The post-pandemic outlook of the real estate industry is lucrative for investors, brokers, and entrepreneurs.
According to recent data, the industry is generating revenue of approximately US$369.90bn. This is expected to touch the mark of US$412.60bn by 2025 with an expected annual growth rate of 3.71%.
Moreover, as traveling and immigration are recommencing, people all across the globe are moving to the United States to avail better opportunities. It has given rise to the demand for rental properties.
That’s why many people are taking advantage of favorable economic and market conditions by using their homes as rental properties. However, those who desire long–term equity are setting up their rental property businesses.
As you are reading this article, we presume you belong to the latter category. So, let’s cut to the chase and learn the ground rules of commencing a rental property business.
Create A Business Plan
It is rightly said that “a goal without a plan is just a wish.” If you have put your mind to it, you must begin by creating a business plan. For this, you must conduct market research and competitive analysis and set business goals.
Your plan should be drafted in such a way that it can answer the following questions:
- What is your target market?
- How will you finance your business?
- Do you need a property manager?
- How will you find tenants and collect rent?
- How much revenue do you expect to earn in the beginning years?
Apart from this, you also need to consider the business name to register it. Of course, the business plan is not rigid; you can modify it as and when required, according to the changing circumstances.
Look For Financing Options
Once you have a business plan, you must figure out how to finance the idea. There are numerous ways in which you can get funds, such as you can apply for a loan, using your existing property (residential or commercial) to pay a down payment, or joining a real estate investment club.
Nevertheless, when financing your business, you have to take expenses into consideration. In simple terms, if you bought an old property at a cheaper cost to upgrade and rent, you have to calculate the estimated expense of property renovation and maintenance.
This will ensure that the first few years of business go by smoothly and you are able to cover the costs.
Leverage Technology For Effective Management
Managing a rental property business is no easy task. You have to list your property, find tenants, conduct background screening and streamline the means of payment collection. Evidently, it requires time and effort to market your business and identify prospective tenants.
To make this work easier and time-saving, you should deploy a mobile landlord app or property management software. It will automate nearly every process, ensuring you don’t have to worry about vacancy and turnover time. Moreover, the rent will be collected easily, assisting you with bookkeeping and accounting. Thereby, you’ll be able to manage all the work efficiently and focus on growth.
Get Necessary Licenses
As renting is not for earning passive income but rather a business, you have to avail necessary licenses. Otherwise, you may have to pay a hefty fine, which may lead to business closure. Some of the critical permits that you need to obtain are the following:
- State and local business permits. (Visit your town, city, or county clerk’s office to learn about the required licenses.)
- Certificate of Occupancy (CO) (Required if you have multiple properties to ensure adherence to all building codes, zoning laws, and government regulations.)
- Other local licenses (For uninterrupted work.)
Run It Like A Business
Last but not least, once the initial formalities are completed, and technology is used to operate the business, owners tend to slack off. However, you have to understand that this business is not merely for earning some extra bucks; instead to build a brand name in the market.
Therefore, you should treat it like a proper business by establishing separate bank accounts, keeping track of income and overheads, and gaining knowledge to become an influential landlord.
In addition, you should also consult a CPA and tax advisor to plan the finances appropriately and improve RoI.
Let’s Take A Recap
The real estate industry is booming and offering numerous opportunities to investors and entrepreneurs to accelerate their income. Having well-defined goals and a business plan is necessary to accomplish the set goals. Once this is done, make sure to get an appropriate license and deploy applications to manage the business hassle-free.
