Real estate agency as a business idea
Investments in real estate are traditionally considered one of the most reliable. At the same time, it is more profitable to invest in commercial objects than in apartments and residential buildings. The average payback period for commercial real estate in Russia today is 8-10 years, and in some cases even less.
This is very attractive for novice investors. But before investing, you need to prepare well. How to do this, we will tell you in today's article.
How much can you earn from commercial real estate?
Rates or capitalization ratios (the ratio between the value of an asset on the market and the net income that it can bring within 12 months) for first-class real estate in the office segment today amount to 9.5-10%, in retail real estate - 9.75-10.25%, in warehouse and industrial real estate - 11.5-12%.
Profitability of trading floors, quorking centers, offices, service salons and cafes on average ranges from 8% to 15% per year. Premises in shopping centers and street retail can bring up to 30-45% per annum.
The most popular segments of commercial real estate today are offices, retail space and warehouses.
And for novice investors, the first two categories are also attractive because they have the lowest capital intensity - small office premises or shops cost significantly less than warehouses or industrial buildings. This allows investors to "enter the business" with a minimum start-up capital.
How much money do you need to invest in commercial real estate?
Investing in commercial real estate requires a substantial initial capital - on average, from 10-15 million rubles. The cost of the most high-quality and profitable commercial real estate objects starts from about 30 million rubles.
In Moscow and St. Petersburg, this is now the lowest price threshold for properties with a good location and reliable tenants.
Where to invest with small capital?
Business real estate is considered as one of the most profitable cash investments, as well as a way to ensure constant income. Most ideas in this area require significant capital investment, however, there are exceptions. In any case, a well-designed real estate business plan will only contribute to a successful operation.
Types of income
Income and real estate business are:
- active (transactions, that is, purchase and sale, with personal property or transactions with objects owned by others - the activity of a real estate agent);
- passive (renting out own property - apartments, houses, offices, providing industrial premises, managing a private hotel (see Investing in the hotel business - how to combine business with pleasure)).
Let's look at each of the options in more detail.
Active operations with personal property
Buying and selling real estate is a very profitable business, however, it requires huge funds. An alternative to this type of activity is the work of a real estate agent. In addition, this has its own prospects - in the future, you can create your own agency.
Desire for successful work as a realtor is not enough, personal qualities are also important in this matter:
- ease of communication and disposition of people - the ability to find contact with strangers and have them to you in a matter of minutes;
- fanatical attitude to work is an opportunity and more desirable work after hours;
- understanding of the client - ease in identifying the wishes of the client and the possibility of their implementation;
- good intuitive vision of the case - they record all incoming proposals, but are taken only to those applications that it is possible to implement it;
- knowledge of the area and market prices - knowledgeable with the infrastructure of the city, well aware of the location of streets, houses, familiar with the layout of apartments, are guided by the approximate cost of objects;
- possession of psychological methods - they know how to "put the squeeze" on the client to carry out a transaction, convince of the profitability of the price, etc.
- legal knowledge - understand the legal issues of the problem and know the legislation well.
Organization of your own real estate agency
Organizing your own real estate agency differs significantly from the activity of an agent working for an existing company. After all, not every successful agent can create and manage an entire organization with a staff of employees. And also the successful functioning of the agency is impossible without an experienced specialist with an established client portfolio, where he is a whole mini-agency.
What is required to open a real estate agency? Pitfalls and benefits of business real estate, business plan preparation.
The real estate market has been developing over the past decades. Constantly emerging new agencies indicate the demand for services. This indicator reflects the profitability of the business. Before starting work on a project, it is worth conducting a market analysis and taking into account the nuances. It is important to be competent in the industry to generate real estate income.
There are two options for becoming the owner of a real estate agency:
- creating a business from scratch;
- buying a ready-made business.
The first method is associated with high costs and a long period of formation, but it is permissible to create the kind of entrepreneurship that you want. As for the finished project, you cannot be completely confident in the quality of clients and employees.
The main capital of a real estate business is people, those who work, and those who purchase services. The aspect of a business is that it does not require a license, for its development you need to collect a standard package of documentation and act.
The basic areas of the real estate agency are:
- Purchase and sale of objects.
- Rent, both long-term and short-term.
Some companies specialize in the daily rent of apartments or other premises suitable for living or working. Buying selling renting apartments is something that happens on a daily basis.
Companies make money from transactions, but in addition to this, it is advisable to provide a range of services to gain customer confidence. These include: consultations, assistance in the preparation of documentation, organization of redevelopment of the object.
