How to Start a Real Estate Investing Company in 5 Steps
Starting a real estate investment company doesn't need to be complicated. Learn how to do it all in just five steps below.
1. Draft Your Business Plan
Creating a real estate investing business plan is a complex process. From establishing your vision and outlining goals to conducting market research and setting up long-term goals, your business plan can make or break your business's success. Luckily, we've put together a guide that will walk you through every step.
2. Form Separate LLCs for Each Real Estate Investment
One LLC might not be enough if you want to own multiple properties — consider creating a separate LLC for every property you own.
This will further separate the liability for each property (including your personal assets) from lawsuits, foreclosure, and other unfortunate circumstances.
Aside from the tangible benefits that come with forming an LLC, the simple process of setting one up makes this decision appealing to most investors. Here are the steps to setting up a real estate investment LLC:
File Articles of Incorporation with the state in which you will purchase an investment property.
Keep the LLC in good standing by having a Registered Agent in each state where you form an LLC.
Pay the appropriate business formation fees — these vary by state but are typically minimal compared to the benefits of forming your LLC.
Before naming your LLC business, make sure to research your business name and make sure it's available in your state. Use our Business Name Search Tool for guidance:
For future investors who are ready to form one or more LLCs for their real estate investment company right now, Bizee can help — no matter what state you want to do business in. Even if you think you have the process under control, consider the long list of benefits we offer business owners at minimal costs, such as the Bizee Standard Package.
Working with a trusted LLC formation service to start your business can be like having an administrative assistant, business consultant, and a wealth of informative resources all in one place!
3. Consider an Umbrella Series LLC
Throughout the course of your research, you may have heard the term series LLC and wondered if it applies to your investing strategy. A series LLC is a single business entity that essentially owns or oversees multiple others. The series LLC allows a real estate investor to keep all of their properties legally separate but continue managing them under one umbrella LLC.
The benefit of this structure is the separation of risk, with the ability to have sole or multiple members managing the different property investments. For example, you may want to be the sole owner of several properties but invite other members into other deals for a variety of reasons. The series LLC is only available in certain states, so do your research first to see if this is a viable option for your business.
4. Hire a Certified Public Accountant (CPA) Or Get Bizee's Free Hour of Tax Consulting
The right CPA can make your life as a business owner a lot easier, whether you own one property or 20. LLC formation comes with several tax-related benefits for business owners, and there are unique ways real estate investors can maximize their deductions and business expenses when tax time comes each year (or quarter, depending on your filing needs).
At Bizee, we think this step is so crucial that we include one free hour of tax consulting for all our customers — no matter what size entity formation package you choose.
However, you also have to do your own homework and research to develop the knowledge and instincts to be successful in real estate investing. Those who are naturally curious and passionate will be best positioned to maximize the ROI on their investments. Make it a habit to research local, national, and global real estate trends — you never know what new opportunities you'll discover.
5. Develop an Investment Strategy
Once you form the right legal entity to fit your business goals, you must apply a smart investment strategy as you move forward. There are many potential pitfalls for real estate investors, no matter how experienced or knowledgeable you are.
For instance, you could invest in too many properties at once and over-extend your finances. What would happen if all those properties experienced a drop in value due to unexpected market conditions? You could lose your ability to finance new properties altogether. What would you do if you placed too much debt on a particular property right before a downturn in the market? What if you have a problem finding tenants for an extended period of time?
Make sure you have a plan for keeping enough capital to cover your investments while minimizing risks. As an investor, you can't predict every twist and turn in market conditions. But you can plan for worst-case scenarios to figure out your best strategies for financing — whether you use your own cash, pitch to investors, or apply for small business loans.
