how to make a business plan for a rent

Rental Properties Business Plan Template

Written by Dave Lavinsky

Rental Properties Business Plan

You’ve come to the right place to create your Rental Property business plan.

We have helped over 10,000 entrepreneurs and business owners create business plans and many have used them to start or grow their rental property business.

Rental Property Business Plan Example

Below is a template to help you create each section of your rental property business plan.

Executive Summary

Business overview.

Noble Properties is a rental property agency in Seattle, Washington, that specializes in managing, renting, and leasing properties. Our mission is to provide luxury rentals that tenants can call home for years to come. Noble Properties rents out hundreds of homes across the Seattle area, including apartments, single-family homes, and trailers. To help prospective tenants find the perfect home, the company has created an online platform that allows them to search by their specific criteria (number of bedrooms, amenities, rent, etc.). We aim to be one of the most popular rental agencies in the area that customers can depend on again and again for their housing needs.

Noble Properties is founded and run by Joseph Pierce. He has worked in the industry for decades and has extensive knowledge of all aspects of the business. He will be in charge of most of the operations but will hire other staff to help with marketing, accounting, and managing the rentals.

Product Offering

Noble Properties offers a variety of properties for prospective tenants to choose from. Some of the options we provide include:

• 1-3 bedroom apartments
• Single-family homes
• Multi-unit buildings
• Short-term rentals
• Mobile homes or trailers

Customer Focus

Noble Properties will target renters located throughout the Seattle area. Most renters are under the age of 40 and earn about the median income. This means that we will primarily market to younger demographics and those who earn around the local median income or more.

Management Team

Noble Properties is led by Joseph Pierce, who has been in the rental property industry for 20 years. Throughout that time, he worked in various positions in local rental property agencies but is now eager to start a rental property business of his own. During his extensive experience in the rental property industry, he acquired an in-depth knowledge of the local area, local regulations, facilities, and the characteristics of different neighborhoods. He also has extensive experience in handling business management activities.

Karen Miller has been Joseph Pierce’s loyal administrative assistant for over ten years at his former rental agency. Joseph relies strongly on Karen’s diligence, attention to detail, and focus when organizing his clients, schedule, and files. Karen has worked in the rental agency industry for so long that she has a thorough knowledge of all aspects required to run a successful rental agency. She will help out with administrative tasks and some of the initial marketing efforts.

Success Factors

Noble Properties will be able to achieve success by offering the following competitive advantages:

• The founder, Joseph Pierce, has decades of extensive experience and knowledge of the industry that will prove invaluable for the company.
• The company will purchase rentals in popular areas around the city, putting our rentals in high demand.
• Noble Properties offers reasonable and affordable rates for all our rentals. Our pricing will be far more cost-effective than the competition.

Financial Highlights

Noble Properties is seeking $1,100,000 in debt financing to launch its rental property agency. The funding will be dedicated to securing initial rental spaces, securing an office space, and purchasing office equipment and supplies. Funding will also be dedicated toward six months of overhead costs, including payroll, rent, and marketing costs. The breakdown of the funding is below:

• Purchasing initial rentals: $600,000
• Office space build-out: $20,000
• Office equipment, supplies, and materials: $20,000
• Six months of overhead expenses (payroll, rent, utilities): $350,000
• Marketing costs: $50,000
• Working capital: $60,000

Company Overview

Who is noble properties, noble properties’ history.

After decades of working for other rental agencies, Joseph Pierce decided to launch an agency of his own. He conducted extensive research on the rental market in the Seattle area. This helped him determine the best spots to find in-demand rentals and how much he should rent them out for. He also did extensive marketing research to determine the best customer segments to market to. After conducting this research and finding a potential office location, Joseph Pierce incorporated Noble Properties as an S-Corporation.

Noble Properties’ operations are currently being run out of Joseph Pierce’s home office but will move to the office location once the lease is finalized.

Since incorporation, Noble Properties has achieved the following milestones:

• Developed the company’s name, logo, and website
• Determined rent/leasing and financing requirements
• Found a potential office location and signed a Letter of Intent to lease it
• Began recruiting key employees with experience in the rental homes/apartment industry

Noble Properties’ Products

Industry analysis.

The rental market is expected to continue to grow over the next five years. According to RentCafe, the average rent for a Seattle apartment is around $2,300 per month. This value is only expected to increase as the demand for apartments and other rentals skyrockets. Furthermore, Seattle’s vacancy rate is incredibly low and expected to decrease further, meaning there aren’t enough rentals to keep up with demand.

The growth is primarily driven by increasing housing prices. Now that housing prices have increased substantially, fewer and fewer people can afford to buy a home. Therefore, many people seek out rentals to live in since they are far more affordable.

Another factor that will help the Seattle rental market is the increasing population. More people are moving to the city, meaning the demand for homes and rentals will continue to soar. This will only push rental prices even higher, which will increase the local rental market’s value substantially.

This is a great market to start a rental agency in. By capitalizing on these trends, Noble Properties is expected to have great success.

Customer Analysis

Demographic profile of target market.

Noble Properties’ target market includes people of all demographics. We are open to offering rentals to people of all ages and groups as long as they can afford to pay their rent. From our initial market research, we expect most of our marketing efforts will target young adults, medium and high-income individuals, and families.

The precise demographics for Seattle, Washington, are:

Customer Segmentation

Noble Properties will primarily target the following customer profiles:

• Young adults
• Individuals who earn the region’s median income or more

Competitive Analysis

Direct and indirect competitors.

Noble Properties will face competition from other companies with similar business profiles. A description of each competitor company is below.

Leasing Inc.

Leasing Inc. is a marketplace for finding rental homes and apartments in multiple metropolitan areas around the country. It originally started more than a decade ago as a networking tool for real estate agents, but today it is a fully searchable online database of homes for both sale and rent. Leasing Inc. offers ideal rental properties, all with different amenities that can best suit the tenant’s requirements. Leasing Inc.’s properties are well furnished with all modern accessories and priced competitively.

Rental Barn

Rental Barn is the most visited rental agency website in the United States. Rental Barn and its affiliates offer customers an on-demand experience for selling, buying, renting, and financing with transparency and nearly seamless end-to-end service. The company’s rental property portfolio provides multiple rental apartments according to the customer’s needs and requirements.

Seattle Properties

Seattle Properties is a local rental property business that has dominated the market since 1982. The company manages and rents out hundreds of properties all across the city, including apartments, single-family homes, and mobile homes. All prices are competitive, and some rentals qualify for government programs to help low-income individuals. The company also utilizes a well-designed website to help prospective tenants find their perfect home based on rent, location, and accessories.

Competitive Advantage

• The company will purchase rentals in popular areas around the city, making our rentals in high demand.

Marketing Plan

Brand & value proposition.

The Noble Properties brand will focus on the company’s unique value proposition:

• Offering homes/apartments for rent suited for families and working professionals.
• Offering a diverse range of rental homes in a prime location for a competitive rate.
• Providing excellent customer service.

Promotions Strategy

The promotions strategy for Noble Properties is as follows:

Print Advertising

Noble Properties will invest in professionally designed print ads to display in programs or flyers at industry networking events and relevant local establishments.

Website/SEO Marketing

Noble Properties has designed a website that is well-organized and informative, and lists all our available properties. The website also lists the company’s contact information and other services it provides. We will utilize SEO marketing tactics so that anytime someone types in the Google or Bing search engine “Seattle rental properties” or “rentals near me,” Noble Properties will be listed at the top of the search results.

Referrals  

Noble Properties understands that the best promotion comes from satisfied tenants. The company will encourage its tenants to refer other individuals by providing economic or financial incentives for every new tenant produced. This strategy will increase effectiveness after the business has already been established.

Social Media Marketing  

Social media is one of the most cost-effective and practical marketing methods for improving brand visibility. The company will use social media to develop engaging content that will increase audience awareness and loyalty. Engaging with prospective clients and business partners on social media platforms like Facebook, Instagram, Twitter, and LinkedIn will also help understand the changing customer needs.

The real estate industry fluctuates, and therefore, rental prices, for the most part, are usually out of a company’s control. However, Noble Properties will market its properties at a competitive rate to ensure we do not have vacant properties. We will also keep tight control of costs in order to maximize profits.

Operations Plan

The following will be the operations plan for Noble Properties.

Operation Functions:

• Joseph Pierce will be the Owner and President of the company. He will oversee all staff and manage tenant relations. Jay has spent the past year recruiting the following staff:
• Karen Miller will serve as the Office Manager. She will manage the office administration, client files, and accounts payable. She will also handle much of the marketing efforts until the agency becomes large enough to hire a marketing team.
• Tim Johnson will be the Maintenance Director, who will provide all maintenance at the properties.
• Joseph will outsource professionals to handle the accounting and human resources aspects of the business.
• Joseph will also hire Rental Managers for the various properties as the agency continues to grow.

Milestones:

Noble Properties will have the following milestones completed in the next six months.

5/1/202X – Finalize contract to lease office space.

5/15/202X – Finalize personnel and staff employment contracts for the Noble Properties team.

6/1/202X – Begin moving into Noble Properties office.

7/1/202X – Finalize purchases of initial properties that will be rented.

7/15/202X – Begin networking and marketing efforts.

8/1/202X – Noble Properties opens its office and rentals for business.

Financial Plan

Key revenue & costs.

Noble Properties’ revenue will come from rental income, property management fees and deposits received from tenants.

The major costs for the company will be staff salaries and property maintenance. In the initial years, the company’s marketing spending will be high to establish itself in the market.

Funding Requirements and Use of Funds

Key assumptions.

The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and to pay off the startup business loan.

• Number of Managed Properties Per Month: 10
• Average Rent Per Month: $2,300
• Office Lease per Year: $100,000

Financial Projections

Income statement, balance sheet, cash flow statement, rental properties business plan faqs, what is a rental property business plan.

A rental property  business plan is a plan to start and/or grow your rental properties business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.

You can easily complete your rental properties business plan using our rental properties Business Plan Template here .

What are the Main Types of Rental Property Businesses?

There are a number of different kinds of rental property companies , some focus on Single family homes, Multi-family properties and others on Short-Term Rental properties.

How Do You Get Funding for Your Rental Property Business Plan?

Rental Property Businesses are often funded through small business loans. Personal savings, credit card financing and angel investors are also popular forms of funding. This is true for a real estate rental business plan or a rental property business plan.

A well-crafted rental property business plan is essential to securing funding from any type of potential investor.

What are the Steps To Start a Rental Properties Business?

Starting a rental property business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.

1. Develop A Rental Property Business Plan - The first step in starting a business is to create a detailed business plan for a rental property that outlines all aspects of the venture. This should include a market analysis, information on the services you will offer, marketing strategy, pricing strategies and a detailed financial forecast.  

2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your rental properties business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your rental properties business is in compliance with local laws.

3. Register Your Rental Properties Business - Once you have chosen a legal structure, the next step is to register your rental properties business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws. 

4. Identify Financing Options - It’s likely that you’ll need some capital to start your rental properties business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms. 

5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations. 

6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events. 

7. Acquire Necessary Rental Properties Equipment & Supplies - In order to start your rental properties business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation. 

8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your rental properties business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising. 

Learn more about how to start a successful rental properties business:

• How to Start a Rental Properties Business

Rental Properties Business Plan Template

Written by Dave Lavinsky

Rental Property Business Plan

Over the past 20+ years, we have helped over 10,000 entrepreneurs and business owners create business plans to start and grow their rental property business. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a rental property business plan template step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What is a Rental Properties Business Plan?

A business plan provides a snapshot of your rental property business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for a Rental Properties Business

If you’re looking to purchase a rental property, multiple rental properties, or add to your existing rental properties business, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your rental property business in order to improve your chances of success. Your rental property business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Rental Property Companies

With regards to funding, the main sources of funding for rental properties are personal savings, credit cards, mortgages, and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.

The second most common form of funding for a rental property is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan. Venture capitalists will not fund a rental property company. They might consider funding a rental property company with a national presence, but never an individual location. This is because most venture capitalists are looking for millions of dollars in return when they make an investment, and an individual location could never achieve such results.

Finish Your Business Plan Today!

How to write a business plan for a rental property company.

Your business plan should include 10 sections as follows:

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of rental property you are operating and the status; for example, are you a startup, or do you have a portfolio of existing rental properties that you would like to add to?

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the rental properties industry. Discuss the type of rental property you are offering. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.  

Company Analysis

In your company analysis, you will detail the type of rental properties you are offering.

For example, you might offer the following options:

• Single family homes – This type of rental property is often owned by a single individual, rather than a company, who acts as both landlord and property manager.
• Multi-family properties – These types of properties can be subcategorized by the number of units per site. Buildings with 2 – 4 units are the most common (17.5%), while multistory apartment complexes with more than 50 units represent the next-largest, at 12.6% of the industry.
• Short-Term Rental properties – These are fully furnished properties that are rented for a short period of time – usually on a weekly basis for vacation purposes.

In addition to explaining the type of rental property you operate, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include occupancy goals you’ve reached, number of property acquisitions, etc.
• Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry analysis, you need to provide an overview of the rental properties industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the rental property industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your strategy, particularly if your research identifies market trends.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your rental property business plan:

• How big is the rental properties industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential market for your rental property. You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population or tourist arrivals.

Customer Analysis

The customer analysis section of your rental property business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: households, tourists, etc.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of rental property you offer. Clearly, vacationers would want different amenities and services, and would respond to different marketing promotions than long-term tenants.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.  

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other rental property companies.

Indirect competitors are other options customers may use that aren’t direct competitors. This includes the housing market, or hotels. You need to mention such competition to show you understand that not everyone who needs housing or accommodation will seek out a rental property.

With regards to direct competition, you want to detail the other rental properties with which you compete. Most likely, your direct competitors will be rental properties in the vicinity.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

• What types of customers do they serve?
• What lease lengths or amenities do they offer?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you provide superior properties?
• Will you provide services that your competitors don’t offer?
• Will you make it easier or faster for customers to book the property or submit a lease application?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a rental property business plan, your marketing plan should include the following:

Product : in the product section you should reiterate the type of rental property business that you documented in your Company Analysis. Then, detail the specific options you will be offering. For example, in addition to long-term tenancy, are you offering month-to-month, or short-term rental?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the properties and term options you offer and their prices.

Place : Place refers to the location of your rental property. Document your location and mention how the location will impact your success. For example, is your rental property located in a tourist destination, or in an urban area, etc. Discuss how your location might draw customer interest.

Promotions : the final part of your rental property marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:

• Advertising in local papers and magazines
• Reaching out to local websites
• Social media marketing
• Local radio advertising

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your rental property business, such as customer service, maintenance, processing applications, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect 100% occupancy, or when you hope to reach $X in sales. It could also be when you expect to acquire a new property.  

Management Team

To demonstrate your rental property business’ ability to succeed as a business, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally you and/or your team members have direct experience in rental property management. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in real estate, and/or successfully running small businesses.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you have 1 rental unit or 10? And will revenue grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $200,000 on purchasing and renovating your rental property, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $200,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a rental property business:

• Location build-out including design fees, construction, etc.
• Cost of equipment like computers, software, etc.
• Payroll or salaries paid to staff
• Business insurance
• Taxes and permits
• Legal expenses

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your property blueprint or map.  

Putting together a business plan for your rental properties company is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the rental property industry, your competition and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful rental properties business.

Rental Properties Business Plan FAQs

What is the easiest way to complete my rental properties business plan.

Growthink's Ultimate Business Plan Template  allows you to quickly and easily complete your Rental Properties Business Plan.

What is the Goal of a Business Plan's Executive Summary?

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of rental property business you are operating and the status; for example, are you a startup, do you have a rental properties business that you would like to grow, or are you operating multiple rental property businesses.

Don’t you wish there was a faster, easier way to finish your Rental Properties business plan?

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BUSINESS STRATEGIES

How to start a rental property business: A comprehensive guide

• Annabelle Amery
• 14 min read

Owning rental properties can be a great way to generate passive income and build wealth over time. But it's not as easy as buying a few properties and collecting rent checks. There's a lot of work involved in managing tenants, maintaining properties and staying up-to-date on the latest laws and regulations.

In this comprehensive guide, we will walk you through the fundamental steps of starting a rental property business. Learn everything from creating your business plan to build your business website and spreading the word about your new venture.

What is a rental property business?

A rental property business is a business venture in which an investor purchases and manages one or more income-producing properties. These properties can have one or more units leased out to tenants in exchange for monthly rental fees. Rental property businesses can be operated by individuals, or they can be more complex operations involving multiple properties and team members.

Is your rental property a business?

Whether or not your rental property is considered a business depends on a number of factors, including:

Your level of involvement in the management of the property. If you're actively involved in managing the property, such as by handling maintenance requests, showing the property to prospective tenants and collecting rent, then your rental property is more likely to be considered a business.

The number of properties you own. If you own multiple rental properties, then your rental activity is more likely to be considered a business.

The amount of income you generate from your rental properties. If you generate a significant amount of income from your rental properties, then your rental activity is more likely to be considered a business.

If you meet all of the following criteria, then your rental property is likely to be considered a business:

You rent the property to earn a profit.

You work at the property regularly and continuously.

You provide significant services to your tenants, such as maintenance and repairs.

You have a significant investment in the property.

If your rental property meets all of these criteria, then you may be able to deduct certain expenses related to the property from your personal income taxes. You may also be able to claim certain tax credits, such as the qualified business income (QBI) deduction.

If you're not sure whether your rental property is considered a business, you should consult with a tax advisor.

Why should you start a rental property business?

Approximately 10.6 million in the U.S. declared rental income when filing taxes, with the average landlord bringing in $61,920 annually . Along with the financial benefits, there are many reasons to start a business in rental property and enter the real estate market.

Firstly, it allows you to create passive income with minimal daily involvement by generating consistent rental payments. You also have the potential for long-term wealth accumulation through property appreciation and the combo of cash flow and equity growth. On top of that, owning rental properties enables you to diversify your investment portfolio, providing stability and acting as a hedge against stock market volatility. There are also various tax advantages to consider, such as depreciation, mortgage interest deductions, property tax deductions and eligible expenses.

How to start a rental property business

To set yourself up for success, follow these steps to start your rental property business:

Define your business goals

Conduct market research

Create a business plan

Secure financing

Identify and acquire properties

Set up property management systems

Market and advertise your rental properties

01. Define your business goals

Determine your investment goals and strategy. Consider factors like property types (residential or commercial), location preferences, target tenant market and desired return on investment (ROI). Establish a clear vision for your rental property business.

