6 Challenges You’ll Face When Starting a Real Estate Business
You too can start a successful real estate business.
It is one of the businesses with the highest return on investment. It, however, takes a lot of discipline, resources and aggressive marketing before it picks up. The path to a profitable real estate success is, however, lined up with obstacles and challenges. Some of the most common include:
1. Huge Initial Investment
This is one of the biggest challenges facing a real estate startup. A real estate business requires more initial capital injection than most other businesses. Even after closing a deal, you may have to wait for a while before your payment is processed. This adversely affects cash flow and compromises the growth of a business. Luckily, you can apply for a real estate commission advance to bolster your cash flow and stay afloat.
2. Qualifying for a Bank Loan
Another challenge you are likely to face when starting a real estate business is getting a business loan. As a startup, you may not have enough capital assets to get a secured loan. It gets worse with a poor personal credit score. There are however subprime lenders who would be willing to loan you the funds but at a higher interest rate. Your other option is to seek a real estate commission advance.
3. Market Fluctuations
Investing in real estate is not for the fainthearted. Although it’s one of the sectors with some of the highest returns, it is also one of the most volatile and risky. When economies are depressed, the real estate market is one of the hardest hit. You can, however, protect yourself from the negative aspects of the market by properly aligning your products and services with market demands. In spite of these fluctuations, an accurate reading of the market will help you capitalize on demand and supply dynamics to make a killing, even during recessions.
4. Insufficient Investment Data and Information
To make informed decisions and accurately read the market, you need quality, actionable information. This will help you understand trends in the industry and align your investments accordingly. You may have to secure the services of other real estate professionals such as surveyors, appraisers, lawyers, etc. to fully understand the market dynamics and protect yourself from losses and potential litigation.
5. Maintaining a Healthy Cashflow
To operate a profitable real estate business, you need a healthy cash flow. This can be hard at times since transactions usually take a long time before they are concluded and commissions paid. To maintain a healthy cash flow during these dry periods, you need access to funding from either traditional or subprime lenders. In some instances, applying for a real estate commission advance may be the best option since you will be getting an advance payment based on your expected commissions.
6. Starting a Real Estate Business Is Hard Work
Although the benefits from a real estate business are many, they come at a cost, which is usually paid in advance. Selling or buying property on behalf of your clients is not an easy task. Managing an office and ensuring all bills are paid is time-consuming. A real estate business thrives on effective marketing. Without a willing seller and a willing buyer, you have no deal. Hunting down potential customers involve following them on social media and pitching to them, maintaining an up-to-date website, sending numerous email campaigns, online and offline advertising, etc.
Starting a real estate business is one of the smartest moves you can make. It is, however, not for those with a depressed appetite for taking risks. Nonetheless, despite the many challenges you are likely to face, the potential benefits far outweigh the challenges. In any case, none of these challenges is insurmountable.