tempted to slack off.
It will also remind you of what it will take to succeed. This can be motivating and encouraging when you hit those inevitable rocky times.
Step 1: Define Your Vision of Success
This first section of your plan is your executive summary. This section is going to briefly summarize your strengths and how you plan to use them to take advantage of the opportunities available to you.
The next part of your executive summary should include the areas that you plan to work in. Define the geographical area and neighborhoods that you want to focus on.
You also need to define the types of property you want to work with. This could be residential or commercial property.
Once you decide the type of property, you need to define the price range of the property you want to focus on. Then give a general overview of your marketing plan for how you will gain business in your goal market.
Wrap up your executive summary by outlining the skills you know you bring to the table. Don't be afraid to include any and all skills. Think about them in terms of sales, business development, and marketing.
Keep It Brief
Don't get too detailed in this section. Think of this as your "elevator speech" when friends and family ask how you plan to succeed in real estate.
They don't want the nitty-gritty details. They want a broad strokes overview.
Step 2: Know Your Market
Your next step is to start digging deeper into your intended market. You need to know everything about the playing field and the competition.
During this process, you may find where you initially wanted to focus on is highly competitive. But if you shift your focus, you can find a niche that is ripe for you to move into and succeed.
The key is to figure out what already saturates the market and what you can do to create a unique selling proposition so you stand out.
So there are 5.51 million homes sold in 2017, how many of them were in your chosen market? How many of them will be yours next year?
Research Topics
Look up this type of information in the market you want to focus on. It may be helpful to research surrounding markets also so you have something to compare yours to.
- Number of agents and brokers in the area
- Average number of sales and sale price
- Rental prices in the area
- Average time homes are on the market
- Demographics of the people in the area
- Average months of supply
The average months of supply is how long it takes for the current supply of home on the market to get sold. You figure this out by dividing the total supply in a month by the average number of homes sold each month.
Step 3: Strategize Lead Generation
The next step in creating your business plan is to define in detail how you plan to generate leads and grow your business. The easiest way to get started is to start with the circle of influence you currently have.
Friends and Family
These are the people you already know and interact with. Begin your business by informing them you are starting a real estate business and offer your services.
Your Market Demographics
Your next step is to reach out to the people in your market area. How you go about doing this will depend on the demographics. You want to tailor your communication approach to resonate with the people.
If your key demographic is older, you may find cold calling and door hangers are the way to go. If your demographic is younger, using more modern tools like 3D tours are more effective.
Step 4: Create Your Financial Plan
Now that you know your goals and your market, it's the time to start looking at the numbers. You need to outline your goals and expected expenses.
Personal Expenses
Start with your personal expenses you will need to cover. If you plan to do this full time, then your real estate business needs to cover your living expenses.
Take into account your home rent or mortgage, utilities, and gas. Keep in mind some of your expenses like gas will increase as you drive from one property to another.
You also need to include your personal financial goals. This could be a new car or a down payment on a home.
Business Expenses
Now you need to look at your expected business expenses. You need to try and come up with an accurate number of costs.
Take into consideration what your clientele will require. You can reduce these costs by subtracting anything that your brokerage will take on.
Take these factors into account when creating your budget:
- FSBO lists
- Commission splits
- Transaction fees
- MLS fees
- Licensing fees
- Professional organization fees
- Client expenses
- Technology
- Vehicle maintenance
- Marketing fees
When it comes to expenses, you will want to keep accurate records of what you spend money on. You should also get a mileage tracker book so you know how much you drive for your work.
Business Volume to Reach Your Goal
To figure out your business volume, you need the research that you did in step two. Since you already know what the average selling price is, you can figure out what your commission would be on that sale.
Estimating a commission of 3% is a safe number. Use this to figure out how many sales you need to complete to break even. Then figure out how many you need to close to reach your goal, which is hopefully more than break even.
Leads Needed to Get the Business Volume
You won't close a deal on every lead you get. So you need to figure out how many leads you'll have to generate to have a chance at closing on a home. These numbers are a bit more fluid than the last section.
A good place to start is assuming you will create thirty leads for every sale you close on. Now, these are warm leads, which are people actively looking to sell or buy a home.
You are going to need to generate even more leads to get your thirty. Cold leads are people that are a few months out from being ready to buy or sell. They may not create income for you right now, but they will fill your pipeline for future business.
Create Your Real Estate Business Plan
Becoming a real estate agent is freeing as you take ownership of your income potential. The sky is the limit, and only you can dictate how successful your new business will be.
The first step you should take is to create a real estate business plan. This will help you stay focused on your tasks at hand.
Ready to put your real estate business plan to work? Start your Hommati franchise today and start doing something you love.