02. Conduct market research

Thoroughly research your target market to identify areas with strong rental demand, favorable vacancy rates and potential for property appreciation. Analyze rental rates, property prices, local regulations and economic indicators. Evaluate the competition and your unique selling proposition to assess the viability of your rental business in the chosen market.

03. Create a business plan

Develop a comprehensive business plan that outlines your investment strategy, financial projections, marketing strategies, executive summary , property management processes and risk management strategies. A well-crafted rental property business plan serves as a roadmap for your rental property business and helps you attract potential investors or secure financing.

04. Secure financing

Determine your financing needs and explore how to raise money for your business . These may include traditional bank loans, private investors, partnerships, crowdfunding or using personal funds. Prepare a solid financial plan, including cash flow projections, expenses and potential return on investment, to present to lenders or investors. Once you’ve secured financing you’ll be able to register your business to make it official.

05. Identify and acquire properties

Once you have secured financing, start searching for suitable properties that align with your investment goals. Consider factors such as location, property condition, potential rental income and market appreciation. Conduct property inspections, perform due diligence and negotiate purchase prices.

06. Set up property management systems

Establish efficient property management systems to handle tenant relations, rent collection, property maintenance and legal compliance. Consider using property management software or hiring a professional property management company to streamline operations.

07. Market and advertise your rental properties

Develop a marketing strategy to attract potential tenants. List your properties on rental listing websites, utilize social media platforms and try networking with local real estate agents or relocation services. Create compelling property listings with high-quality photos, detailed descriptions and competitive rental prices.

How to write a rental property business plan

To write a rental property business plan, you need to consider the following sections:

Executive summary: The executive summary is a brief overview of your entire business plan. It should include your business goals, target market and competitive advantage.

Company description: The company description section provides more detail about your business, such as your business structure, ownership and services offered.

Market analysis: The market analysis section provides an overview of the rental property market in your area. It should include information about the demographic makeup of your target market, the supply and demand for rental properties, and the average rental rates.

Marketing strategy: The marketing strategy section describes how you plan to attract and retain tenants. It should include information about your target market, your marketing channels and your pricing strategy.

Management and operations: The management and operations section describes how you plan to manage your rental properties. It should include information about your team, your maintenance procedures and your tenant screening process.

Financial projections: The financial projections section provides an overview of your expected revenue and expenses. It should include information about your startup costs, your monthly operating expenses and your cash flow statement.

Exit strategy: The exit strategy section describes how you plan to exit your rental property business in the future. It could include selling your properties, passing them down to your heirs or exchanging them for other assets.

Once you have written your rental property business plan, you should review it with a trusted advisor, such as a lawyer or accountant. This will help you identify any potential problems and make sure that your plan is sound.

Here are some additional tips for writing a rental property business plan:

Be specific. Don't just say that you want to "make money." Instead, set specific goals, such as "I want to generate a 10% return on my investment within five years."

Be realistic. Don't overstate your income potential or underestimate your expenses.

Be flexible. Your business plan should be a living document that you can update as needed.

Seek feedback from others. Ask a lawyer, accountant or other experienced real estate investor to review your business plan and provide feedback.

With a well-written rental property business plan, you will be well on your way to success.

How much does it cost to start a rental property business?

The cost to start a rental property business can vary depending on a number of factors, including the type of property you buy, the location of the property and the condition of the property. However, there are some general costs that you can expect to incur, including:

Down payment: Most lenders will require you to make a down payment of at least 20% of the purchase price of the property.

Closing costs: Closing costs can range from 2% to 5% of the purchase price of the property.

Repairs and renovations: You may need to make some repairs or renovations to the property before you can rent it out.

Appliances and furniture: If the property is unfurnished, you will need to purchase appliances and furniture.

Marketing and advertising: You will need to market and advertise your property to potential tenants.

Landlord insurance: Landlord insurance will protect you financially in the event of a lawsuit or other covered event.

In addition to these upfront costs, there are also ongoing costs that you will need to budget for, such as property taxes, homeowner's association fees and maintenance and repairs.

According to a recent survey by the National Association of Realtors, the median down payment for a rental property purchase was 23% in 2022. The median closing costs were 2.1% of the purchase price. And the median amount spent on repairs and renovations was 1.2% of the purchase price.

Based on these estimates, you can expect to spend around 25%-26% of the purchase price of the property on upfront costs. So, if you are buying a $300,000 rental property, you can expect to spend around $75,000-$78,000 on upfront costs.

Of course, the actual cost of starting a rental property business will vary depending on your specific circumstances. It's important to do your research and create a budget before you start investing in rental properties.

Can a rental property business be profitable?

The profitability of a rental property business can vary significantly based on factors such as property location, market conditions, rental rates, expenses, and financing terms.

The "1% rule" is a general guideline often used by real estate investors to quickly evaluate the potential profitability of a rental property. It says that a rental property's monthly rental income should be at least 1% of the property's total acquisition cost. This is used as a quick initial screening tool to determine if a property might be worth the investment.

Here's how the 1% rule works:

1% Rule:** Monthly Rental Income ≥ 1% of Property Acquisition Cost

For example, if you're considering purchasing a rental property for $200,000, the monthly rental income should ideally be at least 1% of $200,000, which is $2,000.

Keep in mind that the 1% rule is a simplified guideline and shouldn't be the sole determining factor for making an investment decision. It's important to consider other factors such as location, market conditions, property management costs, financing terms, potential for appreciation, and the overall financial feasibility of the investment. The 1% rule can provide a quick initial assessment, a thorough analysis that takes into account all relevant factors is necessary to make informed investment decisions in the real estate market.

Properties that meet the 1% rule often have a higher likelihood of generating positive cash flow, where rental income exceeds expenses like mortgage payments, property taxes, insurance, and maintenance costs. However, markets with higher property prices and lower rental rates may make it challenging to find properties that meet the 1% rule while still being viable investment opportunities.

How to manage a rental property business effectively

Managing a rental property business requires effective systems, strong communication and ongoing attention to detail. More specifically, you’ll want to pay special attention to:

Tenant screening: Implement a thorough tenant screening process to ensure you select reliable and responsible tenants. Screen applicants' credit history, employment status and rental history, plus conduct background checks to minimize risks.

Lease agreements: Develop clear and comprehensive lease agreements that outline tenant responsibilities, rent payment terms, property rules and lease duration. Consult a legal professional to double-check that your lease agreements comply with local regulations and protect your interests.

Property maintenance and repairs: Regularly inspect and maintain your rental properties to keep them in good condition. Promptly address maintenance requests and conduct repairs as needed. Establish relationships with reliable contractors or property maintenance teams to ensure efficient service.

Rent collection and financial management: Establish streamlined rent collection processes. Clearly communicate rent payment methods and due dates to tenants. Utilize property management software or online platforms to track rent payments, generate financial reports and monitor cash flow.

Legal compliance: Stay informed about local and national rental regulations, fair housing laws and landlord-tenant rights. Make sure that your rental property business complies with these laws to avoid legal issues or disputes. Speak with legal professionals or local housing authorities when needed.

Regular communication: Foster good tenant relations through clear and open communication. Respond to inquiries or concerns promptly, provide regular updates or newsletters and address issues professionally and efficiently. Good communication builds trust and reduces conflicts.

How to promote your rental property business

As you’re looking to market your business, you’ll need to make sure that your brand's look and feel is professional. Consider things like how to name a business effectively so that your audience remembers you. If you’re struggling, you could use a business name generator . You’ll also need to design an eye-catching logo. Use a logo maker and/or check out these construction logo ideas for a little inspiration. Once you’re happy with your branding, it’s time to get promoting.

Create a professional website: Making a website for your rental property business is important. You can use small business website builders like Wix to showcase your properties, provide property details, highlight amenities and allow prospective tenants to contact you easily. Note that in 2022, renters used mobile devices (74%) to research rental properties, so you’ll want to ensure that your site’s mobile-friendly.

Optimize online listings: List your rental properties on popular rental listing websites like Zillow, Apartments.com or Rent.com. Optimize your listings with high-quality photos, detailed descriptions and competitive rental prices to attract potential tenants.

Leverage social media: Utilize social media platforms like Facebook, Instagram or LinkedIn to promote your rental properties. Create engaging content, share property photos or virtual tours and interact with potential tenants. Consider running targeted ads to reach your desired audience.

Network with local real estate agents: Build relationships with local real estate agents who can refer potential tenants to your rental properties. Offer incentives or commissions for successful referrals to encourage collaboration.

Offer incentives and referral programs: Attract tenants by offering incentives like move-in specials, discounted rent for the first month or referral programs. Encourage satisfied tenants to refer their friends, family or colleagues to your properties.

Showcase tenant testimonials: Collect testimonials from satisfied tenants and showcase them on your website, social media platforms or promotional materials. Positive reviews and testimonials can instill confidence in potential tenants.

Enhance curb appeal: Maintain attractive and well-maintained exteriors for your rental properties. Enhancing curb appeal through landscaping, exterior upgrades or fresh paint (see our guide on how to start a painting business ) can attract potential tenants and create a positive first impression.

In summary, here are the top benefits of starting a rental property business:

Cash flow: Rental properties generate rental income that can provide consistent cash flow. With proper management and strategic property selection, you can ensure a positive cash flow that covers expenses and generates profit.

Appreciation: Real estate properties have the potential to appreciate in value over time. As the value of your properties increases, so does your equity, allowing you to build wealth through appreciation.

Equity build-up: Each mortgage payment made by tenants helps to build equity in the property. Over time, as the mortgage balance decreases, your ownership stake increases, leading to increased wealth and financial stability.

Control and flexibility: As the owner of rental properties, you have control over property selection, rental prices, tenant screening and property management. This provides you with flexibility in decision-making and the ability to shape your business according to your goals.

Challenges of running a rental property business

While starting a rental property business has its advantages, it can come with its fair share of challenges. Here are some common challenges to be aware of:

Initial capital investment: Acquiring rental properties requires a significant upfront investment. Costs include property purchase, down payment, closing costs, property improvements and potentially renovations or repairs. Securing financing or having access to sufficient startup capital is crucial.

Property management: Managing rental properties involves various responsibilities, such as screening tenants, collecting rent, property maintenance, addressing tenant concerns and ensuring legal compliance. Effective property management requires time organization and problem-solving skills.

Tenant relations: Dealing with tenants can present challenges, including late rent payments, property damage, tenant turnover and potential conflicts. Building good tenant relationships and addressing issues promptly are key to maintaining a successful rental property business.

Market fluctuations: Real estate markets can experience fluctuations and cyclical patterns. Economic downturns, changes in demand or local market factors can affect rental rates, property values and vacancy rates. Staying informed about market trends and business cycle and adjusting your strategies accordingly is essential.

Features of successful rental properties

Successful rental properties typically have the following features:

Location: The property is located in a desirable area with good amenities, such as schools, shopping and public transportation.

Condition: The property is in good condition and well-maintained.

Price: The property is priced competitively and offers good value for tenants.

Target market: The property is appealing to a specific target market, such as families, students or professionals.

Management: The property is well-managed, with a system in place to handle maintenance requests, tenant screening and rent collection.

In addition to these general features, there are some specific features that may be more important for certain types of rental properties. For example, vacation rentals may need to have certain amenities, such as a pool or hot tub, in order to be successful. Commercial rental properties may need to be located in a high-traffic area with plenty of parking.

Here are some additional features that can make rental properties more successful:

Energy efficiency: Energy-efficient properties save tenants money on their utility bills, which makes them more attractive.

Security features: Security features, such as alarm systems and security cameras, can make tenants feel safer and more secure.

Pet-friendly policies: Pet-friendly rental properties are in high demand, as many people have pets.

Outdoor spaces: Outdoor spaces, such as patios, balconies and yards, are a valuable amenity for tenants.

Smart home features: Smart home features, such as thermostats and door locks, can make rental properties more convenient and efficient for tenants.

By investing in a property with these features, you can increase your chances of success as a landlord.

Can I start a rental property business with no experience?

Yes, it's possible to start a rental property business with no prior experience, but it's important to approach it carefully and educate yourself to increase your chances of success. Here are some key steps to consider:

Educate yourself: Learn about the real estate market, property management and landlord-tenant laws. Understanding the basics is crucial for making informed decisions.

Research the market: Conduct thorough market research to identify potential areas for investment. Look for locations with growing demand, low vacancy rates and potential for rental income.

Create a business plan: Develop a comprehensive business plan outlining your goals, target market, financial projections and strategies for property management. This plan will serve as a roadmap for your business.

Build a knowledge network: Connect with experienced professionals in the real estate industry, such as real estate agents, property managers and other investors. Their insights and advice can be valuable as you navigate the business.

Start small: Consider beginning with a smaller property to minimize risk and gain hands-on experience. As you become more comfortable and experienced, you can explore larger investments.

Financing: Explore financing options and understand the costs involved. This includes the purchase price, property maintenance, insurance, property taxes and potential vacancies.

Legal compliance: Familiarize yourself with local landlord-tenant laws and regulations. Compliance is crucial to avoid legal issues and ensure a positive landlord-tenant relationship.

Property management: Decide whether you will manage the property yourself or hire a professional property management company. Managing on your own may save costs but requires a commitment of time and effort.

Example of rental property businesses built on Wix

Need a little extra inspiration? Check out these rental property businesses on Wix.

TurnkeyRents

TurnkeyRents has been managing rental homes in Columbus, Indiana since as early as 1994. The company offers newly renovated homes, and provides its application docs and Airbnb calendar right from its Wix site.

Rent DIICO provides a simple landing page for viewing all of its available properties in Southern California. Rental units include apartments, studios and bungalows in some of the hottest parts of town.

How to start a rental property business FAQ

Is a rental property a good investment.

Yes, rental properties can be a good investment. They offer potential for passive income through rental payments and the opportunity for property appreciation over time. Additionally, real estate investments provide tax benefits, including deductions for mortgage interest, property taxes and operating expenses.

What rental properties are most profitable?

Looking to start your business in a new state.

If you're eager to launch your rental business in a particular state, check out these helpful articles:

Start a business in Pennsylvania

Start a business in Connecticut

Start a business in Texas

Start a business in New York

Start a business in Arizona

Start a business in Tennessee

Or, if you’re looking to learn about other business types , check out these related posts:

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Rental Property Business Plan

A rental property business is a great way of earning a passive income. It can help you have great finances if you go about it in the right way.

The rental property market stood at a size of 174.2 bn dollars in the US in 2021. And with the subsiding pandemic isn’t about to shrink any time soon.

Now, if you are planning to become a landlord, you might need just one thing before you start your business. A business plan.

A business plan would become a guide in your business journey. It would also make your journey a less difficult and more successful one. So, if you are ready to start your rental property business , read on to find out all about a rental property business plan.

How can a rental property business plan help you?

A rental property business plan can help you have a clear goal, a well-defined business model, and strategies that work. It can also help you navigate smoothly through roadblocks in your journey and steer clear of costly business mistakes.

Also, putting your idea on paper makes it look more real and clear. Moreover, a business plan also comes in handy while you explain your ideas to your collaborators and investors.

All in all a business plan will help you figure out your way around obstacles through rigorous analysis and strategic planning. This brings us to our next section, how to write a business plan.

Rental Property Business Plan Outline

This is the standard rental property business plan outline which will cover all important sections that you should include in your business plan.

• Business Objectives
• Mission Statement
• Guiding Principles
• Keys to Success
• Start-Up Summary
• Location and Facilities
• Products/Services Descriptions
• Competitive Comparison
• Market Size
• Industry Participants
• Main Competitors
• Market Segments
• Market Tests
• Market Needs
• Market Trends
• Market Growth
• Positioning
• SWOT Analysis
• Strategy Pyramid
• Unique Selling Proposition (USP)
• Competitive Edge
• Positioning Statement
• Pricing Strategy
• Promotion and Advertising Strategy
• Marketing Programs
• Sales Forecast
• Sales Programs
• Exit Strategy
• Organizational Structure
• Steve Rogers
• Linda Rogers
• Management Team Gaps
• Personnel Plan
• Important Assumptions
• Start-Up Costs
• Source and Use of Funds
• Projected Profit and Loss
• Projected Cash Flow
• Projected Balance Sheet

Say goodbye to boring templates

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After getting started with Upmetrics , you can copy this rental property business plan example into your business plan and modify the required information and download your rental property business plan pdf and doc file. It’s the fastest and easiest way to start writing your business plan.

How to write a rental property business plan?

Before writing a business plan, it is always good to ask yourself a few questions. It would surely make the process shorter and easier.

You should think about the following questions:

• What do you wish to achieve with your business?
• Who is your target audience?
• How would your business model work?
• What are your sources of funding?
• What would be your marketing strategy and so on?

All these questions would help you understand what you are getting yourself into. After that, you can start writing a business plan that focuses on all the different aspects of your business.

You can easily write such a plan either by using a premade template on the internet or through an online business plan software that’ll help you write a flexible and ever-changing plan.

What to include in a rental property business plan?

This section would give you a brief overview of the segments you can include in your business plan to make it a well-rounded one. They are as follows:

1. Executive Summary

The executive summary section contains a precise summary of all that your business stands for. If written well, it can help your business in getting funded. As it is mostly the only page an investor would read.

Professionals frequently suggest that this section should be written at the very end while writing your business plan, even if it is the first page. This helps you in summing up your business ideas properly.

2. Company Description

This section would consist of all the information about your business including its location, the services you offer, and your team.

It would also have information about your company’s history and its current position in the market. You can also include information about the projects you have worked on in the past.

3. Market Analysis

This is one of the chief sections of any business plan. It helps you understand what you are getting yourself into.

In this section, write down everything you can find out about the market. Include your target market, ways of reaching out to them, your market position, etc. Also, it is a good practice to include competitive analysis and take note of what your direct and indirect competitors are doing.

4. Marketing Strategy

While market analysis helps you in understanding the market, a marketing strategy helps you while getting into the market.

While formulating a marketing strategy, the most important thing is to have your target audience and market position in mind. Besides, keep in mind that your branding campaign should resonate with the client base you plan on serving.

5. Organization and management

This section includes information about the functioning aspects of your firm as well as about your team.

Include the roles and responsibilities of your team members as well as the progress they are making in their work.

If you write this section clearly and precisely, you’ll be able to identify the gaps you have in your team and your management system. This helps you in resolving those issues on time.

6. Financial Plan

This is one of the most crucial aspects of your business plan. More so in the rental property business. Planning your finances early on saves you from having financial troubles later on.

