The main purpose of this article is to serve as a total checklist for getting ready, creating and structuring your own real estate business. I will also point out the benefits of detailed planning and management, and the pitfalls for failure to do so. First things first: what’s the name of your new company? What type of business entity will you form? A sole proprietorship is the quickest and easiest; but, it may lack the necessary asset and liability protection warranted by your business model. My personal favorite has always been the Limited Liability Company (LLC). It’s quick, inexpensive, and provides individual shelter.

In addition, in which state will you register to do business? Are there any state and/or local licensing requirements? All of these questions should already be answered in your business plan. Some of you may be thinking, „I am going to buy foreclosed properties, rehab them, and sell them for a profit. What further explanation or planning do I need?“ Well, if that is your mindset, stick to your full-time job. I suggest going online (Google it) and downloading a business plan template to assist you with development.

In addition to your business plan, you better have projected financial statements, including a cash flow forecast, projected income statement, and anticipated balance sheet. There are numerous advantages of generating these statements. Clearly depicting your yearly operating expenses let’s you recognize the number of real estate transactions you need to successfully complete in order to break even and/or realize a profit. Taking the time and effort to implement these tasks will assist you in overcoming some of the most important impediments when starting your real estate business.

The biggest recurring mistake I’ve seen amateur entrepreneurs make is quitting their full-time job even before completing their very first real estate deal! Under-capitalization is one of the biggest oversights when starting a new business. If you do plan to quit your full-time job, make certain that you have enough of a monetary cushion to cover your living expenses for twelve months. Ideally, you want to have a surplus in your bank account so as to fund your business (i.e. – entity formation fees, licensing, marketing expenses).

Finally, will you be self-employed or a business owner? No, they are not the same thing! Being self-employed means when you stop working, your business stops working. If you are not marketing for leads or answering phones, then no one is. Being a business owner (hiring and maintaining employees) allows the freedom and independence that entice individuals to begin their own businesses in the first place. Most amateurs quit their full-time job expecting to start and sustain their own business profitably, while playing golf or going to the beach four days a week. WRONG! The transition from self-employment to business ownership is the toughest obstacle to overcome. It took me nearly a year of interviewing hundreds of job applicants, working fourteen hour days, pulling all-nighters, and sacrificing my personal and social life to successfully build and develop each of my businesses to the point where they could all run on „Auto-Pilot.“Remember, a business is only as strong as its weakest link.

Another great article by Lanette Blodgett Real Estate, Coldwell Banker Fortune