Starting a business is something most people consider at some point in their lives. Whether it be a passing idea that never gets acted upon or a serious business venture that involves business plans, finance sourcing, and a lot of hard work. According to the Small Business Association (SBA), over 627k small businesses are started each year in the States, with a further 595k closing each year.
We talk about starting and running a real estate business on this blog a lot. After all, we provide a turn-key automation software solution to support the efficiency of lead management and operations for mortgage professionals. We explored the possibilities of getting started in real estate in 2020, but if you feel like you need that little extra financial boost behind you to begin, this post is for you.
Real Estate Funding in 2020
In 2020, Crunchbase data showed that over $962 million global funds were raised by venture-backed startups in the real estate investment space. Companies successfully raising funds in the real estate sectors include Divvy Homes, Doorvest and Propertymate. Divvy Homes received $290 million in their efforts to support rent-to-own home purchases, Doorvest received $3.6 million to assist people with buying and managing investment properties and Propertymate $1.1 million in their mission to help buyers find and buy new build properties.
What kind of funding is available to start a real estate business?
Starting out on your own in the property industry is not an easy task. However, if you know your stuff when it comes to real estate terminology, you’ve got your NMLS license and you have the work ethic to put in what is really required to create and build a successful business, it is all worth it. The IRS recently reported 71 percent of all Americans who declared over $1 million on their income tax returns over the past 50 years were involved in real estate. So if you’re wondering if real estate is profitable, most definitely, the answer is yes. If you handle all of your assets correctly and invest wisely in your inventory.
Don’t Dismiss the Obvious: Loans
Of course with funding options, you have the standard loan. Loans are the most common source of funding for property development and business startups, with microloans geared towards the latter. The pros of this option are that you can go directly to a lender, everything is straightforward and money can be received relatively quickly to get going as soon as possible. However, many lenders will require a solid business plan and good credit history in order to approve funds for release.
Explore Crowdfunding Campaigns
As people become more interested in real estate, crowdfunding grows in popularity within the industry. The option to invest in properties and build shares is one that could be worthwhile investigating if you’re not under any time pressures. This road can be a bit risky if projects flop as it is the investors that need to foot the fall, but if you’re happy to invest and wait for the projects to deliver on successful completion, the benefits can far outweigh the risks.
Find a Business Investor
Finding a venture capitalist or angel investor is similar to an author trying to find a book publisher to accept their transcript. However, if you can get your business plan in front of the right people and convince them that you are worthy of being invested in and have the clear potential to grow, you could find yourself a more free-flowing source of funds than a loan could provide. These investors tend to be people who have the cash, but lack the skill or interest to go into business for themselves. They, therefore, invest in others who are willing to put in the hard work and give them the opportunity to reap some of the rewards. Be aware that as investors in real estate evolve, as does the interest in societal and environmental factors when considering which businesses to back.
Have you already discovered other ways of funding your real estate business? Share your findings below.
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