A financial plan section includes everything from your financial history, funding options, and requirements to projected cash flow and profits.

Download a sample rental property business plan

Need help writing your business plan from scratch? Here you go;  download our free rental property business plan pdf  to start.

It’s a modern business plan template specifically designed for your rental property business. Use the example business plan as a guide for writing your own.

The Quickest Way to turn a Business Idea into a Business Plan

Fill-in-the-blanks and automatic financials make it easy.

Rental property business plan summary

In conclusion, a good business plan can help you have good finances, a proper marketing strategy, a well-managed company and team as well as clear business goals.

Especially, in the rental property business, planning the flow and structure of your business as well as your finances can take you a long way.

A rental property business depends highly upon well-managed finances and strategies. Planning your business is necessary to make it a good source of passive or primary income.

Moreover, it also makes the process of carrying out your business easier and smoother. So, if you are ready to start your rental property business, go ahead and start planning.

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Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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How to start a rental property business in 14 steps

Real estate investing is a popular choice for entrepreneurs looking to create passive income and sustainable wealth. In particular, rental properties provide you the opportunity to create a diverse portfolio with multiple revenue streams. There are multiple ways you can approach a rental property business, but to rent out that first property, you’ll need to know how to start your business officially. Let’s take a look at the 14 steps you should follow to open your investment property business.

Can I start a rental property business with no experience?

You are not required to have a particular license to buy and sell a rental property. However, you will need to have a strong business sense and an in-depth understanding of real estate investing before you can confidently make both investment and property management decisions. You can go to school to learn this information or work directly with a mentor or other real estate-oriented professional who is willing to guide you through the process and teach you what you need to know.

1) Business plan

Now that you know you’re ready to start your rental property business, you’ll need a written business plan. A rental property business plan acts as both a map for you to stay on track as you build and grow your business and as a concrete document that proves to banks and investors why they should lend to or partner with you.

A strong business plan will have the following components:

• Executive Summary: A high-level overview of your entire business plan. What does success look like for you in this business, and how do you plan to reach that level of success?
• Industry Analysis: What is the state of the housing market? What insights can you glean from local real estate research? Where do you see investment opportunities?
• Competitive Analysis: Are there any direct competitors with your business, and how will you differentiate yourself?
• Marketing Plan: How will you source and secure quality tenants for your properties?
• Management: What is your plan for property management? Do you intend to work with a property manager, or do you plan to handle all maintenance and tenant activities on your own?
• Operations: How will you ensure that your properties are maintained in addition to the everyday operations of your business? Will you have offices? Will you hire staff members?
• Financial Plan: Do you have a clear understanding of how your proposed or intended rental properties will generate cash flow for your business? Will there be enough rental income to make your mortgage payment and then some? Do you have startup costs? What is your plan for continued growth and investment in additional properties over the next several years?

2) Business structure

As part of your business plan, you’ll also need to determine the right business model for you. There are multiple business structures you can set up for your rental property business. These are:

• Sole proprietorship
• Limited liability Company (LLC)
• Partnership
• Corporation

There are additional options within some of these categories. Review your choices carefully and select the business structure that’s best for your business goals.

3) Business name

Your business name will appear on your business cards, website, brochures, and any other marketing materials you use. A solid business name is:

• Clear, simple, and memorable
• Easy to say and spell
• Relevant to your type of business (for example, you could include the word “rental property” in your business name)
• In line with your brand

Use a business name generator to help you brainstorm. No matter which name you choose, make sure the matching website domain and social media handles are available.

4) Ideal clients

While it’s important to consider who you want to do business with when it comes to purchasing property, your ideal clients, in this case, are actually your tenants. If you could choose the perfect tenant to rent from you forever, who would they be? Consider the following questions when determining your ideal tenant type:

• Are they residential or commercial clients?
• What is their annual income or revenue?
• What do they do for a living, or what sort of business are they?
• Are they looking to become homeowners eventually, or do they only want to rent?
• Have they ever owned their own home before?
• What do they value in a rental property?
• Are they married? Single? In a relationship?
• Do they have children?
• Do they like to use their rental home, apartment, or business for parties or social events? How often?
• What social media platforms do they use?

You’ll continue to clarify who your ideal tenant is as you fill your rental property and see what type of person is truly the best fit. Hone your marketing strategy (which we’ll discuss later in this guide) to target your ideal client.

5) Niche, unique value proposition, and branding

Are you interested in filling your portfolio with a very specific type of property? If so, you have a niche. Some niche examples include:

• Vacation rental properties (such as Airbnb)
• Luxury rental properties
• Multi-family rental units
• Single-family homes
• Short-term rentals
• Condominiums

You do not have to have a niche, but it can be useful if you identify a market gap or have specific deep knowledge of your selected property type.

Unique Value Proposition (UVP)

Unlike your niche, your UVP has less to do with the type of property you own and more to do with how you operate your business. What can you offer to your prospective tenants that's so compelling they feel they simply must reach out to learn more about your properties?

Branding for a rental property business includes defining who you are as a business and what your prospective or current tenants can expect from your properties. Your branding should include:

• Color palette
• Mission statement
• Managing style
• Ideal tenant type
• Property type and style
• Design aesthetic
• Rental packages and special offers

Ensure that your branding is cohesive not just in your marketing but also across all your rental properties.

6) Services

Think of your services as what your tenants receive when they choose to rent from you. What are the perks of renting from you over a competitor’s property? What’s included in the rent? Is the management team responsive? These included services help to justify your pricing, so make sure they’re clearly promoted in your marketing.

7) Location

You know how much location matters when making a rental property purchase. But, have you thought about your business location as well? Do you require an office location, or will you operate from your home? If you feel that leasing a space is your best option, work with a real estate agent. Realtors can help you find the right fit for your budget and needs.

8) Equipment

Rental properties require a lot of maintenance and repairs to remain competitive in the market. You may find that your properties need additional fixtures, appliances, and repairs before they’re ready to rent out. You will need to work both the materials cost and the labor cost into your startup budget so that you can achieve a quality product without financial strain.

9) Finances

You will need to be able to qualify for a loan from a bank or other lender to finance the full amount of each of your properties, minus the down payment, which is paid out-of-pocket.

Your chosen bank will probably require that specific types of insurance coverage are in place before they lend to you. They will also want to see your business plan to understand in detail how you intend to pay off any loan they may give you.

Beyond the initial investment, recurring costs are also a factor in your overall budget. These can include property management fees, property taxes, legal and accounting fees, and more. Ensure that all these are accounted for in your business plan.

10) Insurance

As a new real estate business owner, you must have certain small business insurance policies in place. This applies to all businesses. However, the exact type of insurance coverage needed changes based on the type of business you are in. As a rental property business owner, you’ll require a specific set of policies . Some of these policies may include:

• Workers' Compensation : If you have one or more employees, you are required to have workers’ comp. This form of insurance covers you if one of your employees becomes injured or sick at work. Securing workers’ compensation used to be a long process, but now you can purchase it online . Get a fast estimate of your workers’ comp premium with Huckleberry’s 60-second workers' compensation calculator .
• General Liability Insurance : Covers your business if you are ever sued for injury or property damage .
• Business Property Insurance : Protects your building in case of serious damage. This policy also applies to any fixed components of your building, such as permanently installed equipment. It does not cover removable items.
• Business Owner's Policy : A Business Owner’s Policy bundles several insurance policies together. Your Business Owner’s Policy may include general liability and business property insurance, among others.Find out your estimated business insurance expenses with a fast and free quote from Huckleberry.

11) Paperwork, licenses, permits, and accounts

You’re almost ready to rent out your property, but first, there’s some important administrative work to handle.

• Register your business name: Go through the Small Business Association (SBA) website to learn how to register your business name.
• Get your Employer Identification Number (EIN): Your EIN acts as a Social Security Number (SSN) for your business. An EIN gives you multiple benefits , so get yours ASAP.
• Secure your business license: Each state is different, so check with your state to see how to get your business license. Each property you rent may need its own business license, so read your state’s guidelines carefully.
• Open a business credit card and business bank account: A business bank account keeps your personal and professional finances separate—very important come tax time. In addition, a business credit card ensures that you can clearly show your business spending were the IRS ever to audit you.

Check with your local government for any other specific licensing requirements you must fulfill.

12) Employees

You will likely need to hire an employee of some kind, whether as a full-time, part-time , or contracted worker. When that time comes, you’ll need the proper paperwork. You can easily download essential hiring forms such as a W-4 and W-9 online. Remember that your employees are as much a reflection of your brand as any other part of your business. Hire wisely to ensure that your partnership with them provides a positive impact for all involved.

13) Marketing strategy

A well-designed marketing strategy will help you keep all your rental properties filled with quality tenants year after year. There are multiple ways you can reach your potential tenants. Let’s take a look at some of the most popular and effective marketing methods.

Your website

Your rental property website is often a potential tenant’s main destination when determining whether or not they want to reach out to you to schedule a tour or even rent on the spot. Make sure your website is fast, mobile-friendly, and built with the customer’s experience in mind. Slow load speeds, outdated information, and unintuitive search functionality will only deter your site’s visitors.

Work with a web developer, copywriter, and Search Engine Optimization (SEO) strategist to help you build a website that shows your rental properties in the best light possible.

Email marketing

Email marketing is a great way to follow up with potential tenants who may have submitted their information to learn more about a property but have yet to rent from you. Design a series of newsletters or marketing emails meant to educate and build trust. You can also advertise new property rentals as you have them. The more helpful your email marketing content is to your reader, the more likely they will want to work with you in the future.

Social Media Marketing

Social media allows you to promote your vacancies as well as your company. Build brand authority with great photography and helpful, informative captions. You can also add ways for interested parties to get in touch with you about a property.

Some major social media platforms to consider for your marketing strategy are:

Google My Business

Google My Business helps your company get found on—you guessed it—Google. This applies most specifically to Google local search but may also help you rank better nationally when paired with an effective SEO strategy. Register for a free account, enter your business information, and you’re set!

Word-of-mouth and referrals

When you find a great tenant, you want to keep them. What’s more, you probably want to find more tenants just like them. That’s where word-of-mouth and referrals come in.

Offer an incentive to current tenants if they refer more potential tenants your way. A common incentive is to offer a certain dollar amount off their rent the month after a referred tenant signs a lease. Remember that you can harness social media for word-of-mouth as well, so encourage the circulation of your “available for rent” posts on all your platforms.

14) Additional resources

The life of a rental property business owner is fast-paced and filled with a lot of hard work. Sometimes that can make life a little stressful . To help you stay grounded, focused, and growth-oriented along your real estate journey, check out these and other real estate investment resources.

• Small Business Monthly Checklist
• Investopedia’s List of 9 Essential Books for Rental Property Investors
• BiggerPockets: A popular networking site for real estate investors
• Property search engines such as Trulia and Zillow

Congratulations! You’ve made it to the end of our step-by-step guide, and you’re that much closer to starting your rental property business. At this rate, you’ll have your first rental property ready for renters in no time.

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How to Start a Rental Property Business: A Comprehensive Guide

The rental property market has been experiencing significant growth and presents many opportunities for aspiring entrepreneurs.

With increasing urbanization, changing lifestyles, and a rising preference for rental housing, the demand for rental properties continues to rise.

This trend creates a favorable environment for individuals interested to start a rental property business . For that reason, we've developed this guide so that you can understand how to start a rental property business of your own.

What Is a Rental Property Business?

A rental property business involves an investor acquiring and overseeing one or multiple properties that generate income. These properties typically comprise units leased out to prospective tenants who pay monthly rental fees.

While a commercial real estate investor has the option to manage these properties directly, they can also enlist the services of property management companies to handle various landlord responsibilities, including rent collection and maintenance tasks. This allows investors to have an effective rental property business plan while entrusting the day-to-day operations to professionals in the field.

Why Rental Properties Can Be a Good Business

Starting a rental property business offers several advantages, which together help you generate cash flow, build wealth over time, and enjoy long-term capital gains:

• Reliable source of passive income
• Property value appreciation
• Tax benefits
• Hedge against inflation

Steps for Starting a Rental Property Business

Develop your rental property business plan.

A well-structured rental property business plan serves as a roadmap for your venture and provides a comprehensive overview of your business objectives, strategies, and financial projections. Here are the things to include in your entire business plan:

• Executive summary: Provide an overview of your real estate business, including its mission statement, goals, and competitive advantage.
• Market analysis: Conduct thorough market research to understand the local housing niche market, demographics, rental trends, and competition. Identify target tenants and their needs.
• Investment strategy: Define your investment strategy, including the types of properties you plan to acquire (e.g., single-family homes, multi-unit buildings) and the target locations.
• Use of property managers: Outline your management approach, including tenant screening, lease agreements, maintenance procedures, and rent collection processes.
• Financial projections: Include a detailed financial analysis that covers projected income, business expenses, and cash flow for the first few years. Consider property acquisition costs, renovation expenses, ongoing maintenance, property taxes, and vacancy rates.
• Marketing strategy and tenant acquisition: Describe your marketing strategies to attract and retain quality tenants. Outline your plans for advertising, online listing platforms, social media presence, and any unique marketing tactics you intend to employ.
• Risk management: Identify potential business risks and challenges, such as economic downturns, regulatory changes, or property damage. Develop contingency plans to mitigate these risks.
• Exit strategy: Outline your exit strategy, whether it involves selling properties, refinancing, or expanding into other real estate ventures.

Join a Real Estate Investor Club

To locate a local real estate investor club, a simple online search will provide numerous options in your area. In the event of limited availability, consider initiating your club to bring together undiscovered real estate experts eager to share their knowledge and connect with like-minded individuals.

Choose the Legal Structure for Your Rental Property Business

Selecting the appropriate legal structure for your first rental property business is an important step that impacts your liability, taxes, and overall business operations.

Consider the following options:

• Sole proprietorship: This is the simplest and most common business structure for small businesses. As a sole proprietor, you have full control and ownership of the real estate business, but you are personally liable for any debts or legal issues.
• Partnership:  A partnership structure may be suitable if you plan to co-own the investment property business with one or more individuals. It involves shared responsibilities, profits, and liabilities based on the terms outlined in a partnership agreement.
• Limited Liability Company (LLC): An LLC protects personal liability, separating your personal assets from the business's debts or legal obligations. It also provides flexibility in terms of management and taxation options.
• Corporation: Forming a corporation, such as a C Corporation or S Corporation, provides strong liability protection. It allows for the issuance of stock and may have additional tax advantages. However, corporations involve more complex legal and administrative requirements.

Consult with a business attorney or tax professional to understand each structure's legal and financial implications and choose the one that aligns with your long-term goals, risk tolerance, and tax considerations.

Once you've decided on a legal structure, fulfill the requirements to establish your legal business entity. This typically involves registering with the appropriate state or local authorities, obtaining the required licenses and permits, and adhering to specific regulations governing rental property businesses in your jurisdiction.

Complying with legal obligations from the outset will help ensure that your business operates within the confines of the law.

Secure Startup Funding for Your Rental Property Business (If Needed)

Starting a rental property business may require initial capital to acquire properties, cover renovation costs, or finance other startup expenses.

You can use your capital to finance your rental property business if you have personal savings or access to funds. This provides independence but carries the risk of tying up your finances.

Approach banks or lending institutions to explore options for business loans or lines of credit. You can also seek initial investment from individuals or private equity firms interested in becoming rental property investors. Present a compelling investment proposal that outlines your business plan, expected returns, and the potential for long-term growth.

Determine Financing Options and Investment Strategies

As a new landlord, navigating the financing landscape can be particularly daunting. However, with the right approach, you can increase your chances of obtaining the required funding.

Beyond the cost of the building itself, you need to factor in expenses such as utilities, insurance for the property, and landlord insurance. A comprehensive approach to proper financing will set you up for long-term success.

Fortunately, landlords today have access to a wide range of financing options. Traditional avenues include banks and private lenders, but alternative sources like hard money lenders exist.

While some alternative options may have higher interest rates, they might also offer more favorable terms that align with your business goals.

To secure the right kind of financing for your rental property business, it's important to start by determining your specific funding needs.

A clear understanding of the amount of money required will enable you to engage with lenders more effectively. From there, you can evaluate and compare different lenders, considering their terms, interest rates, and overall suitability for your business.

Conduct Market Research and Identify Ideal Clients

Begin by researching the local housing market where you plan to invest. Look for key indicators, including the following:

• Rental demand
• Vacancy rates
• Rental prices
• Market trends

This information will help you determine your rental property business's potential profitability and feasibility.

Identify the demographics of your target audience. Consider age, income level, lifestyle preferences, and family size. This will help you tailor your properties and marketing efforts to appeal to your ideal clients.

Analyze the specific types of rental properties in high demand in your target market. For example, student housing or smaller apartments might be sought-after if you're in a college town. Meanwhile, larger homes or properties near schools might be more desirable in a family-oriented neighborhood.

Understanding the demand will guide your property selection and investment decisions.

Assess the existing rental properties in your target area. Look at their amenities, rental prices, and practices of property managers. An analysis will help you differentiate your offerings and identify opportunities to provide a unique value proposition to potential tenants.

Develop detailed profiles of your ideal clients. Consider their preferences, needs, and pain points. This will allow you to tailor your marketing messages, property features, and customer service to attract and retain your target tenants.

Choose the Name for Your Rental Property Business

Your business name should accurately reflect the nature and purpose of your rental property business. It should convey the idea of providing tenants with quality properties and excellent service.

Consider incorporating keywords related to real estate, property rentals, or management to clarify your business.

Choose a business name that exudes professionalism and inspires trust in potential tenants. A professional-sounding business name can create a sense of reliability and competence, giving prospective renters confidence in your services.

Avoid using generic or overly casual names that might undermine the perception of your business.

Secure a Location for Your Business

Here are some important considerations when looking for a business location:

• Determine your needs: Evaluate your business requirements and determine the specific needs of your rental property business. Consider factors like space requirements, accessibility, parking availability, proximity to target rental properties, and convenience for clients and employees.
• Research potential areas: Consider local rental market demand, competition, economic growth, demographic trends, and zoning regulations. Look for areas with a high demand for real estate investing and where your target audience will likely be.
• Evaluate property options: Once you've identified potential areas, explore property options within those locations. Look for commercial spaces or office buildings that can accommodate your business needs.
• Negotiate lease terms: Negotiate lease terms with the rental property owner or landlord when you've found a suitable property. Carefully review the lease agreement, ensuring it covers important aspects such as lease duration, rent amount, maintenance responsibilities, and additional fees or provisions.
• Consider virtual options: Sometimes, a physical location may not be necessary for your rental property business. With technological advancements, you can leverage virtual office spaces or remote working arrangements. This can provide flexibility and cost savings, particularly if you primarily conduct business online or have a small-scale operation.