Registration of such transactions is a rather difficult task for people without legal education, and it takes a lot of time. This has led to the fact that most people seek help in such matters.
Real estate agencies are a competent intermediary between the two parties to the transaction, which in the shortest possible time can find a lot of suitable offers for their clients.
Disadvantages and positive aspects
The business of a real estate agency should be viewed from different angles. Any business always has its pluses and minuses, pitfalls and bright prospects. Therefore, when considering how to open a real estate agency, you must take into account such points.
The disadvantages include high competition, a fair amount of dependence on your agents, the likelihood that the realtor will receive money bypassing you, as well as the possibility of no payments from clients. At the same time, the advantages of a real estate agency business are that you do not need significant investments, with the correct prioritization, you can occupy your niche in this service market, and the absence of a seasonality factor also plays an important role.
Market volatility is a particularly important issue in the real estate business. It depends on the global economic situation. People buy, sell, change real estate in favorable, stable periods. And during a crisis, this market can completely stand up, and you will find yourself out of work.
How to organize your business
A real estate agency consists of two key people: an administrator and a lawyer. The main task of the administrator is to communicate with clients and search for various options to satisfy their requests. The task of a lawyer is to check real estate documents and formalize transactions.
Are you one of these people? If not, you need to become one, or find another business idea.
More than half of individuals applying to real estate agencies come there on the recommendation of friends. And legal entities usually turn to well-known, proven agencies that have been working on the market for a long time. This means it doesn't make sense to invest heavily in advertising. Print a couple hundred business cards and ask your friends to distribute them to your friends and family. Submit free classified ads to newspapers and the internet. For a start, this is quite enough. Wait one month and see the results. If one or two people turn to you, then it's worth continuing. If such a mini advertising campaign does not produce results, you should seriously think about whether you need it. Most likely, the market in your region is already divided and saturated, it is practically impossible to break into it as the most ordinary real estate agency providing the most common set of services, without experience in this area.
When considering how to start a real estate agency, you should pay attention to collecting a real estate database. Any such business starts from it. You can purchase it from companies that collect and process this information. They usually provide a demo version that you can call to make sure it is valid. After that, you simply enter into an agreement for the purchase of the database. There is an alternative - to ring up the ads that you find in newspapers, magazines, the Internet, and also look for ads posted around the city. This process is more time-consuming, but less expensive than purchasing a database. Since you are reading this article, it means that you are interested in this business, and you should focus on the second option.
At first, you can even do without a permanent office. For meetings with clients, meeting rooms are suitable, which are rented by the hour.
Before you open a real estate agency, you must legally register it. This is what the law says. In practice, in this country, the first two to three years of life, many real estate agencies work illegally. The fact is that complete with a clear conscience before the law, there is a lot of paperwork, taxes, reporting, all this requires your time, and sometimes money. Nor does it contribute to the development of your business. Which path will you choose for your business?
Kozubenko Lyubov Konstantinovna
Due to the fact that the cost of housing is gradually falling, on the one hand, earning money through real estate does not seem to be a very good idea. However, in reality, things are a little different in this area. Although the real estate market is volatile, many people choose it for their passive income.
General information about this type of earnings
The real estate sector allows its owners to make good profits even in times of crisis. Especially business class housing, it is characterized by a higher cost, so for some people this option will be completely inappropriate.
Old housing is constantly being replaced by new high-rise buildings. Therefore, the lower segment is characterized by such a decline in value. The introduction of mortgage programs has slightly improved the situation in this segment.
Therefore, not the cheapest, inexpensive real estate will bring you good income. The most profitable is the previously underestimated business segment. Russia has a not very developed middle class; most of the population is represented by people with either low or high income levels.
Many investors considered it unwise to consider the middle price segment as a source of profit. They tried to make money exclusively with the help of expensive or very cheap premises.
Therefore, the business segment is characterized by deferred demand, builders receive orders from just such an area. During the maximum decline in prices, the secondary market was represented by relatively inexpensive apartments (approximately 200 - 170,000 rubles), and when the construction stage is taken into account, it was 70 - 90,000 rubles.
Now prices have increased by approximately one and a half times. These are not the most impressive figures. The price is growing very slowly, it rises by about 1% after each quarter. Although growth is still observed, this is evidenced by their acceleration and results in general. If you are ready to wait, then getting good finance will be available after a year.
Real estate - earnings on real estate and earnings on renting real estate:
Ways to make money on real estate within Russia
The following processes are possible in the real estate industry: