I would like to get started in the property sector. What should...

I would like to get started in the property sector. What should I know before starting a real estate or property related business?

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The Basics

Knowledge and preparation are requirements for success in the property and real estate industry.  If you do not have skills in this industry, get some experience in the business first, such as working for a management company to learn the ropes.

Prepare a business plan

Before starting any business venture, a business plan is vital. One of the reasons that having a business plan is so important is that it will help you consider all the details of your business. As you are working on your plan, you will probably find that there are many aspects of your new business that you have not considered.

For more information on how to write a comprehensive business plan, read Entrepreneur’s guide – How to Write a Business Plan: Step-by-Step Guide.

Sample Business Plans

For more information on what should be included in your business plan. Refer to one of our sample plans for guidelines.

Register the business

If you already have experience in the property management business, the next step is to find out what the legal requirements are. Register the business entity you have decided on with Companies Intellectual Property Registration Office, (Cipro).

“You need to visit your nearest Estate Agency Affairs Board (EAAB) to establish what is required. If you are collecting rent and taking commission, you have to register with the EAAB,” says EAAB Representative, Thoko Makhubo.

More legal leg work

You will have to discuss the business with a lawyer to ensure you have all the necessary paper work. Remember you will be signing management agreements, writing leases, evicting tenants, hiring repair staff and so on. To get in touch with a legal expert or business in your area, browse through the Entrepreneur legal directory for options.

Sell your services

Once the business is set up, it is time to sell your services in order to recruit local property owners as clients. You have to be able to show them that you are ready to manage their property and be the middleman between them and prospective tenants.

Be professional and kind. A prospective client is not looking for a person who appears inconsistent or unprofessional.

Background checks

Set up the business so that you can complete thorough background checks to insure proper financial responsibility on prospective tenants. Being detail-orientated will increase your odds of having reliable tenants. Rent or lease to tenants that meet all requirements established between you and the client.

Set reasonable rent or lease agreements. Having a good relationship with tenants may increase the odds of renewing their lease or rental agreement. In this kind of business, you need to register with a company such as TransUnion, South Africa’s largest credit bureau that manages credit information on both consumers and businesses.

Advertising property for sale and rentals through the internet

To offer a search engine service and advertising opportunities, you do not require a real estate licence, even though you are focusing on the property market. “Providing that you are not earning commission from sales or rental of property, you do not need a licence,” says EAAB representative, Margie Campbell. Contact the EAAB for more information.

Is property a viable business start-up?

Every city and town in South Africa has a set of regulations to control development. These regulations are determined by the zoning of the property.

A good source of income

A well-run property business can be an excellent stream of income, especially if you plan to lease the property to other businesses. A properly maintained and well-run commercial property gains value.

There are disadvantages

However, the disadvantages include the fact that you are tying up a large amount of capital. On top of this, you are responsible for the safety of the building – for example, you need to keep up to date with and implement fire and health regulations.

The building has to properly insured and as the owner/manager, security and general maintenance is your responsibility. If a tenant defaults in the payment of rent, you may incur legal costs and loss of income. All these issues must be considered in the business plan.

Choose the best location possible

The right location for a commercial property is vital. Conduct thorough research to determine if the location will attract the right target market, be close to suppliers, customers or related businesses. You need to establish if the venue will be convenient in terms of transport links for workers and so on.

Investigate Government Grants

It’s worth investigating Government grants and incentive schemes set up to tempt small businesses into urban areas, such as grants for inner city renewal projects, or cheaper premises for small businesses in designated areas. To find out more about the various options available to you, you can visit our comprehensive funding directory.

Property zoning must be checked

Property zoning is set out in the Town Planning Scheme, which determines possible land use, floor area, coverage, building lines, parking provisions and so on.  Development of any kind is also controlled by conditions of title.

These conditions are set out in the Title Deed of each property, and can restrict the way in which a property may be developed. Approach the Town Planning Department and establish if any restrictions apply on the property you are interested in.

Can you change zoning regulations?

If a proposed property development requires a change of zoning regulations or an amendment of the title conditions, this can be done; but it requires an application and a formal procedure. There are many different kinds of applications, all of which are technically and legally complex. Therefore, it is a good idea to seek professional help. Depending on the type of application, obtaining a decision may take as long as 12 months.

Property legislation

Before you attempt to write a business plan, research Land Use Management Laws as well as other pieces of legislation that regulate commercial development including the National Building Regulations and Building Standards Act (Act 103 of 1977), the Public Health Bylaws and various other Municipal Bylaws. Any development of land that does not abide by legislation and its various sets of regulations can result in prosecution.

Find a mentor

Seek help before you approach investors – look for a suitable mentor. The reason for this is that a mentor will help you prepare a business plan and will provide guidance and support. A business plan is the blue print of a start-up business, so to speak, and reflects what you intend to do with your business. Mentors have access to realms of information and advice, from training and mentoring, business planning, and registration of the business

Why is a business plan needed?

If you haven’t yet written a business plan, start writing one as soon as you can so you that can turn your idea into reality A business plan includes a funding plan, market research, sales, advertising and marketing plans. Once the business plan is in place, you would then be able to approach investors.

Getting funding

If you have a good business idea and a well-constructed business plan, there is no reason why investors will not support the buying of land and the required building costs involved in property development. These issues should be included in your business plan, giving potential investors a clear blueprint of what they would be investing in.

Investors need to see a business plan before they will even consider lending money. Depending on the type of business you are setting up, the traditional way to raise money is to apply to a bank for a commercial property loan.

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  • Thandolwenkosi Mathabela

    This is very helpful. I will take these steps as I am a person who is very much interested in starting a property management company