Register Your Rental Property Business with the IRS

To establish your rental property business as a legal entity and fulfill tax obligations, you should register your business with the Internal Revenue Service (IRS). This process will grant you an Employer Identification Number (EIN), which is necessary for various purposes.

Opening a business bank account is often a requirement by financial institutions, and they typically ask for an EIN as part of the account setup process. Moreover, if you plan to hire employees, having an EIN is essential; it enables the IRS to track your payroll tax payments accurately.

Get the Required Business License and Permits

Ensure the chosen location complies with local regulations and obtain necessary permits or licenses to operate your rental property business. This may include zoning permits, occupancy permits, or other industry-specific licenses.

Obtain Business Insurance for Your Rental Property Business

Insurance coverage provides financial security and safeguards your investments against unforeseen circumstances. Here are key considerations when obtaining business insurance for your rental property:

Research Insurance Options

Assess the risks associated with your rental properties, such as property damage, liability claims, natural disasters, or loss of income. Understanding your risks will help you determine the type and amount of insurance coverage required.

Determine Appropriate Coverage Types

Identify which type of coverage suits your needs. Here are some examples:

• Property insurance: Protects the physical structure of your rental properties, as well as the contents inside, against perils like fire, vandalism, or severe weather.
• General liability insurance: Covers legal expenses and damages if a tenant or visitor suffers an injury or property damage due to negligence or unsafe conditions on your rental property.
• Loss of income insurance: Provides coverage for lost passive income if your property becomes uninhabitable due to a covered event, such as fire or flood.
• Umbrella insurance: Offers additional liability coverage beyond the limits of your primary policies, providing an extra layer of protection.

Obtain Quotes from Insurance Providers

Consider working with an insurance agent specializing in commercial property or owning real estate to help you navigate the process and find the most suitable coverage.

Select an Insurance Policy

Carefully read through the insurance policies, paying attention to any exclusions or limitations that may affect your coverage. Understand the conditions under which claims can be filed and the procedures for reporting incidents.

Get a Business Credit Card

A business credit card can help you streamline your rental property business finances, track expenses, and earn rewards or cashback on business-related purchases.

However, make sure to use the credit card responsibly and avoid accumulating excessive debt. Regularly review your statements, monitor your spending, and manage your credit card effectively to maximize its benefits for your rental property business.

Buy or Lease the Right Rental Property Business Equipment

List the essential equipment required to manage your rental properties efficiently. This may include office furniture, computers, printers, communication devices, property management software, maintenance tools, cleaning supplies, security systems, etc. Consider the day-to-day operational needs and specialized equipment specific to your property types.

Identify Your Software Requirements

Determine the specific functionalities and features you need in software to manage your rental properties effectively. This may include property management software, accounting software , tenant screening tools, online rental listing platforms, maintenance tracking software, communication and collaboration tools, and more.

Make a comprehensive list of your requirements to guide your software selection process.

Develop Your Rental Property Business Marketing Materials

To effectively develop your rental property business marketing materials and create a comprehensive marketing plan, follow these steps:

Determine Marketing Channels (Online and Offline)

Decide on the most effective marketing channels to reach your target audience. Consider both online and offline platforms.

Online channels may include property listing websites, social media accounts, email marketing, and search engine optimization (SEO). Offline channels may include local print media, billboards, direct mail campaigns, and community events.

Choose channels that align with your target audience's media consumption habits and preferences.

Develop a Brand Identity and Message

Create a strong and memorable brand identity for your rental property business. This includes designing a professional logo, selecting appropriate colors and fonts, and crafting a consistent brand voice.

Your brand message should communicate the unique value proposition of your rental properties, highlighting key features, benefits, and the overall experience tenants can expect.

Establish Advertising and Promotion Strategies

Determine your advertising and promotion methods to reach your target audience. This may include online advertising campaigns, such as pay-per-click (PPC) ads on search engines or social media platforms.

Offline strategies may involve partnering with local businesses, distributing flyers, or attending rental property industry trade shows and events.

Consider budget allocation, timeframe, and each marketing strategy's effectiveness in reaching your goals.

Track and Measure Results

Implement tracking mechanisms to measure the effectiveness of your marketing efforts. Use analytics tools to monitor website traffic, lead generation, conversion rates, and tenant acquisition.

Regularly assess the success of your marketing strategies and make adjustments as needed to optimize your marketing campaigns.

Determine Rental Pricing and Profit Optimization

So, how do you collect rent?

Start by reviewing the average rental rates in the area where your property is located. Look for comparable units with similar features, such as the number of bedrooms, bathrooms, and amenities. This will provide a baseline understanding of the prevailing rental rates in the market.

You can examine similar apartment buildings to see what they charge for rent. Take note of properties that closely match the features and location of your rental property. Consider property size, condition, location advantages, and unique selling points. This will give you a clearer idea of the competitive rental rates in your specific area.

Take into account your monthly loan repayment as a starting point. Factor in other expenses such as maintenance and repairs. Analyze the typical maintenance costs in the market to ensure you allocate a realistic amount for these expenses.

If your rental property is in a college town or has unique maintenance requirements, it's advisable to budget extra for repairs. However, if you have a trusted long-term tenant, you may have more flexibility in setting the rent.

Monitor the rental market trends and periodically reassess your rental rate. Factors such as changes in demand, local economic conditions, and property improvements may warrant adjustments to stay competitive and maximize returns. Regularly evaluating the rental market and staying informed about rental rate trends will help you make informed decisions.

Conduct Property Selection and Acquisition

Research the local real estate market to gain insights into property values, rental demand, and market trends. Look for areas with potential for growth, low vacancy rates, and strong rental demand. Analyze historical data and consult with local real estate professionals to assess the market's stability and prospects.

• Establish a budget: Determine your budget for property acquisition, taking into account not only the purchase price but also additional costs like closing fees, property inspections, and any necessary renovations or repairs.
• Search for properties: Utilize various resources to search for suitable properties, such as online listings, real estate agents, auctions, and networking within the real estate industry. Consider both on-market and off-market opportunities.
• Perform property analyses: Evaluate each property's financial potential by analyzing its passive income potential, expenses, and return on investment (ROI). Assess the area's rental rates, projected vacancy rates, property taxes, insurance costs, maintenance expenses, and potential for property appreciation.
• Perform due diligence: Once you identify an investment property of interest, conduct thorough due diligence. This includes property inspections , reviewing legal documents (title, leases, permits), verifying the property's condition, and assessing potential liabilities or risks. Consider hiring inspectors, appraisers, and real estate attorneys to assist with the due diligence process.

If the property meets your investment criteria and passes the due diligence, negotiate with the seller to agree on a purchase price and terms. Work closely with your real estate agent or attorney to ensure a smooth transaction.

Prepare the necessary legal documents, such as purchase agreements and proper financing arrangements, and coordinate with relevant parties (lenders, escrow agents) to finalize the purchase.

Manage the Income-Producing Properties and Ensure Property Maintenance

A habitable living situation for residential properties entails various factors such as no leaks; functioning plumbing, gas, and electricity; sanitary building and grounds with adequate trash receptacles; and well-maintained floors, stairways, and railings.

As a landlord, you are typically responsible for addressing issues directly impacting the tenants' quality of life, like repairing a broken air conditioner unless the tenant caused the damage.

Managing short-term tenants requires additional attention to government regulations, which may vary by city. The property must comply with these regulations, and you'll need to clean and replenish certain amenities between each stay.

Some expected amenities for short-term tenants include shampoo and conditioner, clean dishes and silverware, fresh towels and linens, basic food staples like salt and pepper, cleaning supplies, and toilet paper and paper towels. Regular inspections after each stay can help identify any damages or low supplies.

If you prefer a more hands-off approach, you can hire a trustworthy cleaning service to act as a property manager or engage a property management company.

Hiring a property manager would be around 10% of the monthly rent collected. While this fee may seem substantial, it can be worthwhile for those seeking minimal involvement in day-to-day operations.

How much profit do you want to make on a rental property?

Profitability targets can vary based on individual circumstances and preferences. Some private investors seek a modest cash flow to supplement their income, while others aim for higher returns to build wealth and achieve financial independence.

How much rent should I charge?

Multiply monthly rent or expected rent amount by 12. Divide it by the sale price of a particular property and divide this figure by 100 for a percentage. A decent rent return usually has a rate of 8% or more.

What type of business is best for rental properties?

An LLC will generally be more useful when renting a property than a corporation. Although both aim to protect the rental property business owner from liability, an LLC allows for flow-through taxation, offering additional benefits for a real estate investor.

How can I make money in a rental business?

In a rental property business, you make money through rental income generated by leasing your commercial properties to tenants. The rental income should exceed your expenses, including mortgage payments, property maintenance, insurance, and self-employment taxes. As the property value appreciates over time, you can benefit from capital appreciation when you sell the property.

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his three children, he's writing articles here!

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How To Start A Rental Property Business Like A Pro

What is a rental property business?

Starting a rental property business

Writing a business plan

Is a rental property business a good investment?

As Antoine de Saint-Exupery once said, “A goal without a plan is just a wish.” Consequently, the best plans have developed a reputation for helping people in every industry realize their own goals, no matter how lofty they may be. There literally isn’t a single professional who couldn’t benefit more from a well-crafted strategy, and real estate investors are no exception. When learning how to start a rental property business , buy-and-hold investors in particular stand to improve their long term outlook by establishing a rental property business plan.

A proven rental property business plan can help layout the systems and benchmarks investors need to realize success at a higher level. That said, only one question remains: what does a rental property business plan look like?

If you are interested in starting a rental property business, there are several valuable lessons to take away from experience. Meanwhile, here’s a guide for developing a bullet-proof rental property business plan; it may be just what you have been waiting for.

On the FortuneBuilders Real Estate Investing Show , join our host, Jeffrey Rutkowski, as he talks to Gregg Cohen, the Co-Founder of JWB Real Estate Capital, on the subject of passive income and rental properties. Listen to the podcast here:

What Is A Rental Property Business?

A rental property business is a venture through which an investor will purchase and manage one or more income-producing properties. These properties can have one or more units leased out to tenants in exchange for monthly rental fees. Investors can have an effective rental plan without directly managing these properties; property management companies can be hired to carry out the duties often associated with landlords, such as rent collection and maintenance.

Is My Rental Property A Business?

Renting a house may be considered a business endeavor, depending on who you ask. This may seem like a controversial question, and there are at least two answers to consider. From a financial standpoint, renting a residential property may result in passive income. It is important to note that investors do not have to pay self-employment taxes when reporting their rental properties. Therefore, many would argue that owning a rental property is not considered a “business,” specifically in the lens of tax filing. However, from a career standpoint, many individuals live on passive income derived from their rental property companies; in this lens, renting a house can be considered a business. It’s entirely possible to manage a rental property portfolio as a business. Still, those with a single rental property may not need to start a company to collect passive income. It’s only once the portfolio starts to grow that turning the practice of renting into a business becomes more important.

How To Start A Rental Property Business

Learning how to start a rental property business isn’t all that different from just about every other entrepreneurial endeavor. Investors need to identify several key elements before getting started; that way, they can start their business on a solid foundation. Here are some of the most important steps to consider when drafting a rental property business plan and becoming a real estate entrepreneur:

Join a local REI club and start networking

Pick a niche and choose your rental property market

Figure out the proper financing and secure it

Conduct the appropriate research and hire a manager

Implement systems to improve efficiency

Manage the properties and scale the business at a sustainable pace

1. Join A Real Estate Investor Club

Joining a local real estate investing club or association provides networking opportunities, not the least of which may actually help rental property investors find a partner—or perhaps anyone else who may help them further their rental property business plan. Nathan Hughes at DiggityMarketing suggests that “investors need to identify various factors before entering the rental property business. Investors should join some real estate investors clubs as a beginner”. There’s absolutely no reason to think new investors, specifically aspiring rental property owners, can’t find a helpful hand at a real estate investor club. These types of meet-ups are specifically designed to help their attendees, and there’s always someone willing to lend a hand. At the very least, investors will gain insight into local professionals who are most likely already doing the one thing they want to do.

2. Pick A Niche & Choose A Market

Determining where to invest can often be more important to investors than how much capital or experience they bring to the table. After all, the golden rule of real estate persists: location, location, location. There is perhaps no more influential factor to a rental property investor’s success than the location in which they choose to invest. The location will determine everything from demand and price, not to mention the property’s long-term potential. Therefore, a truly great rental property business plan will want to make sure it answers these questions and many more like them:

How distant a market am I willing to invest in?

Do I have a team in place to handle the day-to-day, or will I have to commute back-and-forth?

How much will commute and market research cost me?

How stable and diverse is the economy in a market? Are there various business sectors that can help keep jobs and businesses? Is there one main employer?

What’s the average market price for property acquisition?

What’s the average rental price?

No rule says investors need to live in the markets they invest in, but there is no excuse for neglecting to mind due diligence and research the local housing market. To invest successfully, investors need to know every detail about a specific area, not to mention the specific niche they intend to serve.

Jordon Scrinko, the Founder & Marketing Director of Precondo states that “Investors’ decisions on where to invest are frequently more significant than their capital or experience. After all, when it comes to real estate, location is the most important. The area in which a rental property owner chooses to invest is possibly the most important aspect in determining their success”.

If for nothing else, investors need to know their renters just as much as the area they are investing in. Picking a niche, not unlike focusing on college housing or single-family homes, is the easiest way to target a specific audience. Therefore, at this time, rental property investors should decide who they will serve; only then will they be able to tailor their rental property business plan to see their audience’s needs.

3. Figure Out Financing

Securing financing is probably the biggest hurdle rental property investors face. However, financing a real estate deal isn’t nearly as hard as many new investors make it out to be. As it turns out, there are countless lenders just waiting for an opportunity to give savvy investors the money they need to invest in real estate. Like institutionalized banks, today’s real estate investors have access to more funding sources outside of traditional sources than ever before. Private money lenders and hard money lenders, in particular, have become synonymous with the best ways to secure funding and are as willing to work with investors as investors are eager to work with lenders.

These “alternative” sources tend to coincide with higher interest payments (often three to four times higher than traditional banks), but the added cost is well worth it. In exchange for their higher rates, investors not only receive the money they need to complete a deal, but they also receive it a lot faster than they would if they went through a bank. Whereas banks can take upwards of a few months to distribute funds, alternative lenders can have the money in investors’ hands in as little as a few days—if not hours.

It is also important to note that securing financing should be done before even looking for a home. That way, the investor will know exactly how much home they can afford and which investments are worth pursuing further.

4. Conduct Research & Hire A Property Manager

Becoming a landlord means investors will be responsible for maintaining the appearance and function of the rental property. However, whether or not the investor is a handyman is a moot point, as hiring a property manager is highly recommended. While it helps to know everything about a subject property, enlisting a third-party property manager’s services is an essential step in a rental property business plan. Through their help, investors may expand their portfolio without adding on countless hours of work. If for nothing else, a property manager will take care of everything. From finding tenants to collecting rent, property managers will see to it that everything is covered. Meanwhile, the investor is free to add more assets to their portfolio and increase their passive income cash flow.

5. Systemize

There are many rental plan options for landlords, such as specializing in low-income neighborhoods or university towns. Alternatively, they can choose to specialize in higher-income, urban neighborhoods. Different strategies require different skill sets, so landlords may find better success if they pick a niche in which they specialize. However, landlords will need to set up a system for running applications, credit, and background checks regardless of the niche. Adding proven systems to a rental property business plan is the surest way to make success habitual. Therefore, investors will need to create a system for every single process associated with rental property investing. That way, there will always be an appropriate course of action, regardless of the situation. Property managers, for that matter, make it a lot easier to implement systems.

6. Manage The Properties

Managing a rental property is about far more than just hiring a property manager; it’s about figuring out exactly what systems will be put in place to keep the properties in good shape and the cash flowing in. This means answering queries like:

Are you going to be a landlord? (Or will you hire a property manager?)

Who will find and select tenants?

Will you perform repairs to maintain the property? (Or hire a contractor?)

Who will perform yard maintenance and other duties?

Your answers will depend on your budget and available time. The key is to use your rental property business plan to map out all management systems beforehand and ensure no last-minute surprises.

Why Write A Business Plan

A well-crafted business plan will help in more ways than one as you learn to navigate the real estate industry. You can establish a clear framework of your goals and overall mission by writing a business plan. It should also include the reason why you want to start investing. This will ensure you remain focused as you make investment decisions and eventually grow your business. Think of a business plan as a roadmap for your future.

A business plan is also highly useful when speaking to potential lenders, designing marketing campaigns, and hiring new employees. These tasks will be made easier if you have a clear outline of what your business does (and how). For example, when you begin raising funds for your first deal, you will likely need to present your business goals to potential investors. A business plan can help take the pressure off — as the information will already be written down. If you are even slightly considering opening a rental real estate business, learning how to write a business plan is a great first step.

How To Write A Rental Property Business Plan

Starting a rental property business is one thing, but learning how to write a rental property business plan is entirely different. While the two sound similar, the latter is critical to making the former even stronger. At the very least, knowing how to start a rental property business must come before actually starting one. As a result, investors will need to familiarize themselves with the most important steps first:

Determine a vision and write a mission statement

Set passive income and business goals

Build a team structure that is conducive to success

Gain a high-level overview perspective of the company as a whole

Develop marketing systems and funnels tailored to a specific audience

1. Vision & Mission

A truly great rental property business plan must emphasize one thing above everything else: the investor’s vision or mission. What an investor hopes to achieve by investing in real estate may simultaneously serve as motivation and a guide when times are less than ideal. Therefore, investors must take a minute to think about why they are investing. Is it to retire comfortably? Is it to spend more time with family and friends? Is it both of these things? Knowing their “why” will help investors build out a sound business strategy, one that gets them closer to their goals with every investment. Consequently, those without a mission won’t know what direction to head, which doesn’t bode well for any rental property business.

2. Passive Income Goals

While closely related to one’s own vision or mission, passive income goals identify how much cash flow will be necessary to satiate investors’ appetites. That said, passive income goals should help investors meet their own mission statement. Likewise, if an investor wants to retire comfortably, they will need to set their passive income goals high enough to facilitate their desired retirement. While everyone’s passive income goals will be different, a general rule of thumb accounts for how much cash flow will be necessary to maintain their preferred lifestyle.

