Starting Strong: The First 4 Steps for New Real Estate Investors
How do you set your company up to win? As a new investor, there are 4 steps that new real estate investors should take. These steps will not only set you up correctly for lending, but they will also protect you in the future. As we’ve discussed before, real estate is all about money and leverage. Consequently, businesses that are not set up as an LLC or company, will not be approved for a commercial loan. By establishing your business correctly from the beginning, you will in turn set yourself up to win. So what are the four steps that a new investor should take? Let’s take a closer look!
First, Set up your business name
It is imperative that you select a business name that represents your company, and that your name is available within your state. Something to remember when selecting a business name is to not include real estate terms within the name itself. In looking into the lending world, about ⅓ of lenders find it unfavorable if you include “real estate”, “fix and flip”, or other real estate terms within the business name. To get started, go to the Secretary of State page for your specific state. Then select the business tab, and finally locate the link to search name availability. After you have researched name availability, it is important to register your business name with your state to make it official.
Second, Set up an EIN
Once you have successfully selected and registered your business name with the Secretary of State, it is helpful to talk with your accountant or lawyer. They can help to guide you through the process of setting things up correctly not only for your state, but for the IRS as well. Businesses need to apply for an EIN in order to open business accounts. The EIN is the federal employer identification number for business owners. It’s like a social security number for your business. This can be set up directly through the IRS website.
Third, Set up your bank account
The next step that you should take as a new investor is setting up a business bank account. It is important to set up business bank accounts as soon as possible to begin separating personal and business expenses. Lenders will often look at what you have in your bank account to assess your financial stability. By separating personal and business accounts, it can make the underwriting process go faster.
Fourth, Make yourself known
After you are correctly established as a business, it is important to make yourself known! By creating a website, securing an office space, and filing with 411, businesses can obtain a greater client base. Completing this process within the first year of forming your business, further establishes your presence within the community.
As a new investor it can be overwhelming. In order to win, it’s vital that you set up your business correctly from day one. We can get you started by providing a step by step resource guide for new business owners. This guide is state specific and includes direct links that will get you on the fast track to success.
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Do you have more questions about setting your business correctly? Do you need additional information regarding lending options or business credit cards? Contact us today!