The current real estate downturn may be bad news for homeowners, but it means opportunity for savvy entrepreneurs. To find business niches that will grow during the down cycle, we turned to two real estate experts: Robert Kiyosaki, Entrepreneur's "Rich Returns" columnist and author of the Rich Dad series of books, and Rick Sharga, vice president of marketing for real estate data provider RealtyTrac. They had so many great ideas, we didn't have room for them all!
Below, we've compiled their top 10 real estate-related business ideas for 2008 (in no particular order). You don't need to be a real estate agent or have any special training for most of these niche businesses. You also don't need a lot of startup capital, and only one requires that you buy real estate. Many will work whether or not you're in a market that's particularly hard-hit by foreclosures. They're all good opportunities that any smart entrepreneur can use to ride the market downturn straight up to business success.
1. REO Outsourcer: Banks have no exper-tise in home repair or property maintenance for their foreclosed homes—known in the industry as real estate-owned, or REO, properties. So until these properties sell, lenders often rely on REO outsourcers, also called property preservation specialists, to get the homes market-ready. While anyone can run a property preservation company, real estate agents sometimes get into this niche as well, hoping to land listings from the owning banks.
The recent rise in foreclosures means there's ample opportunity to jump into this niche, says Tyler Drew, 24, co-founder and COO of U.S. Best Repairs in Tustin, California. Many foreclosed homes are left trashed and need repairs to be salable. Even homes that are in good condition need regular yard maintenance and cleaning to stay ready for buyers.
Drew, a former executive assistant at a bank, partnered with licensed contractor Mark Zaverl, 47, to start U.S. Best Repairs in late 2006. They began by providing lawn mowing services for four bank-owned homes in their market.
Word spread rapidly from there, Drew says, and the company now provides services throughout California, Alaska and Hawaii. The company also added lockout services—the often unpleasant task of evicting the former homeowner and getting the locks changed. At first, the company did one or two lockouts a day, but that number has since risen to 35 lockouts a day. Drew projects that sales this year will hit $5 million. He says, "We're looking at rapid expansion for at least the next three years."
2. Home Repair: Many foreclosed homes need fixing up to get their bank owner the best resale price. So it's no surprise that home repair firms are also seeing a surge in business. In Buffalo, New York, CertaPro Painters franchisee Dominic Ventresca, 24, says tightening mortgage lending has created an upswing in jobs painting homes for both sale and remodel. Whether they're staying in their homes or trying to sell them, homeowners are looking to upgrade.
Revenue has doubled for Ventresca's CertaPro business in the past year, and he expects sales to hit $1.5 million for 2008. "People are definitely calling us to get their houses as clean as possible," he says. "It's got to be in tiptop shape to turn."
3. Retail Tenant Finder: As retailers close locations, there's a business opportunity in helping those business owners find replacement tenants. In the real estate industry, this is known as a disposition, and it can involve subleasing by the existing tenant or arranging a settlement where the existing retailer bows out and a new one gets a new lease from the landlord. The disposition specialist receives a fee from the landlord or the exiting tenant for locating the new tenant.
While you don't need to be a real estate agent, you will need to partner with an agent to qualify to nego-tiate disposition deals, says Ann O'Neal, president of TKO/Real Estate Advisory Group, which does dispositions for regional chains. She says there's opportu-nity in this niche for those who can handle these tricky deals, which usually require landlord approval: "I suspect there will be 6,000 stores closing [nationwide] within the year."