7 Ideas For Starting A Real Estate Business In California
It’s no secret successful investors profit by the millions in the real estate industry, and true to it, the real estate market is expected to hit $369 billion in annual revenue this year.
But outside of the mainstream methods of investing in real estate, such as buying a primary residence, many strategies allow even a novice investor to tap into the real estate market.
Don't believe me? Here is a roundup of 7 ideas for starting a real estate business in California.
Why Consider Starting A Real Estate Business In California?
Whether you're into house flipping, rental properties, or wholesaling, the state of California is one of the best to invest in the real estate industry. Despite pandemic-inspired emigration, the sunny state still has a significantly high population of about 39 million people. As a result, demand for real estate is always high, fueling consistent real estate value and investment profit margin appreciation.
The Golden State has a high-value, high-job growth market. This means the state continuously attracts wealthy residents willing to pay top dollar for residential and commercial real estate.
Additionally, California has favorable taxes, and its real estate market is diverse, ranging from beach areas and vibrant urban centers to leafy suburbs, allowing investors the flexibility to invest in markets that suit them best. That said, here are seven ideas for starting a real estate business in California:
1. Wholesaling In California
Thanks to high-value, continuously-growing markets like San Francisco, Fresno, San Diego, and others in southern California, the state is historically a high-value real estate industry. As a result, property values are always high.
This makes it an excellent market for wholesaling because home buyers are always open to paying top-dollar for properties, allowing a wholesaler a larger profit margin from each deal.
Additionally, the region has a high population, which means ongoing demand for wholesale properties from residential buyers and property investors. Moreover, wholesaling is legal in California and has no education requirements, capital, or prior experience, making it an even viable business model for first-time investors.
2. Flipping Houses In California
If wholesaling is not your speed, flipping houses in California is the second most sought after way to start a real estate business in California. The region has a strong buyer market because people are constantly moving here to enjoy its sunny weather, a long string of national parks, miles of coastline, and cultural diversity. That drives demand for housing higher, and one is guaranteed a market for flipped properties. What's more, California has high median property prices, which motivate lenders to offer more significant loan limits meaning easy access to funding for house flippers.
Also, although the state of California's high population favors real estate investors, it's a boon for low-earning property buyers because it fuels skyrocketing property prices. As a result, despite California being a high-value market, there's demand for affordable residential and commercial properties. Flipping is an opportunity to capitalize on this demand since you could focus on flipping distressed or after-market properties at a price high enough to earn a handsome profit but below market value.
Some of California's best areas for house flipping include Sacramento, Los Angeles, San Jose, the Bay Area, Fresno, San Diego, and Irvine. If this will be your first time investing in California's house flipping ecosystem, consider adding both detached and attached housing units to your target portfolio. But take your time to research the area before investing because, like other areas, the success of house flipping in California is also influenced by geography, culture, livelihood, and population.
3. Property Management
California is one of the most viable markets for a property management business. The state's property market has about 45% rental units, with more coming up due to the area's high population. This creates significant business potential for property managers. Furthermore, California's population is diverse and includes all sorts of people, from students, to the working class. This allows property managers to target niches they thrive in best to maximize profitability.
Although California's property management market has a low barrier to entry, it's subject to specific laws and regulations. You will need a real estate broker's license to start a property management business. You can obtain it either through the California Department of Real Estate or work in partnerships with licensed Realtors or real estate brokers.
If you opt for the former, you must undergo education training and pass a licensing exam before getting your real estate license. You'll also be subject to real estate license revocation or suspension should you fail to uphold the necessary property management laws. You also need to register the business, and obtain an employer identification number to hire employees, open property management bank accounts, and pay taxes.
Note, however, that these are only required if you plan to buy and sell properties as part of your property management business. But if you only solely manage the property, you don't need a license.
4. Real Estate Brokerage
A real estate brokerage is a firm established to assist consumers in purchasing, selling, or leasing real estate properties. When performing on behalf of the buyer, a brokerage assigns its brokers to locate, and show home buyers new properties, aid them in creating an offer, negotiate on their behalf and ensure everything goes smoothly.
When working on behalf of a seller, a brokerage in California lists, advertises and supports the seller throughout the selling process by advising them, aiding with negotiations, and executing a purchase contract, among other tasks. California is an ideal place to start a real estate brokerage because it has a hot housing market with high prices, resulting in large sales commissions.
Besides capital, you will need to get a broker license to start a real estate brokerage in California. You also need to register it as either a corporation or sole-proprietor brokerage. Starting your brokerage as a corporation can be expensive, but it protects you from the liability of legal disputes arising from real estate transactions carried out by your firm.
5. Real Estate Photography
Many of California's residents are well-educated individuals with up-to-date knowledge of technology. They often begin their property searches on the internet via sites like Zillow and other similar listing sites.