Remember, goals should be realistic and directly related to the reason someone wants to invest. Seeing overly ambitious goals can deter many investors from progressing, so the goals must be achievable. The sense of accomplishment developed from realizing a goal is, oftentimes, a powerful motivator.

Determining passive income goals will also help answer the most important question of them all: what type of rental property will I focus on? Residential? Commercial? Multi-family? Start from the end and work backward for better results; it’s the best and most efficient way to build a business.

3. Structure

Starting a rental property business may lead many investors to hire a team. After all, it’s true what they say: many hands make light work. The more qualified individuals investors have worked towards a common goal, the more likely they are to realize success. Not only that but hiring a competent real estate team is simply one more step towards investors removing themselves from the equation and earning more passive income. That said, it’s not enough to hire just anyone; the employees need to bring something new to the table. Investors need to hire a team that complements their skills—not that replicates them. That way, the team structure is more well-rounded and capable of accomplishing more tasks.

4. High-Level Overview

Investors need to look beyond the prospects of a single investment property and towards the potential of an entire portfolio. While a single home can produce encouraging cash flow levels, an entire portfolio can help investors realize financial freedom. Therefore, it’s important not to forget the “bigger picture.” Sure, start with a single home, but plans should inherently be scalable. When writing a rental property business plan, see that everything can be expanded to include future growth.

5. Marketing

Buying a rental property is just the first step on a passive income investing journey. At some point, investors need to figure out how to find tenants to bring in cash flow. More often than not, investors will rely on their property managers to fill vacancies. However, in the event an investor neglects to hire a property manager, there are various ways to find tenants, not the least of which include:

Rental websites

Social media

Print media/newspaper

Local bulletin boards

Local Realtors

Word-of-mouth marketing

Direct mail campaigns

Previous renters

Is A Rental Property Business A Good Investment?

Investors will know if a rental property is a good investment if their net cash flow remains consistently positive. Seasoned real estate investors know that to have a solid rental plan and business, they must first mind their due diligence and ensure that a rental property is indeed a good investment. There are several measurements available to help investors get an idea of the profit-making potential for a property. Make use of 10 real estate calculators that are helpful for any type of real estate investor.

Features of Successful Rental Properties

You don’t have to reinvent the wheel to be successful. Many successful rental properties can serve as a model for your business. Here are some distinct features of profitable rental properties:

Location: Real estate is always about location. The location of your rental property will be a major determinant of the type of tenants you will attract. For example, if you purchase a rental property at the edge of a university, you’ll naturally get applications from many college students. Consider the neighborhood and how it could influence your tenant profile, behavior, income, and vacancies.

Taxes: The location will also influence the property taxes that you end up paying. High property taxes may be well-worth it if your property is located in a great area that attracts high-paying tenants. However, property taxes could be a burden if your financials don’t make sense. Find out your property tax rate by contacting the local assessor’s office.

Schools: The ratings of local schools will help indicate what type of tenants you’ll attract. Rental properties near distinguished school systems will help draw in families willing to pay higher rental rates.

Safety: No one wants to walk home while constantly checking over their shoulder, or living in fear that their car will get broken into. Check local crime statistics and pay attention to trends. A reg flag could be a stead increase in criminal activity, even if it’s in a neighborhood that was known to be safe in the past.

Employment: A hot job market can help draw in larger groups of tenants, thus creating a healthy demand for your property. This could bring in benefits such as higher rental rates and lower vacancy rates. Growing employment opportunities can also boost your local economy and local amenities.

Local amenities: Tenants are constantly looking to balance rental rates with quality and easy of life. If your rental property is located near public transit systems, shopping, restaurants, gyms, and entertainment, you may find yourself having to field competitive offers from many tenants.

Economy: The local economy and horizon of industrial developments can also be a good indicator of rental property performance in a given area. The resulting improvement of local infrastructure could vastly improve the neighborhood and tenant pool. However, watch out for noisy construction that could hurt rental rates temporarily, plus new housing developments that could put a strain in competition.

Rental rates: Be sure to research a local neighborhoods average rental rate. This number can help you conduct a financial analysis to determine whether owning a rental property in the area would be feasible. Be sure to factor in costs such as property taxes, maintenance, repairs, and mortgage payments.

Vacancy rates: If you notice that the neighborhood has an abnormally high number of listings, it could signal that demand is low and vacancy rates are up. You may not want to invest in an area that is on the decline.

How To Determine Rent

Rent can typically be determined by analyzing other properties in the area. Start by reviewing the average rental rates, and then look at similar units to see what they go for. Pay attention to properties with the same number of bedrooms, bathrooms, and amenities. This will give the best idea of what you can charge.

Another approach is to take your monthly loan repayment as a baseline, and raise the rate to cover maintenance and repairs. Maintenance costs can vary significantly, so again pay attention to the typical market. If your rental property is in a college town, you may want extra room for maintenance. However, if you already know you are renting to a tenant you know you may be able to leave less room for repairs.

The final number should stay in the range of other properties in the area. However, they may be some wiggle room to decide exactly where to land for your own property. Just remember: charge too much and you risk vacancies, charge too little and you lose out on valuable income. If you want to learn more about determining rent , be sure to read our guide.

Confidence isn’t simply a positive mood based on affirmations and “feel-good” mantras. Confidence, according to Webster’s Dictionary, is the “state of feeling certain about something.” As you learn how to start a rental property business , there may be no greater confidence-booster than a business plan that comes to fruition. By mapping out your precise goals—and the systems you’ll employ to achieve them—you’ll find wealth-building objectives more attainable than you ever thought possible.

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Beginner's Guide to Starting a Rental Business

Launch your rental business with confidence using our beginner's guide. Step‑by‑step advice for a successful and profitable venture.

Becoming your own boss while generating a steady stream of income is something many people only dream about. However, many would argue that it's much easier than sitting in a cubicle for 8 hours a day. If you want to own your own business but aren't sure where to start, consider starting a rental business.

Whether renting equipment, vehicles, property, or anything else, the rental industry offers opportunities to turn the things you own into investment opportunities that generate profit.

The best part about owning a rental business is that there's no experience required. So whether you're an experienced entrepreneur or simply taking the first steps to becoming a business owner, anyone can own a rental business.

Keep reading to learn valuable tips about how to start a rental business, from generating business ideas to creating a business plan and beyond.

Learning how to start a rental business begins with finding the right rental business ideas, which may include rental properties, equipment, luxury items, or even vehicles. Consider the things you're passionate about or knowledgeable about.

For instance, if you own a rental property you're not using, you might consider renting it to tenants. On the other hand, if you enjoy woodworking and own equipment like table saws or lathes, you might prefer an equipment rental business.

However, before jumping into starting your own rental business, there are several other factors to consider, such as market demand, profitability, and potential challenges.

After choosing your business idea , conduct thorough market research. First, identify your target customers and understand their needs.

If you've chosen property as your rental business idea, you should consider whether your customers are short-term renters looking for a place to stay during their vacations or long-term renters in a residential area.

You can use online tools, public surveys, and databases to gather information about the potential market.

At the same time, you should understand who your competitors are, what they offer, and brainstorm ways to differentiate your business.

In addition to determining if there's a need or demand for your rental business, you should consider whether it'll be profitable. Understanding the costs associated with the business and a realistic pricing strategy can help you determine profitability.

If you have a rental property, you'll need to consider maintenance, insurance, and other operating costs. You'll also need to compare rates in the area to determine the fair market rent of your property.

It's equally important to identify potential challenges you might face with a rental business, including management of the process, legal issues, dealing with damages, and so forth. You should have a comprehensive plan for mitigating risks when starting a business of any kind, ensuring you have legal advice available to you when necessary.

A detailed and comprehensive rental business plan can help guide your business to success by helping you navigate each step of the journey when starting your own rental business.

Regardless of your business idea, you'll need a plan of action to help you achieve your goals. Your rental business plan should consist of the following information:

Executive summary

Your rental business plan should begin with a summary that discusses your business model, key goals, and strategies. This section acts as a comprehensive overview of the entire plan. We recommend writing it after finishing the rest of your business plan to ensure you include the necessary information.

Company description and vision

The company description and vision give an overview of the company and its objectives. It should explain the type of rental business you establish, the company's organizational structure, and the overall goals.

This section can also include detailed information about how your company stands out from the competition, which may include the type of rentals you offer, how you source the rentals, the business model as a whole, and your unique selling proposition (USP).

You should also provide information about your target market and the pain points your company will address.

The description of your company vision should look to the future and outline where you see your company a few years from now. It should be aspirational and provide a sense of direction to help guide your decisions and provide an overview of what you're working towards.

Rental services offered

No rental business is the same, each with its unique challenges and opportunities. The right one for you depends on your interests, available resources, and market demand. Your business plan should include information about the types of rental services offered and related services you provide.

If you offer party supply rentals, additional services might include event planning, setup or breakdown services, and delivery.

Try to be as specific as possible to help clients and customers understand your offerings.

Marketing and sales strategies

Whether you start a small business online or in a physical business location, rental companies need marketing and sales strategy to attract potential customers.

Part of your marketing plan should include branding and positioning to help you set yourself apart in the marketplace. You should outline your branding and positioning strategies within the business plan to ensure you effectively differentiate yourself from the competition.

At the same time, you should consider promotional channels and campaigns you'll use to attract customers. Specify the marketing channels you plan to use to reach your target audience.

These may include social media marketing, paid digital advertising, billboards, and so forth. For each channel, outline the specific promotional campaigns or tactics you plan to use.

Operational plan

All rental companies need an operational plan that details the business's daily operations. Depending on the types of items you rent, this might include inventory management, logistics, and delivery.

If you're renting equipment, supplies, vehicles, or even rental property, you'll need to have a detailed plan of action for acquiring, maintaining, and tracking them. This is more challenging if you have several different types of items.

A bike rental business may only have a few offerings, while a party supplies rental business has chairs, tables, tents, and a variety of other large and small items.

At the same time, you'll need a logistical plan for how these items are delivered. For a rental property business, this includes ensuring the properties are clean, functional, and ready for tenants.

Delivery and logistics can be more complex for other types of rental businesses. For instance, you might deliver your items to customers and pick them up when the rental period ends, which may include associated costs, such as vehicles, staff, and fuel.

At the same time, logistics requires scheduling. Tenants need to know when to pick up their keys or sign their leases. Meanwhile, equipment renters need to share venue locations while business owners ensure items are in place and ready at the agreed-upon time.

Financial projections

Financial projections are an important part of the rental business plan because they can help you understand your business's financial outlook.

With sales forecasts, you can estimate your sales revenue over the next several years, allowing you to consider your target market, pricing strategy, and rental frequency.

You should also perform a break-even analysis to show when your business will become profitable. This information can help you determine how much you should have saved to ensure the smooth operation of your business while it remains unprofitable.

Budgeting and financing can also help you manage your business costs. You should provide a clear budget outlining the initial investment, operating expenses, and expected revenues. In addition, you should have a financing plan, if necessary, including loans you plan to secure to help your business succeed.

After you've created your new rental business plan, it's time to start building your rental policies. Your rental policies will be the backbone of your business and ensure its smooth operation while acting as a guideline that outlines the terms and conditions of your services.

Policies should cover everything from rates, security deposits, fees, terms and conditions, damage control, and insurance. They should be clear, enforceable, and compliant with any local laws or regulations.

Setting rental rates

Rental rates directly influence your business's profitability and should be determined by the market research you performed earlier. Look at the prices your competitors charge for similar services.

Also consider your existing costs, such as maintenance, replacement, insurance, and other operating expenses, to find a profit margin you're comfortable with.

Security deposits and rental agreements

When starting a rental business, it's important to protect your assets. Security deposits and rental agreements do just that. The deposit should cover potential damages or losses but shouldn't be so much it deters potential customers.

Each piece of rental equipment, asset, or item should also come with a rental agreement that's clear and comprehensive, outlining the terms of the rental and the customer's expectations. It should include payment details, liability, and the dispute resolution process.

Because the rental agreement is so valuable to your business, you should have a lawyer help you draft it to ensure it's legally sound and can protect your business in case of legal issues.

Terms and conditions

The terms and conditions cover details like the rental period, late fees, cancellation policies, guidelines, and penalties for damage or loss. They should be easy to understand and accessible to your customers. You can provide the terms and conditions in the rental agreement and your website.

Damage control and insurance

You can't control how your customers use the items you rent them, which is why many leases include damage control policies that establish when customers are liable, how damage is assessed, and who is responsible for repairs. Even if you're not renting property, you should still have a policy to cover damages.

All business owners should have insurance. While the type of insurance policies you're required to carry varies based on the nature of your business and location, insurance coverage can protect your business from losses due to damage and liability claims.

Scaling and expanding the rental business

As your rental business starts to take off, scaling and expanding will be vital next steps to help you grow. Optimizing operations, improving customer relationships, and expanding your marketing efforts will become crucial. Let Mailchimp help.

Our all-in-one platform can help support rental business growth with CRM and m arketing automation tools that help you deliver personalized marketing messages to the right customers at the right time. Track your marketing campaigns to gain valuable insights about your audience and make data-driven decisions for future growth with Mailchimp.

How to Write a Business Plan as a Landlord

Editor's Note: This post was originally published in April 2020 and has been completely revamped and updated for accuracy and comprehensiveness.

Buying investment properties and renting them out to tenants is a great way to diversify your real estate portfolio and earn passive income. If you are considering becoming a landlord, writing a rental property business plan is vital to make your investment thoughtfully and deliberately. A well-crafted business plan can help you secure financing from lenders. A business plan demonstrates that you clearly understand your business and its potential, making you more attractive to potential lenders. Let's begin! This piece will walk you through what a rental property business plan is, why you should create one, and how to put one together.

What is a rental property business plan?

Most simply, a rental property business plan is a document that describes the following:

• You and your rental business.
• What your intentions and goals are with a property.
• Your plan for executing these goals.

Your rental property business plan will outline the strategies and goals for managing your properties.

Why should you develop a rental business plan?

Here are some reasons why you should create a rental property business plan:

• Provides a clear direction: A business plan outlines the goals and objectives of the rental property business, which helps you stay focused on achieving your vision. It also provides a roadmap for decision-making and ensures all activities align with the overall strategy.
• Helps secure financing: A business plan shows that you understand your business well, making your business more appealing to lenders.
• Identifies potential risks: A business plan identifies potential risks associated with the rental property business and provides strategies to mitigate them. This helps to avoid costly mistakes and ensures that you're well-prepared for any challenges that may arise.
• Enhances property management: A business plan includes a strategy outlining how you will manage your rental properties effectively.
• Enables monitoring and evaluation: A business plan provides performance metrics that will help you to monitor and evaluate your progress. This also allows you to identify areas for improvement and adjust your strategy accordingly.

First things first — set your business plan objectives.

Before creating your business plan, consider your specific objectives for your rental business. By setting your objectives, you're providing yourself with a target to aim for. A SMART goal incorporates all of these criteria to help focus your efforts and increase the chances of achieving your goal. This is a specific, measurable, achievable, relevant, and time-bound goal commonly used in business and project management to set and achieve goals.

The acronym SMART stands for:

• S - Specific: The objective should be clear and well-defined so everyone involved understands what they need to accomplish.
• M - Measurable: The objective should be quantifiable to measure and track progress over time.
• A - Achievable: The objective should be realistic and achievable based on available resources and the timeframe.
• R - Relevant: The objective should be relevant to your business's or project's overall mission or goals.
• T - Time-bound: The objective should have a specific deadline or timeframe for completion so you can monitor progress and make adjustments as needed.

Here are some examples of SMART goals for a rental investment business:

• Own four properties by the end of the year
• Earn $5k in rental revenue per month
• Earn $150k in rental profit by the end of year 5
• Hire a team of 4 business partners and open an office in Nashville, TN, in the next five years
• Find 15 tenants by the end of next year

You may only have one key objective or multiple, but each goal should have strategies and tactics to help achieve it.

Strategies and tactics for your SMART objectives

Let's take the relatively straightforward objective — own four properties by the end of the year. Easier said than done, right? Your strategy will be your rough game plan to achieve this goal. Here are some examples of strategies you may employ:

• Study local housing markets to find undervalued neighborhoods.
• Use hard money lending groups and meetups to help secure capital.
• Specialize in and become a master of a specific housing type (single-family homes, duplexes, apartments, townhouses, etc.)

You can then drill down each strategy into specific tactics. Here's what that looks like:

Study local housing markets to find undervalued neighborhoods:

• Study Zillow and MLS listings to see locations and figures of sales.
• Physical drive-thrus of neighborhoods to see house styles, number of For Sale signs
• Attend foreclosure auctions in different Tennessee counties
• Leverage social media to identify potential properties
• Try creative methods to find undervalued properties beyond the MLS

Use hard money lending groups and meetups to secure affordable and scalable financing:

• Join online hard money communities and see which lenders offer low rates, good terms, etc.
• Go to real estate conferences and network with lenders, wholesalers, etc.

Specialize in and become a master of a specific housing type:

Focus on 3br/2b single-family homes between 1500-2500 sq feet

How to write a rental property business plan

Now that you've thought about precisely why and how you will structure your business and execute your investment, it's time to write it! A rental property business plan should have the following components: The business plan typically includes the following elements:

• Executive Summary
• Business Description
• Market Analysis
• Marketing and Advertising
• Tenant Screening

Property Management

• Financial Projections

Risk Management

• Exit Strategy

Let's go through each of them separately.

Executive summary

The executive summary of a rental property business plan provides an overview of the key points of the plan, highlighting the most critical aspects. Here's an example of an executive summary:

[Your Business Name] is a real estate investment firm focused on acquiring and managing rental properties in [location]. The business aims to provide tenants high-quality rental properties while generating a steady income stream for investors. The rental property portfolio comprises [number] properties, including [type of properties]. These properties are located in [location], a growing market with a high demand for rental properties. The market analysis shows that rental rates in the area are stable, and the demand for rental properties is expected to increase in the coming years. The business's marketing and advertising strategies include online advertising, signage, and word-of-mouth referrals. The tenant screening process is thorough and includes income verification, credit checks, and rental history verification. The property management structure is designed to provide tenants with excellent service and to maintain the properties in excellent condition. The business works with a team of experienced property managers, maintenance staff, and contractors to ensure that the properties are well-maintained and repairs are made promptly. The financial projections for the rental property portfolio are promising, with projected revenue of [revenue] and net income of [net income] over the next [timeframe]. The risks associated with owning and managing rental properties are mitigated through careful screening of tenants, regular maintenance, and appropriate insurance coverage. Overall, [Your Business Name] is well-positioned to succeed in the rental property market in [location], thanks to its experienced team, careful management, and commitment to providing high-quality rental properties to tenants while generating a steady stream of income for investors.

