The real estate market has its strong and weak moments over time. During some years there is little movement, and in others large economic bubbles can form, with a lot of sales involved.
But still, people are always buying or selling houses. Unlike other sectors, housing is necessary to live. That makes the real estate companies endure a lot and last over the years. So maybe an idea may have crossed your mind:
Is it worth setting up my own real estate?
Is a real estate company profitable?
Real estate companies are, deep down, like any other business. They are there to generate income and be a profitable way of earning a living - while providing a useful and valuable service.
A real estate agency generates income from the sale of homes; takes the house of an individual interested in selling and is in charge of managing that sale. That implies several services:
- Promote the home to find buyers.
- Advise the owner on the sale price.
- Receive visits and persuade a potential customer to buy.
- Manage the paperwork of the sale.
All these services have a series of expenses: staff salaries, the cost of the office or the marketing budget, among others.
So as long as your income is greater than your expenses, you will have a profitable business. In other words, a business that makes money every month and stays afloat.
And how do I calculate profitability?
There are many ways to know how easy it will be to achieve profitability in your real estate, but the easiest is to start with the expenses.
If you can estimate how much it costs to keep your real estate running day by day, you can have a clear idea of how many houses you need to sell.
The expenses of a real estate
A real estate is comparable to any other physical business. In most cases, you will have to hire a team and open an office - although it is also possible to open a real estate 100% online.
We are going to take a look at each of your fixed expenses, which you will have to cover to make ends meet and keep your business afloat.
Taxes and riding society
The first expense you will have is the freelance fee. To be able to practice any profession on your own, it will be necessary for you to become self-employed in the eyes of the Treasury. This includes the real estate sector.
You can start selling houses in two ways: being self-employed or through a company:
As a freelancer , you will act on your own behalf and respond with yourself. The advantage of being self-employed is that it is a simpler way to be self-employed, and there are fewer associated costs. Managing a freelancer is also easier.
As a company , you can have a company with your own name and become just another employee. This has the advantage that the company is a separate legal entity from you, and it has some advantages at the tax level. The problem is that keeping the accounts of a company is much more complicated than with a freelancer, and there are also more expenses. For example, the freelance fee can be up to $ 75 more expensive.
To open a real estate, my recommendation is to start with the practical: be autonomous and have the least amount of expenses possible to be profitable as soon as possible.
Tax expenses: $ 640
$ 380 self-employed
$ 100 social security
$ 160 agency (labor, tax and accounting)
You will also need to have a place to receive your clients. In most cases, that means renting a space and setting up a real estate office.
To do this you will have to buy office supplies: tables, chairs, wiring, computers ... the initial cost is high, but from then on, your biggest expense will be rent.
It is essential to have a well-located office, to be able to be seen by everyone and that people are interested in your showcase. In these cases, the rent can be quite expensive: in a small city, a medium-sized premise can be worth around $ 1200 per month.
In any case, remember that the office is optional.
Instead of submitting to monthly expenses from the beginning, you can have a more secluded place. For example, an office in a business center.
The office is only necessary if you want to set up something big and with a very face-to-face team. But today it is perfectly possible to work online and sell flats over the Internet. Logically you will not have the comforts of an office in the heart of your city, but you can have a profitable business with much less risk.
Monthly office expenses: $ 2000
1200 $ for rent
$ 200 of water and electricity
$ 300 insurance
$ 100 cleaning
$ 100 of office supplies
$ 100 of various maintenance
Whether you have an office or not, you will need work tools. That means that you will have to buy a computer - laptop or desktop - and also software tools for day to day.
Software tools are essential for your productivity as a realtor. Here is a short list of the most useful for a real estate agent:
Real estate CRM: necessary to keep track of your clients, manage your property portfolio, and publish to real estate portals.
Dropbox, to save your files: it allows you to have all your files in the cloud, both to share them and to safeguard them. If your computer breaks, you will need a backup.
Microsoft Office, to manage documents: since you will have to work with documents and spreadsheets, it is essential that you use an office suite.
Adobe Photoshop, to retouch photos: if you don't take good photos, people will not be interested in your floors, it's that simple.
Google Suite, for a professional email: email is one of the most important elements of your business, so make sure you have a quality platform.
In addition to that, you will need to have a monthly budget to buy tools and technology that you need. Some of these include:
- A good camera
- A laptop or PC
- USB flash drives
- Chargers and batteries
- Mobile phones
The best thing for this is to allocate a small monthly amount for these types of expenses.