As a result, most landlords, property managers, property sellers, and real estate companies often resort to hiring photographers to help make their listings stand out due to the competitive nature of real estate in California.
This creates demand for professional real estate photography services, making it an excellent way to get your leg into California's real estate market without putting your money on the line.
6. Real Estate Appraisal
Don't fancy all the above ideas for starting a real estate business in California? You should consider being an appraiser or starting a real estate appraisal company. An appraisal company makes independent assessments and estimates the value of a property for purchase or sale.
Given appraisals are necessary for every property sale or purchase, you stand to earn good money when you start an appraisal company in California since the region reports over 400,000 units in annual home sales.
Additionally, an appraisal business has a vast target market with options ranging from homeowners and mortgage brokers to escrow companies. The best part about it? A real estate appraisal business can be home-based and part-time. However, startup costs might be a bit high because you need business insurance, a good computer, internet service, and a decent marketing budget besides licensing.
7. Home Staging
Staging homes for sale is another excellent way to earn money and get into California's lucrative real estate market. This is because property owners and sellers always look for a more hands-off way to stage their properties.
Suppose you've got an eye for design, or professional interior decorating skills; you can start a professional home staging company and offer a complete design package which saves them time and earns you a good commission. To begin a California staging business, choose a name for your entity, and get licensed. Research your target market to understand the target buyer.
This is especially essential because staging in affluent areas like Los Angeles County means you'll need to invest in expensive staging props to appeal to the buyer. Additionally, create a pricing structure, and market your business to other investors, property managers, Realtors, contractors, and real estate agents.
Helpful Resources For Starting A Real Estate Business In California
Considering an investment in California's real estate market? Here are some helpful resources to kickstart your investment journey on the right note:
The California Department Of Real Estate
California's real estate investing market has favorable regulations but also unavoidable bureaucratic red tape. For instance, you must have a real estate license to run a real estate brokerage in California. To acquire the license, one must take three college-level rei courses approved by the California Department of Real Estate, take a salesperson exam, and include an employing broker's information in their license.
That said, the California Department of Real Estate website is one of the best resources if you're getting into the Golden State's REI investing. The website covers everything from licensure and regulations to what out-of-state applicants need to get into California's REI. It also has a resource page with a lot of helpful information for real estate businesses in the region.
California Association Of Realtors
The California Association of Realtors, known as CAR is a non-profit organization for Realtors. It’s one of the largest and also oldest Realtor organizations having been first established in 1905.
It was purposely established to promote professional ethics in the real estate industry, and has over 170,000 members. It lobbies and promotes the interests of its members at local, and federal state levels.
The organization has a website full of data & statistics on the latest real estate sales and prices in California, emerging and upcoming trends and basically everything a first-time rei investor needs to know.
The Northern California Real Estate Investors Association
The Northern California Real Estate Investors Association, famously NorCalREIA, is one of California's largest public real estate investing clubs. It's headquartered in Sacramento and has over 900 members ranging from professional Realtors, real estate agents, mortgage lenders, brokers, investors, and contractors, to other related real estate professionals.
The club regularly organizes and hosts rei investing educational events and monthly meetings allowing new investors ongoing networking opportunities with like-minded individuals. The association also has a helpful website with an informative blog and a rich variety of downloadable resources.
Real Estate Websites
The beauty of living in the information era is that you can find almost anything on the internet. Nowadays, many trustworthy websites are jam-packed with helpful information regarding real estate investing.
The Real Estate Skills blog is an excellent example. We have a ton of resources ranging from how-to articles to complete investment guides fit for first-time wholesalers to seasoned rehabbers.
Besides us, legal sites like Nolo boast plenty of legal and regulation-related information that comes in handy when you are a beginner investor trying to figure out what's legally required of you. Investopedia covers almost anything you might want to know about financial services and real estate investment.
Investing in real estate is one of the most sure-fire ways to build wealth. To be precise, California's real estate market is ripe with opportunities thanks to the state's high population, high-growth job market, and continuously thriving economy.
We've highlighted some of the best ways to get your foot into this market and included a good mix of low to medium capital investments, like wholesaling in California, that suits beginners with little to no real estate investing budgets.
Ryan Zomorodi is the Co-Founder and COO of RealEstateSkills.com
Real Estate Skills is an online real estate education company that helps people start and grow real estate businesses. With thousands of students nationally, Real Estate Skills offers a suite of educational programs and coaching in the areas of house flipping, wholesaling, and real estate investing.
Ryan has led the identification, acquisition, rehab, leasing, and management of rental and fix-and-flip properties across twelve states and counting. He has over 10 years of business and real estate experience, including a business management degree with a specialization in entrepreneurship and a minor in marketing from San Diego State University.