Your executive summary is the Cliff Notes version of the complete business plan. Someone should be able to understand the full scope of the project just by reading this section. When writing your executive summary, assume it is the only part of your plan that someone reads. Aim for a half-page to full-page in length.

Business description

The business description section of a rental property business plan provides an overview of the company, including its mission, history, ownership structure, and management team. Here's an example of a company description section:

[Your Company Name] is a real estate investment company focused on acquiring and managing rental properties in [location]. The company was founded in [year] by [founder's name], who has [number] years of experience in the real estate industry.

Mission: Our mission is to provide high-quality rental properties to tenants while generating a steady income stream for our investors. We aim to be a trusted and reliable partner for tenants, investors, and stakeholders in our communities.

Ownership structure: [Your Company Name] is a privately held company with [number] of shareholders. The majority shareholder is [majority shareholder name], who holds [percentage] of the company's shares.

Management team: The management team of [Your Company Name] includes experienced professionals with a proven track record of success in the real estate industry. The team is led by [CEO/Managing Director's name], who has [number] years of experience in real estate investment and management. The other members of the management team include:

[Name and position]: [Brief description of their experience and role in the company] [Name and position]: [Brief description of their experience and role in the company]

Market analysis

Researching neighborhood trends can help you identify areas poised for long-term growth. This can enable you to make strategic investments that will appreciate over time, providing a stable source of income for years to come. The Market Analysis section of a rental property business plan for landlords should provide a comprehensive overview of the local rental market. Below are some key elements you should include in the Market Analysis section of your rental property business plan.

• Property Value: The value of a rental property is highly dependent on its location. By researching neighborhood trends, landlords can stay updated on changes in property values, both positive and negative. They can make informed decisions about whether to purchase, hold or sell their properties based on changes in the area.
• Rental Rates: Knowing the rental rates in a neighborhood can help landlords determine how much to charge for rent. Understanding how much other landlords charge for similar properties in the area can help a landlord price their property competitively and attract quality tenants.
• Tenant Preferences: Different neighborhoods appeal to different types of tenants. For example, families with children may prefer neighborhoods with good schools and parks, while young professionals may prefer areas with trendy restaurants and nightlife. By understanding neighborhood trends, landlords can cater to the preferences of their target tenants.
• Neighborhood Safety: Safety is a significant concern for tenants, and landlords can be held liable for any harm that befalls their tenants due to unsafe conditions on the property. Competitive landscape: There are several steps that landlords can take to research the competitive landscape of a rental market. These include identifying competitors, analyzing rental rates, researching amenities offered by competitors, and checking their online reviews.
• Growth potential: Consider external factors that may affect the rental market, such as population growth, job growth, or changes in zoning laws. This can help landlords identify potential growth opportunities in the market.

Marketing strategy

The marketing strategy section of your rental property business plan outlines how you will promote and advertise your rental properties to potential tenants. Below are some key elements to include in this section.

• Target Market: Identify the target market for rental properties, such as young professionals, families, or retirees. Describe their demographics, interests, and needs, and explain how the rental properties cater to these groups.
• Unique Selling Proposition: Identify the unique selling proposition of the rental properties, such as location, amenities, or affordability. Explain how these factors differentiate the properties from competitors in the market.
• Advertising Channels: Describe the advertising channels you'll use to promote the rental properties, such as online rental listings, social media, or local newspapers. Explain how you'll use these channels to reach the target market.
• Promotion Strategy: Describe the promotion strategy to attract tenants to the rental properties, such as discounts, referral bonuses, or move-in incentives. Explain how you'll communicate promotions to potential tenants and how they will be tracked and measured for effectiveness.
• Branding: Develop a branding strategy for the rental properties, including a logo, website, and promotional materials. Explain how the branding will reflect the unique selling proposition of the properties and how it will be used consistently across all marketing channels.
• Budget: Develop a marketing budget outlining each advertising channel's expected costs and promotion strategy. Explain how you'll track and adjust the budget as needed to ensure maximum return on investment.

Tenant screening

This section should outline the steps you or your property manager will take to evaluate potential tenants and ensure they fit your rental property well. This can ensure that your company has a thorough and fair process for evaluating potential tenants and selecting the best fit for their rental property. B elow are some critical components to include in this section.

• Criteria for Screening: Define the criteria you will use to evaluate potential tenants. This includes credit score, income, employment, criminal, and rental history.
• Application Process: Detail the application process that potential tenants will go through. This may include the application form, application fee, and required documentation such as pay stubs, rental history, and references.
• Background Checks: Describe the background checks you'll conduct on potential tenants. This may include a credit check, criminal background check, and reference checks with previous landlords.
• Approval Process: Outline the process for approving or denying a tenant application. This may include a review of the applicant's qualifications, background check results, and a decision based on the landlord's discretion.
• Fair Housing Compliance: Include a statement about compliance with fair housing laws. Landlords and property managers must ensure they do not discriminate against applicants based on protected classes such as race, color, religion, sex, national origin, disability, or familial status.

This section should outline the steps you or the property manager you have hired will take to manage the rental property effectively and ensure a positive experience for tenants. Below are some key components to include in the property management section of a rental property business plan.

• Maintenance and Repairs: Outline the process for addressing maintenance and repair issues. This may include a description of how tenants can report problems, the timeline for responding to requests, and the types of repairs that are the landlord's responsibility versus the tenant's responsibility.
• Rent Collection: Detail the process for collecting rent from tenants. This may include the due date for rent payments, late fees, and consequences for non-payment.
• Lease Agreement: Describe the lease agreement that tenants will sign. This may include the length of the lease, rent amount, security deposit, and rules and regulations for the property.
• Tenant Communications: Outline your approach to communicating with tenants. This may include regular newsletters or updates on property maintenance, a process for addressing tenant concerns, and emergency contact information.
• Compliance and Risk Management: Include a statement about compliance with regulations and risk management. This may include descriptions of insurance coverage, safety protocols, and any regulatory requirements the business must follow.

The financials section of your rental property business plan is crucial for demonstrating the business's financial feasibility and potential profitability of the investment. Let's take a look at what you can include.

• Income projections: Start by estimating the expected rental income from the property. This should be based on market rates for similar properties in the area, considering location, size, amenities, and condition. Consider any potential income streams beyond rent, such as laundry facilities or parking fees.
• Expense projections: Next, estimate the ongoing expenses associated with owning and managing the property, including mortgage payments, property taxes, insurance, utilities, maintenance and repairs, and property management fees, if applicable. Be sure to factor in seasonal or irregular expenses, such as snow removal or landscaping.
• Cash flow projections: Based on the income and expense projections, calculate the expected net cash flow for the property monthly and annually. This will give you a sense of how much income the property will likely generate after paying expenses.
• Financing plan: If you plan to finance the purchase of the property, outline your financing plan, including the loan amount, interest rate, and repayment terms. Be sure to calculate the impact of financing on your cash flow projections.
• Return on investment: Calculate the property's expected ROI based on the initial investment and projected cash flows over a specified time (e.g., five years). This will give you a sense of whether the investment will likely be profitable in the long term.
• Sensitivity analysis: Conduct sensitivity analysis to assess the potential impact of changes in key assumptions (e.g., vacancy rate, rental income, expenses) on your cash flow projections and ROI. This will help you identify potential risks and make informed decisions about the investment.

As a landlord, you must include a risk management section in your rental property business plan to address potential risks and establish strategies for mitigating them. Below are some key steps you can take to create a risk management section for your business plan.

• Identify potential risks: Identify risks associated with your rental property business. This may include risks related to property damage, tenant safety, liability, financial loss, and legal compliance.
• Assess the likelihood and impact of each risk: Once you have identified potential risks, assess the likelihood and potential impact of each risk on your rental property business. This will help you prioritize which risks to address first and determine the resources you must allocate to manage each risk.
• Establish risk management strategies: Develop a plan for managing each identified risk. This may include measures to prevent the risk from occurring, as well as steps to mitigate the impact of the risk if it does happen. For example, you may establish a routine property inspection program to identify and address maintenance issues before they become significant problems. You may also require tenants to carry renters' insurance to mitigate financial loss if they cause damage to the property.
• Review and update your risk management plan regularly: Risks can change over time, so it's essential to review and update your plan regularly. This will help you ensure that your strategies are still effective and that you are prepared to manage new risks as they arise.
• Seek professional advice: Consider seeking professional advice from a lawyer, insurance agent, or another expert to help you identify potential risks and develop effective risk management strategies. This can help you ensure your business is well-protected and minimize risk exposure.

By including a comprehensive risk management section in your rental property business plan, you can demonstrate to potential investors, lenders, and tenants that you are committed to running a safe and sustainable rental property business.

Exit strategy

An exit strategy is integral to any rental property business plan as it helps you plan for the future and maximize your ROI. You most likely plan on renting out your property for a long or indefinite time. If you have a shorter or more definite timeline, like renting it out for ten years and then selling it, mention it here. Should your property go vacant for a long time, or economic circumstances, cause rent prices to fall dramatically, maintaining your property may no longer be sustainable. You should have a plan, or at least a framework, to decide what to do if this happens. Otherwise, your exit strategy should be your backup plan if things don't go as planned.

Final thoughts

Creating a comprehensive rental property business plan provides you with a clear direction for your business, helps secure financing, identifies potential risks, enhances property management, and enables monitoring and evaluation of performance. A business plan is valuable for landlords who want to run a successful rental property business.

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How to start a rental property business in 6 steps

People invest in rental property for a number of reasons, including recurring rental income, appreciation in property value, investment diversification, and tax benefits. 

While there are numerous potential benefits to owning real estate, it’s important to have a plan in place to increase the odds of success. In this article, we’ll explain how to start a rental property business by following 6 important steps.

Key takeaways

• Owning rental property helps investors diversify investment portfolios, manage risk by avoiding stock market volatility, and generate recurring rental income.
• Following a systematic approach to starting a rental property business can help investors avoid costly mistakes and allow investors to scale up and grow.
• The key steps to starting a rental property business include learning about the real estate business, researching investment and financing options, and having a system in place to grow the business. 

6 steps to start a rental property business

The steps for starting a rental property business are similar to most other business ventures. It’s much easier to achieve your investment goals and financial objectives when you have a plan in place.

While every real estate investor may take a slightly different path, here are the 6 main steps to follow to start a rental property business.

1. Networking and education

A good education is the foundation of a solid rental property business. That’s because the real estate business is all about who you know and what you know. An investor can become educated by reading books and blogs, attending in-person networking events to rub shoulders with other investors, or signing up for online real estate courses.

When choosing a good real estate education course, it’s important to look for things such as the ability to move at your own pace, the opportunity for customized classes and one-on-one coaching, options for networking via dedicated communities and online forums.

Roofstock Academy is an online option worth checking out. There are 3 plans to fit different investing timelines, learning styles, and budgets. Classes include exclusive lectures, group and one-on-one coaching, access to a private investor community, and more, depending on the membership plan selected.

2. Research investment options

Many first-time rental property investors choose single-family homes and small multifamily properties. That’s because houses and apartments are everywhere, easy to understand, and have a variety of financing options available.

There are also different investment strategies used to make money in real estate. One of the most common investment options in real estate is buying and holding single-family rental (SFR) homes. Rental property can be rented in the long term using a one-year lease, or it can be used as a short-term vacation rental. Both options work a little bit differently, and, when starting a rental property business, investors may wish to explore the pros and cons of each before settling on an investment strategy.

Methods for finding homes for sale that can be used as rentals include traditional sources, like real estate agents and the multiple listing service (MLS) or websites like Zillow, Redfin, or Roofstock. Of these options, Roofstock is the only platform specifically developed for buying and selling SFR homes, small multifamily properties, and short-term vacation rentals.

Roofstock simplifies the process of remotely investing in real estate. Every investment property listed for sale on the Roofstock Marketplace includes details to make research easier, including:

• Property inspection and valuation on certain properties
• Title report and insurance quote
• Neighborhood Rating and local school scores
• Current lease information and rent payment history if the property is already rented
• Interactive tools for visualizing and measuring key financial metrics, such as cash flow, cash-on-cash return, gross yield, and appreciation 

3. Run the numbers

Rental property investors look for homes that generate cash flow, appreciation, or a combination. Investors use a variety of financial metrics to analyze the potential returns from rental properties, including:

• Gross rental income
• Operating expenses
• Net operating income (NOI)
• Capitalization rate
• Cash-on-cash return
• Appreciation and rent growth
• Internal rate of return

Rather than focusing on one return metric, investors generally consider all of the above data points to create a holistic picture of potential returns. 

4. Financing options

Real estate investors finance rental property for a variety of reasons, such as making a small down payment to control 100% of the property, diversifying capital across several investments, and using other people’s money in the form of a loan to increase cash-on-cash returns.

There are a wide range of options for financing rental property, including:

• Conventional loans
• Federal Housing Administration (FHA) financing
• FHA 203(k) loans
• Veterans Affairs financing
• Self-directed individual retirement accounts (SDIRA) for real estate
• Home equity loans
• Home equity lines of credit (HELOC)
• Private money loans
• Hard money loans
• Portfolio loans
• Blanket mortgages
• Group investing
• Owner financing

Financing a rental property with a fixed-rate, long-term loan is an option used by buy-and-hold real estate investors to lock in low interest rates as a hedge against future interest rate increases. 

The online mortgage rate calculator available on Roofstock helps investors to explore different financing options offered by third party lenders that are based on down payment amount, credit score, loan terms, and location.

After running the numbers, investors can connect with lenders to get preapproved before making an offer.

5. Management responsibilities

Some investors choose to self-manage rental property to gain the hands-on experience of being a landlord. However, trying to self-manage an out-of-state rental property can be difficult. 

That’s why remote real estate investors generally hire a local, professional property management company to take care of tasks such as communicating with tenants, making repairs, and complying with local, state, and federal housing laws.

Management responsibilities of owning and operating a rental property include:

• Running rent comparables to determine the fair market rent
• Quickly making a home rent-ready between tenants
• Advertising and marketing for a new qualified tenant to minimize the vacancy rate
• Screening prospective tenants by running background checks, credit reports, rental history reports, and speaking to references
• Collecting security deposits and monthly rent, assessing late fees, and exploring options for increasing rental income, such as pet rent or roommate rent
• Enforcing the terms and conditions of the lease and handling tenant communication and complaints
• Coordinating maintenance and repairs with in-house staff or cost-effective third-party vendors
• Ensuring rental property complies with building codes, health and safety regulations, and state and federal landlord-tenant laws
• Conducting move-in and move-out inspections and periodic property inspections 
• Making monthly owner distributions from a cash-flowing property and providing routine financial performance reports

6. Grow the business

Systemizing a rental property business by automating routine tasks can make it much easier to scale up and grow. Signing up for a free account with Stessa is the first step to track and optimize a real estate business. 

Rental property financial management software from Stessa helps investors to maximize profits through smart money management, automated income and expense tracking, and personalized recommendations to help maximize property performance. 

Rental property owners can use Stessa for SFR homes, small multifamily buildings, short-term vacation rentals, and multiple portfolios of rental property. 

When tax time rolls around, investors can generate tax-ready financial reports and access the Stessa Tax Center to claim free resources created in partnership with The Real Estate CPA, as well as an exclusive TurboTax discount.

Closing thoughts

Starting a rental property business is about a lot more than applying for a loan and buying a home. Having a step-by-step plan in place for education, networking, research, financial analysis, and property management can help an investor stay focused on business goals and financial success.

Jeff has over 25 years of experience in all segments of the real estate industry including investing, brokerage, residential, commercial, and property management. While his real estate business runs on autopilot, he writes articles to help other investors grow and manage their real estate portfolios.

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How to Start a Profitable Rental Property Business [11 Steps]

By Nick Cotter Updated Feb 02, 2024

Business Steps:

1. perform market analysis., 2. draft a rental property business plan., 3. develop a rental property brand., 4. formalize your business registration., 5. acquire necessary licenses and permits for rental property., 6. open a business bank account and secure funding as needed., 7. set pricing for rental property services., 8. acquire rental property equipment and supplies., 9. obtain business insurance for rental property, if required., 10. begin marketing your rental property services., 11. expand your rental property business..

Embarking on a rental property business requires a thorough understanding of the market landscape to ensure informed decision-making and strategic positioning. A meticulous market analysis will arm you with the knowledge necessary to identify opportunities, assess competition, and cater to the needs of your target clientele. Here are key steps to guide you through the process:

• Research the Local Market: Examine the local real estate market trends, including rental demand, average rent prices, occupancy rates, and seasonality.
• Analyze Competitor Offerings: Look into the properties offered by competitors, their pricing strategies, amenities provided, and tenant demographics.
• Understand Your Target Audience: Identify your prospective tenants, understand their needs, preferences, and what they value in a rental property.
• Evaluate Economic Indicators: Consider factors such as employment rates, population growth, and economic forecasts that could affect the rental market.
• Assess Legal and Regulatory Factors: Stay informed about zoning laws, rent control regulations, and any changes in property laws that could impact your business.
• Review Financial Metrics: Analyze potential revenue, expenses, cash flow, and return on investment for properties of interest.

Are Rental Property businesses profitable?

Yes, rental property businesses can be very profitable. The potential for profit depends on many factors such as location, rental rates, occupancy rates, and property management fees. Generally, rental property businesses can provide a steady income stream and long-term appreciation of the underlying asset.

Embarking on a rental property business requires meticulous planning and a robust strategy. A well-crafted business plan serves as a blueprint for success, guiding your decisions and helping secure financing. Here are the essentials to include in your rental property business plan:

• Executive Summary: Provide a snapshot of your business goals, target market, and vision for the future of your rental property business.
• Company Description: Detail the legal structure of your business, location, and the type of rental properties you'll offer.
• Market Analysis: Research the local real estate market, analyze competitor strategies, and identify your target tenants.
• Marketing Plan: Outline how you will attract and retain tenants, including advertising methods and any unique selling propositions.
• Operations Plan: Describe the day-to-day operations, property management, maintenance responsibilities, and any technology you'll use.
• Financial Plan: Include revenue projections, expense estimates, cash flow analysis, and information about funding sources and investment strategies.
• Appendices: Attach relevant documents such as property photos, resumes of key managers, and legal documents.

How does a Rental Property business make money?