Tool costs: $ 220
Real estate CRM: $ 70
Technology: $ 100
Software licenses: $ 50
Employees and collaborators
Even if you decide to start your real estate agency alone, it will be essential to have at least one assistant.
In the real estate business, there is a lot of paperwork to do: you have to keep accounts up to date, respond to clients, make arrangements, send emails, and much more. All of that is pretty straightforward, but time-consuming and will keep you from selling houses.
Therefore, you will need at least one person to take care of saving you time - an administrative assistant. Having an employee can cost you around $ 1,400, if you include social security expenses and taxes associated with hiring them.
Employee expenses: $ 1,400
$ 1000 net salary
$ 400 tax and quotation
To get potential clients, an easy way is to hire services in the main real estate portals such Skymarketing Depending on the type of apartments you want to sell, it is very likely that one portal or another will be more useful to you.
For example, if you focus on foreign audiences, a good option may be Kyero. It is a portal in English, and it offers a lot of visibility.
Real estate portals should be one more expense in your real estate accounts. The amount to invest is variable, but in many cases, you can pay $ 500 or even $ 1000 per month. It all depends on the volume of your property portfolio and how many sales you generate per month.
What you should keep in mind is the optimization of your ads on real estate portals. Analyze at all times the money invested and the results you get, to know which portal works best.
Expenses in real estate portals: $ 300
The real estate website
If you have a real estate, you need to have a website. Although paying real estate portals and receiving clients in return sounds good, relying too much on them can become a problem. It is something that is beyond your control and exposes you.
Therefore, having your own real estate website is important. Here you have all the control you need, and it is also advisable to invest in it to generate traffic and visits organically. It is not an easy task, but in the long term a good real estate branding strategy can bring you more income than the portals themselves.
A web page can be made at many prices, but at least you should think about spending around $ 1000. That, unless you use a real estate CRM like Tajarat which already includes it at no additional cost:
In any case, the important thing is that you can easily publish your portfolio of properties and dedicate yourself above all to the sale.
Website costs: $ 1000 (or $ 0 with a CRM)
Real estate marketing
Finally, you must implement a real estate marketing strategy. Real estate marketing is what will help you generate long-term sales - for that, you can use many sales channels:
- Real estate portals
- Web page
- Social media
You will need to dedicate time and effort to your strategy, in addition to setting a monthly budget to spend on advertising. The portals already represent a part of your expenses, so your real estate marketing may be focused on other means.
For example, you can start a real estate blog and position your website on Google. Or you can hire a billboard at a strategic point. Be that as it may, you should always think about how to sell houses faster.
Spending on real estate marketing: $ 500
The total costs of setting up a real estate
As a business, these are the vast majority of costs that you will have to face month by month. In total, about $ 5,000 excluding taxes.
To this, you have to add your own salary. As the real estate is yours, it can be a very flexible figure, but the normal thing is to enter at least $ 1,200 per month.
That means that you need at least $ 6,200 per month. Or about $ 74,400 a year.
Now that you know what it costs you to keep the real estate open, you can make several estimates of what you would have to sell to be profitable.
The idea is to try different scenarios and see the possibilities you have to stay afloat.
We are going to try with an easy goal, an intermediate one, and a higher one.
How many houses can you sell?
This simulation depends on the city you live in. Logically, a house is not worth the same in Madrid as in Albacete, so you will have to do your own numbers.
We are going to test with houses with an average of $ 200,000, and taking into account a commission of 3% (and minimums of $ 3,500, although this figure is easily exceeded). That means an average of $ 6,000 commission per house. Your income would be:
10 houses per year: $ 60,000 ( -$ 14,400 )
20 houses per year: $ 120,000 ( + $ 45,600 )
30 houses per year: $ 180,000 ( + $ 105,600 )
As you can see, to stay afloat you should sell at least 13 houses a year. Do you see it possible?
Do your numbers
Keep in mind that the numbers we have taken are only an approximation. You can do without an office, collaborators, and save in many aspects of your real estate. In fact, you may have a competitive advantage.
Real estate is like any other business. Before entering the sector, you should make a feasibility plan and have a rough idea of what you can win against what it will cost you.
This has been a simple example, and it all depends on the type of houses you want to sell, the area in which you are, and the demand that there is to buy apartments.