A rental property business makes money by charging tenants rent for the use of the property. The owner can also make money from additional services such as maintenance and property management fees. Additionally, the owner can generate income from appreciation of the property's value over time.

Creating a compelling brand for your rental property business is crucial in setting yourself apart in a competitive market. It involves more than just a catchy name; it's about building a reputation that resonates with your target audience and reflects the unique experience you offer. Here are some key steps to guide you through the process:

• Identify Your Unique Selling Proposition (USP): Determine what makes your rental property different and appealing. Is it the location, amenities, service, or price? Your brand should communicate this uniqueness.
• Define Your Target Audience: Understand who your ideal renters are. What do they value? What are their needs and preferences? This will help tailor your branding messages effectively.
• Choose a Memorable Name and Logo: Your brand name and logo are often the first things potential tenants will see. Make sure they are distinctive, easy to remember, and reflect the essence of your brand.
• Develop a Brand Voice and Personality: How your brand communicates, whether it's professional, friendly, or quirky, should be consistent across all materials and interactions.
• Implement Branding Across Touchpoints: Ensure that every aspect of your business, from your property design and marketing materials to your online presence and customer service, aligns with your brand identity.

How to come up with a name for your Rental Property business?

Coming up with a name for your rental property business can be a fun and creative process. Start by brainstorming words that relate to your business - ideas like 'home', 'abode', 'property', 'rental', 'lease', and 'housing' can be a great place to start. Then, consider what tone you want to set for your business - are you going for something professional or something more casual? Finally, combine some of the words you brainstormed to create a unique name that conveys your business's identity. With a bit of creative thinking, you can come up with a name that will set you apart from the competition.

Starting a rental property business requires not just finding the right property but also ensuring that your business is legally recognized. Formalizing your business registration is a vital step that protects you legally and financially. Here’s how you can go about it:

• Choose a business structure (e.g., LLC, S Corp, partnership) that best suits your needs for liability protection and tax benefits.
• Register your business name with the appropriate state agency, ensuring it’s unique and meets state requirements.
• Obtain an Employer Identification Number (EIN) from the IRS for tax purposes, even if you don't plan to have employees.
• Register for state and local taxes to ensure you are set up to pay all necessary sales, property, and employment taxes.
• Apply for the necessary permits and licenses that your local and state governments require for operating a rental property business.
• Consider consulting with a legal professional to help navigate the specific legal requirements of your locality and to ensure all paperwork is filed correctly.

Resources to help get you started:

Explore pivotal resources designed for rental property entrepreneurs eager to gain insights on market trends, refine operational strategies, and propel business growth:

• BiggerPockets Website: A comprehensive platform offering articles, forums, and podcasts on investment strategies, property management, and networking opportunities. https://www.biggerpockets.com
• National Association of Residential Property Managers (NARPM): Provides educational programs, industry reports, and a network of professionals for best practice sharing. https://www.narpm.org
• The Real Estate Guys Radio Show: A podcast delivering expert interviews and practical tips on real estate investing and management. https://realestateguysradio.com
• HousingWire: Offers latest news, analysis, and reports on real estate market trends, including insights into the rental property sector. https://www.housingwire.com
• Landlordology: A blog by Cozy providing in-depth guides, legal advice, and tools for successful property management and investment. https://www.landlordology.com

Starting a rental property business requires due diligence in obtaining the appropriate licenses and permits to ensure legal compliance and smooth operations. Each region has its own set of regulations, so it is crucial to understand and adhere to the specific requirements of your location. Here's a concise guide to help you through the process:

• Research Local Regulations: Check with your city or county government to understand the local zoning laws and whether your property is in a zone that allows for rental use.
• Business License: Apply for a business license through your local government. This generally involves filling out an application and paying a fee.
• Rental Permit: Some jurisdictions require a rental or landlord permit. This could involve a property inspection and an additional fee.
• Building and Housing Codes: Ensure your property complies with local building and housing codes, which may necessitate permits for renovations or upgrades.
• Health and Safety Inspections: You may need to pass health and safety inspections, especially if your rental property includes multiple units.
• Landlord-Tenant Laws: Familiarize yourself with landlord-tenant laws in your state to adhere to required practices regarding security deposits, lease agreements, and tenant rights.

Starting a rental property business requires careful financial management, which is why opening a dedicated business bank account and securing the necessary funding are essential steps. Here's how to navigate these financial milestones:

• Choose the Right Bank: Research banks that offer business accounts with favorable terms. Look for low fees, easy access to online banking, and any additional services that cater to small businesses.
• Open Your Account: Gather the required documents such as your business license, EIN, and incorporation papers. Schedule an appointment with a bank representative to set up your account.
• Understand Funding Needs: Assess how much capital you need to purchase properties, renovate, or cover other initial expenses. Create a detailed budget to guide your funding requirements.
• Explore Funding Options: Consider various sources of funding such as traditional bank loans, SBA loans, private lenders, or real estate investment groups. Evaluate the pros and cons of each option.
• Prepare Documentation: When applying for loans, be prepared with financial statements, a solid business plan, and credit history to demonstrate your creditworthiness and investment potential.
• Monitor Cash Flow: Once your business is operational, use your business bank account to monitor cash flow, manage expenses, and keep personal and business finances separate.

Setting the right price for your rental property services is crucial for attracting tenants and ensuring profitability. It's a delicate balance between being competitive in the market and covering your costs. Here are some steps to guide you in setting your pricing:

• Analyze the Market: Research local rental rates for properties similar to yours in size, location, and amenities. This will give you a benchmark for competitive pricing.
• Calculate Costs: Tally up your expenses including mortgage, insurance, taxes, maintenance, and any utilities or services you'll cover. Ensure your rental price covers these costs and allows for profit.
• Value-Add Services: Consider whether you'll offer additional services such as furnished rentals, cleaning, or maintenance. These can justify higher rental rates.
• Adjust for Demand: If demand is high and your property offers unique features, you may be able to set a higher price. Conversely, in a slow market, you might need to offer a lower rate to attract tenants.
• Review Regularly: Rental markets can change quickly. Regularly review and adjust your pricing to stay competitive and profitable.

What does it cost to start a Rental Property business?

Initiating a rental property business can involve substantial financial commitment, the scale of which is significantly influenced by factors such as geographical location, market dynamics, and operational expenses, among others. Nonetheless, our extensive research and hands-on experience have revealed an estimated starting cost of approximately $274000 for launching such a rental propertybusiness. Please note, not all of these costs may be necessary to start up your rental property business.

When starting a rental property business, it's crucial to equip your property with the necessary equipment and supplies to ensure a comfortable and functional space for your tenants. This will not only enhance their living experience but also help maintain the value of your property. Here's a guide to help you acquire the right items:

• Appliances: Invest in essential appliances such as a refrigerator, stove, dishwasher, and microwave, if not already installed.
• Furniture: For furnished rentals, provide quality, durable furniture that fits the space and aesthetic of the property.
• Safety Equipment: Ensure you have smoke detectors, carbon monoxide detectors, fire extinguishers, and security systems in working order.
• Maintenance Tools: Keep a set of basic tools and garden equipment (if applicable) for property upkeep and minor repairs.
• Cleaning Supplies: Stock the property with necessary cleaning supplies for tenant use and for preparing the rental between tenants.
• Utilities: Set up essential services like water, electricity, gas, and internet, and decide if these are included in the rent or managed by tenants.
• Welcome Kit: A small welcome package with essentials like toiletries, local information, and a guide to the property can make a great first impression.

List of Software, Tools and Supplies Needed to Start a Rental Property Business:

• Real Estate Software – Rental property software can help you manage leases, payments, and other important paperwork.
• Accounting Software – Accounting software can make it easier to track income, expenses, and other financial information related to rental property.
• Property Management Software – Property management software can help you manage tasks such as tenant screening, rent collection, and maintenance requests.
• Legal Advice – Consulting a lawyer can help you understand your rights and responsibilities as a landlord.
• Business Insurance – Business insurance can help protect your rental property business from liability and other risks.
• Marketing Materials – Creating marketing materials such as flyers and brochures can help you promote your rental properties.
• Cleaning Supplies – Cleaning supplies such as mops, brooms, and sponges can help you keep your rental units clean and presentable.
• Repair Tools – Tools such as screwdrivers and wrenches can help you make quick repairs to rental units.
• Security Systems – Installing security systems such as cameras and locks can help protect tenants and their property.

Securing the right business insurance for your rental property is essential for protecting your investment and ensuring the longevity of your business. It's important to understand the various types of insurance available and determine what coverage is necessary for your specific situation. Here's a brief guide to help you with this important step:

• Consult with an insurance agent who specializes in real estate to get professional advice tailored to your property.
• Consider general liability insurance to protect against injuries or accidents that could occur on your property.
• Look into property insurance, which can cover damage to your building from events like fire, storms, or vandalism.
• Don't overlook loss of income insurance, which can compensate you for lost rental income during periods when your property is unrentable due to covered damages.
• Research landlord insurance policies that combine several types of coverage, offering a comprehensive package tailored to rental properties.
• Review your policy regularly and update it as necessary to keep pace with changes in your property value, rental rates, and other factors.

Successfully launching your rental property business hinges on effective marketing strategies to attract tenants and build your brand. Here are some essential tips to market your rental property services and make a lasting impression in the competitive real estate market.

• Build an Online Presence: Create a professional website showcasing your properties with high-quality photos, detailed information, and virtual tours to engage potential tenants.
• Leverage Social Media: Use platforms like Facebook, Instagram, and LinkedIn to reach your target audience, share content about your properties, and network with potential clients.
• Utilize Online Listings: Post your rental properties on popular real estate websites and platforms to gain visibility and attract prospective renters.
• Networking: Attend local real estate events and join community groups to build relationships with potential tenants and industry professionals.
• Referral Programs: Encourage word-of-mouth marketing by offering incentives to current tenants or partners who refer new clients to your services.
• Invest in Advertising: Consider paid advertising options such as Google Ads, local newspapers, or real estate magazines to reach a broader audience.

Once you have established a successful rental property business and are comfortable managing your current properties, it's time to consider expansion. This step requires careful planning and strategic decision-making to ensure sustainable growth. Here are some key points to guide you in expanding your rental property portfolio:

• Assess your current operations and identify what has been successful, then look for new opportunities that align with these strengths.
• Secure financing for additional properties through banks, private lenders, or by leveraging the equity in your existing properties.
• Research emerging markets and neighborhoods with growth potential to find undervalued properties that can yield high returns.
• Consider diversifying your portfolio by investing in different types of properties, such as residential, commercial, or vacation rentals.
• Build a reliable team, including real estate agents, property managers, contractors, and legal advisors to support your expansion.
• Implement systems and technology to streamline operations, such as property management software, to handle an increased number of tenants and properties efficiently.
• Reinvest profits from your current properties into your expansion, and maintain a solid cash reserve for maintenance and unexpected expenses.

• Making a property investment business plan
• Rental yield calculations
• Property investment strategies
• How to quit your job and invest in property

Setting investment goals

• Are property training courses worth the money?
• Do you need a property mentor?
• The process of buying an investment property
• How to evaluate a property investment
• Property assessment checklist
• The 4 types of property deal I look for (and why)
• How to find a property sourcer
• Deciding where to invest
• How to flip a house: the ultimate guide
• Rent-To-Rent: The ultimate guide
• Lease Options explained
• Lending against property
• Lessons from running a letting agency
• How to get started with limited funds
• Mortgages: The ultimate guide
• Mortgages for limited companies
• New mortgage rules: rental cover and portfolio landlords
• Interest-only vs repayment mortgages
• Bridging finance: the ultimate guide
• Property joint venture agreements – The ultimate guide
• Recycling your cash
• Self-manage or use a letting agent?
• Landlord insurance guide
• How to find tenants
• Writing a tenancy agreement
• What does self-managing a property involve?
• Rent guarantee insurance
• The 18-year property cycle
• Will London house prices crash?
• Avoiding Inheritance Tax
• Exit strategies
• Mortgage interest relief
• Buying through a company

How to create a rental property business plan (and why you need one)

Last updated: 21 October 2022

Take it from someone who’s spoken to a lot of investors over the last few years: almost everyone who achieves great success started out with a solid plan.

All businesses start out with a plan . Even if that plan is just “I think I can buy this widget for £1 and sell it for £1.50”, it’s still a statement of what the business will do and how it will make a profit.

But many – in fact, most – wannabe property investors start out without even the most basic of plans. Often, people have nothing more than vague thoughts like “ property prices go up, so it’s a good investment ” or “ most wealthy people seem to own property ”.

It might feel like sitting around planning is just delaying you from getting out to look at properties and start making money. But take it from someone who’s spoken to a lot of investors over the last few years: almost everyone who achieves great success started out with a solid plan.

(Or to put it another, more painful way: almost everyone who didn’t start with a plan ends up disappointed with where they end up – however much effort, money and time they put in.)

What does a rental property business plan look like?

It certainly doesn't need to be 100 spiral-bound pages of projections and fancy charts. In fact, the best plan would be so simple that it fits on the back of an index card – meaning that you can commit it to memory and use it to drive every decision you make.

In order to get to that simplicity though, you might need to do some seriously brain-straining thinking first.

It's not easy, but it is simple: your plan basically just needs to set out…

Where you are now

• Where you want to get to, and
• What actions you're going to take to bridge the gap

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To give a cheesy analogy, you can't plan a route unless you know where you're starting from.

Working out your starting point is the easiest part, because it involves information that's either known or easily knowable to you.

You'll need to be clear about:

• The amount of money you've got to invest
• The amount of savings you can allocate to property investment in future years
• The time you can invest each week or month
• The skills and knowledge you can apply to your property business

Note that I said it was the easiest part, but still not easy – because it involves honesty about what you can commit, and self-knowledge to determine where your strengths lie.

Knowing how much money you've got to invest should be straightforward, but it's probably worthwhile speaking to a mortgage broker to check that you'll have borrowing options – because this will determine your total investment figure. A broker will also be able to tell you about your options around releasing equity from your own home, if that's something you want to consider.

I'd also strongly encourage you to consider what “emergency fund” you want to keep in cash, and deduct that from your total investable funds. I suggest having at least six months' expenses in the bank at all times: the last thing you want is to plough every last penny into investments, then lose your job the next day and be unable to pay your bills.

Where you want to get to

So now you know where you're starting from, where do you want to end up? In other words, what's your goal?

Yes, you want to be “rich”, or “secure”, or “build a future” – but what does that actually mean, in pounds and pence terms, for you?

And just as importantly, when do you want to have achieved that?

You might be surprised by how much thought is involved in answering these questions properly. It's easy to throw around terms like “enough to fund my lifestyle” and assume that it might involve an income of £10,000 per month, but it's another matter entirely to look honestly at your ideal lifestyle and determine what a genuinely meaningful figure is.

The same is true for “when” – and it's an often-ignored factor that actually cuts to the heart of the most basic of investment decisions.

For example, take a choice between two properties:

• Property 1 will give a return on your investment of 15% but will probably never increase in value
• Property 2 will give a return of 7% but has the potential to double in value over the next decade.

If your goal is to create a certain monthly income within three years, the Property 1 is likely to be a better choice. Growth is unlikely to happen to any great extent over that time, so you need to optimise for cash in the bank right now.

On the other hand, if you have a decade before you want to have achieved your goal, Property 2 is probably the better bet. It very much is a “bet” because you're taking something of a gamble on capital growth, but it's got a lot of time to happen – and when it does, your returns will dwarf the higher rental income you'd have made from the other property.

That's just one example of why making even simple decisions in your property business are impossible without having that most basic ingredient of your plan: where you ultimately want to end up, and when.

So, by this point in the plan you need to:

• Assess your finances to build up an honest picture of where you are now
• Put some serious thought into where you want to get to, and when

If you need help with this goal-setting process, I co-own Property Hub Invest which offers free strategy meetings . It's often easier to work this stuff out in conversation with someone who knows their stuff, rather than doing it all in your own head.

That's a great start, but for most people it'll produce an uncomfortable insight: the gap between where you are and where you want to be seems impossibly large! With the resources you've got now, how are you possibly going to reach your goal in a sensible period of time?

Well, that's where it's time to start thinking about the details of the third step: the strategy you'll use to pursue your goal.

A strategy to bridge the gap

The steps you take to get from Point A to Point Z are what's commonly referred to as your strategy – and strategy is a vital component of your business plan.

The way I like to think about strategy is the way you compensate for a lack of cash . It's an unusual way to look at it, but I find it useful – because it tells you (given your timeframe and your goal) how much heavy-lifting your strategy will need to do to keep you on track.

Think of it like this: if you had £10m in the bank and your goal was to make an income of £5,000 per month within a year, you wouldn't need any strategy at all . You could just use your £10m to buy any properties, anywhere – you wouldn't need to maximise the rent, manage them well or even keep them all occupied at all times! You'd be able to buy so much property that you really couldn't fail.

Sure, it'd be a pretty stupid thing to do – you should really have had a more ambitious goal – but you get the point.

Obviously, most of us aren't in that position – and that's why we need a strategy.

So, just what position are you in?

A rule of thumb

A handy way of looking at it is to take the amount of money you've got to invest in property, and assume that you can get a 5% annual return on that money (ROI) – which is a rough rule-of-thumb for a normal property bought with a 75% mortgage.

So, if you've got £100,000, you can generate a (pre-tax) profit of £5,000 per year – or £416 per month.

That's unlikely to be enough to hit most people's goals – but then there's the time factor. If you save up the rental income for 20 years, you'll be able to buy another batch of properties just like the first – so you'll now have income of £832 per month.

If you're happy with that, then you've already got your strategy: buy properties that will give you your desired ROI, then wait!

Portfolio-building strategies

But most people will want more than that: we've hardly been talking about life-changing sums, and 20 years is a long time to wait before you can buy again!

This is where more of an advanced strategy comes in, allowing you to get better results, faster.

This might include:

• Buying properties and adding value, so you can refinance at the higher value and buy your next property more quickly ( learn more about this strategy )
• Buying properties at a discount, allowing you again to refinance at the higher value and move on to the next one
• Turning properties into HMOs, so you can generate a higher ROI on them
• “Flipping” properties for a profit, so you can replenish your cash more quickly ( read my guide to flipping )

…or something else entirely.

I go into different strategies in enormous detail in my book, The Complete Guide To Property Investment .

Simply appreciating the need for one of these strategies from the start is a really big deal.

Most people don't: they'll rush in, use all their money to buy properties that generate (say) £500 profit per month, then…what? They'll be stuck – because they didn't go in with a plan for how they were going to get to their target number . They'll effectively be starting from scratch, having to scrape together the money to go again.

It's extremely common, and it doesn't surprise me – but it does frustrate me. If they'd started with just a bit of time making a plan, they wouldn't have made this mistake – because it would have become very obvious that they wouldn't reach their goal without applying some strategy.

Any of the strategies I listed (or a different one, or a combination of several of them), when applied effectively, can get you to where you need to be. But that's not to say that all of them will be equally good for you. Each of them has different risk factors, requires different time commitments, are suited to different skill sets, and so on.

That's why this is your business plan: copying someone else's homework isn't going to do you any good, because their skills, attributes and preferences will be different from yours.

For example, one person's plan might be to get their hands dirty by renovating properties for resale – completing two projects per year, and using the profits to buy an HMO. Within five years they'll have five HMOs, which will give them all the income they need.

Someone else might be hopeless at anything hands-on, but a master negotiator. Their plan could be to buy at enough of a discount that they can pull at least half of their funds back out again by refinancing – and keep doing that until in ten years' time they have 15 single-let properties giving them their target income figure.

(That's why when someone emails me asking if their strategy “sounds good”, I have to say that I don't know: usually it sounds like on paper like it would work for someone , but I have no idea if they're the right person to execute it.)

So, coming up with your strategy involves:

• Starting with an assessment of where you are now
• Deciding where you want to get to, and by when
• Seeing how far you'll fall short by just buying “normal” properties
• Thinking about your own skills, time and preferences to choose which strategy (or strategies) you'll use to fill in the gap

It might take a while, and that's OK – it's not an easy decision . To take the pressure off though, remember: your plan isn't set in stone. It's important to start with a clear vision and not get distracted by every new opportunity that comes your way, but every plan is just a starting point: you'll be seeing what works, reviewing and adjusting course along the way.

Once you've got a strategy down on paper, that's a huge step – and you should congratulate yourself, because it's a step that most people will never make (and will suffer for).

But of course, the act of writing the plan isn't going to magic it into existence: you need to get out there and execute on the plan.

Turning your property business plan into action

Having an appropriate goal and a solid strategy to get you there are essential, sure – but nothing is going to happen until you actually take the steps that are necessary to execute that strategy.

If you don't take the time to identify the steps and make a plan to carry them out, you'll end up in “pulling an all-nighter the day before your homework is due in” mode. And you don't want that: it's no good setting a five-year goal, feeling all virtuous for being such a strategic and big-picture thinker, then realising in four years and 364 days that you've not actually got any closer towards making it a reality!

So let's get those steps in place. And the good news is…it's really simple. (The best things usually are.)

Breaking it down

However big, ambitious and far in the future a goal seems to be, all goals are achieved in exactly the same way : by breaking them down into individual tasks, and working through those tasks one by one.

As you work through those tasks, it’s important to have sub-goals as “checkpoints” along the way.

Sub-goals are how you stay on track: by setting a deadline for each sub-goal, you can make sure that your progress is fast enough. They also keep you motivated, because it means you’ll always have a small “win” on the horizon: you won’t just be looking at the main goal (potentially) years off in the future. Think of them as mile markers at the side of a marathon course.

To put it another way:

Small task + Small task + Small task = Sub-goal Sub-goal + Sub-goal + Sub-goal = Overall goal

It's those small daily tasks that are the foundations of your achievement. And that's the beauty of a good plan: all you need to concentrate on is ticking off your tasks each day, and your overall goal is achieved automatically!

So, this final step in your plan is about breaking that big goal down into sub-goals, and those sub-goals down into bite-sized individual tasks. That's it!

As you break it down, there are a few things I find are useful to think about…

One-off tasks v recurring tasks

Your business will have two types of task:

• One-off tasks , like finding a mortgage broker
• Recurring tasks , like viewing properties and making offers

These two types of task will both appear in your weekly, monthly and quarterly to-do lists. A useful way of planning your time is to start by filling in your recurring tasks – like going through portals to find new potential acquisitions every day, and calling agents to follow up on offers once per week – then adding your recurring tasks on top.

By thinking about both types, you'll make sure you're not dropping the ball on the important day-by-day stuff, but you're also not ignoring the big-picture one-offs that are going to make a huge difference to your business in the long run.

The first, simplest step

Just like you break a goal down into sub-goals and sub-goals down into tasks, I favour breaking every one-off task down into the smallest possible unit .

For example, “find a mortgage broker” could be an important one-off task for you, but it's not something you can just sit down and do until it's done. Because it seems nebulous and you can never identify a block of time when you can do it from start to finish, you can end up never doing it at all.

Instead, you'll make yourself feel better by ticking off smaller tasks that seem easier – but are often less important.

The solution is to break every task down into as many sub-tasks as possible. So instead of “find a mortgage broker”, the tasks become :

• Email 3 contacts to ask for recommendations
• Post on The Property Hub forum to ask for recommendations
• Email everyone who is recommended to set up a quick call
• Draw up a shortlist of 2-3 people to have a longer conversation with
• Pick a winner

Doesn't that seem much easier already? You can imagine sitting down and bashing out the first task in five minutes right now, then you're underway!

Who will do each job?

Here's a potential lightbulb moment: you don't have to do everything in your business yourself.

Any business has different “functions”, or departments – like sales, manufacturing, and admin. A property business is no exception.

The basic functions of all property businesses are the same:

• Acquisition
• Refurbishment
• Refinancing/selling

The types of task that fall within each function will depend on your business plan. For example, if your aim is to find properties you can buy “below market value”, acquisition could be a major part of the business – involving direct-to-vendor marketing, networking with estate agents, and attending auctions.

On the other hand, if your model involves buying properties that you think will experience strong capital growth, there could be a lot more tasks in the “research” part of the business – and acquisition could be very straightforward once you’ve identified the opportunity itself.

Could you do every task within every function yourself? Maybe.

Could the business achieve better results if you bring in specialists to do what they do best? Definitely .

You could go big and employ an assistant to view properties and make offers for you, or just make sure you outsource functions like management and accountancy to the relevant professionals.

Whatever you do, once you start thinking about your property venture as a business with various departments, you'll start to break away from the idea that this is something you have to do all on your own – and that's a very powerful insight.

OK, this has been a long one – but we've covered a lot of ground.

To recap, those critical steps are:

• Assess where you are now
• Work out where you want to be, and by when
• Outline a strategy to get you there
• Fill in the detail, to get you from “big picture” to individual steps

It's a process that's worked for me, and I've seen it work for many investors I've encouraged to put it into action too.

Its power is in its simplicity: you take the time to intelligently decide exactly what you need to do, then you figure out a way to (to borrow a registered trademark) just do it . As long as you show up and work through your to-do list each day, the big, scary, long-term goal takes care of itself!

Of course, you'll need to assess your progress and adjust course along the way: nothing will pan out exactly as expected, and there's a lot that can change over a timespan of several years.

But by having your plan, what you won't do is get distracted by every new idea that comes your way – researching HMOs one day, and holiday lets the next – and end up getting nowhere.

(You'd be amazed by how many plan-less people that description fits to a tee.)

So now you know how to put a property business plan together. It's not a plan that will necessarily get you funding from the bank, but it's something more important than that: a plan you can use every day to make sure you stay on track to hit your goals.

The one thing that every successful investor does

How to Start a Home Rental Business

In the rental property industry, entrepreneurs invest in one or more single family homes. These income-producing properties are either self-managed by the owner or by a property management company. Owners lease their rental units out to tenants in exchange for rental fees.

Learn how to start your own Home Rental Business and whether it is the right fit for you.

Ready to form your LLC? Check out the Top LLC Formation Services .

Start a home rental business by following these 10 steps:

• Plan your Home Rental Business
• Form your Home Rental Business into a Legal Entity
• Register your Home Rental Business for Taxes
• Open a Business Bank Account & Credit Card
• Set up Accounting for your Home Rental Business
• Get the Necessary Permits & Licenses for your Home Rental Business
• Get Home Rental Business Insurance
• Define your Home Rental Business Brand
• Create your Home Rental Business Website
• Set up your Business Phone System

We have put together this simple guide to starting your home rental business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas .

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

What will you name your business?

• What are the startup and ongoing costs?
• Who is your target market?

How much can you charge customers?

Luckily we have done a lot of this research for you.

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Home Rental Business Name Generator

If you operate a sole proprietorship , you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name , we recommend researching your business name by checking:

• Your state's business records
• Federal and state trademark records
• Social media platforms
• Web domain availability .

It's very important to secure your domain name before someone else does.

Want some help naming your home rental business?

Business name generator, what are the costs involved in opening a home rental business.

Financing for investment properties is very different from securing a personal home loan. Rules change periodically, so make sure you understand the down payment required prior to making any major decisions. Under today’s financing, investors who own more than four rental properties are expected to put down 25%. 20% down is required for entrepreneurs who own less than four. If you have enough cash flow to pay for your investment in full, consider this decision carefully. Many investors recommend using this capital to purchase multiple properties. This should increase both your monthly income and long-term equity.

Each rental property should have adequate insurance to protect both the property and your liability. A portion of your budget should also be set aside to make any necessary improvements and to maintain the property.

What are the ongoing expenses for a home rental business?

There are a number of expenses associated with a home rental business. Seek guidance from other professionals in the community or organizations such as the Institute of Real Estate Management when setting a budget and rental rates.

• Standard expenses include:
• Maintenance
• Property taxes
• Loan interest
• Some landlords absorb the cost of lawn maintenance, while others require their tenants to cover these costs.

Who is the target market?

When considering potential investments, consider your target market. Do you want to fill your portfolio with HUD housing or do you wish to target tenants in a different demographic? While both are positive investments, defining your demographics will ensure you purchase property that can yield your target returns.

How does a home rental business make money?

As a landlord, you will collect rent from each of your tenants on a monthly basis. This does not, however, guarantee that your investment will generate passive income. When determining your rental rates, carefully consider all ongoing expenses. Collecting rent higher than the property’s expenses will ensure an income each month. Entrepreneurs just starting out in this industry are urged to invest in properties that can generate a steady cash flow and to set money aside each month for unexpected expenses that will come up from time to time.

The most significant income, however, comes from your long-term investment. The equity in each property will be a meaningful asset in your portfolio. A majority of rent collected will go towards your business’ profits and, when you so choose, you can sell the home at a higher price than your initial investment.

Rental fees vary based on location, the specifics of the property, and landlord costs. When setting your rates, carefully consider all costs.

How much profit can a home rental business make?

Profit is directly tied to the number of properties you own, loan amounts, ongoing expenses, and the amount of rent you charge. A professional accountant should be able to assist you in determining your rate of return on investment prior to purchasing.

How can you make your business more profitable?

The most obvious way to increase your profits is to invest in as much quality property as possible. Investors are urged to minimize costs and pay off loans as quickly as possible. Many business owners opt to partner with another investor, significantly reducing expenses and responsibilities.

Want a more guided approach? Access TRUiC's free Small Business Startup Guide - a step-by-step course for turning your business idea into reality. Get started today!

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship , partnership , limited liability company (LLC) , and corporation .

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your home rental business is sued.

Form Your LLC

Read our Guide to Form Your Own LLC

Have a Professional Service Form your LLC for You

Two such reliable services:

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services . You can choose to hire a registered agent or act as your own.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

You can acquire your EIN through the IRS website . If you would like to learn more about EINs, read our article, What is an EIN?

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil .

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history , which can be useful to raise money later on.

Recommended: Apply for an easy approval business credit card from BILL and build your business credit quickly.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a home rental business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits .

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses .

Certificate of Occupancy

If you grow your business to the point where you own multiple properties, it is likely your business will be run out of an office.  Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws and government regulations have been met.

• If you plan to lease a location :
• It is generally the landlord’s responsibility to obtain a CO.
• Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a home rental business.
• After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
• If you plan to purchase or build a location :
• You will be responsible for obtaining a valid CO from a local government authority.
• Review all building codes and zoning requirements for your business’ location to ensure your home rental business will be in compliance and able to obtain a CO.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance . This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance . If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

FInd out what types of insurance your Home Rental Business needs and how much it will cost you by reading our guide Business Insurance for Home Rental Business.

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners , we'll give you helpful tips and advice for creating the best unique logo for your business.

Recommended : Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker .

If you already have a logo, you can also add it to a QR code with our Free QR Code Generator . Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.

How to promote & market a home rental business

Most cities across the United States have a real estate investment club. Networking with other members will prove invaluable. Most are willing to share the knowledge they have gained over years in the industry. This should include strategies regarding finding quality tenants. Marketing techniques vary based on demographics, but landlords have found success through: rental sites, newspaper ads, realtors, word of mouth, and social media.

How to keep customers coming back

Tenant retention is the most effective way to maintain profits and avoid destruction of property. A thorough screening process is important. Once your tenant moves in, try to maintain a balanced relationship. Check in periodically, but give them their space. Avoid large increases in rent at lease renewal. Most importantly, when a renter calls about a complaint or issue, work to resolve the problem swiftly and at minimal inconvenience to them.

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business .

While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn’t delay building your website:

• All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
• Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
• Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.

Recommended : Get started today using our recommended website builder or check out our review of the Best Website Builders .

Other popular website builders are: WordPress , WIX , Weebly , Squarespace , and Shopify .

STEP 10: Set up your business phone system

Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.

There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.

Recommended Business Phone Service: Phone.com

Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.

Is this Business Right For You?

Many people are drawn to this business venture, as they recognize the short and long-term value of investing in real estate. Through their tenants’ rent payments, owners are able to successfully manage each property’s mortgage and expenses, while building equity and further expanding their portfolio. Those with discipline and a sound business plan are able to reach their passive income goals on schedule and under budget. This business is not right for everyone, however. Successful home rental business owners must be confident enough to take investment risks and disciplined in saving money, both for additional investments and to ensure their current investments are properly maintained.

Want to know if you are cut out to be an entrepreneur?

Take our Entrepreneurship Quiz to find out!

Entrepreneurship Quiz

What happens during a typical day at a home rental business?

Until you have accrued a great deal of property investments, the home rental business will typically not require your attention on a daily basis. In fact, many business owners choose to use this as their primary source of income, while working on part-time projects they are passionate about.

Your responsibilities include:

• Finding and screening tenants when one of your properties comes up for rent.
• Having leases drawn up and signed by both you and your tenants.
• Managing properties, handling issues as they arise.
• Researching common repairs that are typical in rental properties and interview contractors, plumbers, and/or handymen, etc. that can handle problems you are unable to address yourself.
• Networking within the community would also prove beneficial. Many property owners choose to join local real estate investing associations. This can lead to potential business partners. Additionally, the contacts you make will prove invaluable in ensuring you are able to manage your property successfully and economically.

What are some skills and experiences that will help you build a successful home rental business?

Success in this business requires a certain set of skills. You must possess strong business acumen and understand the intricacies of real estate investment. Not all properties are created equal. If this is not a personal strength, consider seeking the advice of someone more knowledgeable on the subject.

Being a landlord is not as easy as many make it sound. It is important that you treat it like a business. This means being financially frugal during the initial years, maintaining the property at all times, and making difficult decisions regarding tenants who are not fulfilling their lease responsibilities.

A personable personality and the ability to make connections spanning a broad spectrum of people would also prove beneficial. Connecting with others will help keep your tenants around for years. It could prove beneficial when a property needs attention that is outside of your capabilities.

New investors are urged to attend REIA meetings. A Landlord’s Association is also recommended. These groups will offer support and education throughout your journey. They also provide access to business tools such as lease contracts, tenant application forms, and credit search services.

What is the growth potential for a home rental business?

This business venture offers significant opportunity for growth. While some landlords choose to stick to local investments, the only real limitations are available cash flow and your personal vision. Many entrepreneurs choose to expand their portfolio to include properties across the country, or even the world. When considering investment opportunities outside of your region, it’s important to conduct thorough research. Not all properties increase in value or offer enough rent to cover all expenses.

TRUiC's YouTube Channel

For fun informative videos about starting a business visit the TRUiC YouTube Channel or subscribe to view later.

Take the Next Step

Find a business mentor.

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Learn from other business owners

Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.

Resources to Help Women in Business

There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:

If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.

What are some insider tips for jump starting a home rental business?

Successful home rental business owners indicate they have made a lot of mistakes throughout their years in the industry. To help set you up for success, they offer the following tips:

• Leave no stone unturned when writing your lease agreement. If it is not written down, tenants will find a way around your rules.
• Self management vs. hiring a property management company - They each have their own benefits and drawbacks. Property managers charge a monthly rate, cutting into your profits. Without their assistance, however, you are responsible for handling every issue that comes up. This can prove challenging, particularly if you own rental properties in other parts of the country. If you are considering hiring a property manager, Biggerpockets shares the critical questions you should ask prior to making a decision.
• Carefully consider your target demographic prior to investment. Ask yourself - Is this in a good neighborhood? What size homes are they looking to rent? What is their price point? Is a quiet street and/or a fenced in backyard important to them?
• Keep in mind that problems are guaranteed to come up. Don’t get caught off guard. Plan and save accordingly.
• Have a defined exit strategy. Do you want to maintain your investments until retirement or sell in ten years? Timelines can be adjusted, but it’s important to have a plan of action.
• Conduct background checks on every potential tenant. When you find one that pays on time and maintains the property, do what you can to keep them, even if it means reducing your profits a small percentage.
• Remember, this is a business. Stick to the terms of the agreement. If you give tenants a little leeway, they will make it a habit to take as much as they can from you.

How and when to build a team

As previously mentioned, building a team is a matter of personal preference. With the right skills, knowledge, and time, much of your business can be run without assistance. When physical issues, such as roof replacement, electrical work, or plumbing come up, you will want to consider hiring a professional to tackle the problem. Many property owners welcome the peace of mind that comes with having a management company maintain their rentals. Additionally, a financial advisor, attorney, and/or respected insurance agent could prove a valuable asset to your team.

Useful Links

Industry opportunities.

• National Rental Home Council
• American Rental Association

Further Reading

• How To Start A Rental Property Business Like A Pro
• How to Write a Rental Property Business Plan for Landlords

Have a Question? Leave a Comment!

RENTAL PROPERTY BUSINESS PLAN: How to Write One with a Template

• by Kenechukwu Muoghalu
• August 14, 2023
• No comments
• 6 minute read

Table of Contents Hide

What is a rental property business plan, #1. executive summary, #2. company description, #3. market analysis, #4. sales and marketing strategy, #5. organization and management, #6. financial plan, is rental property a good investment in 2023, rental property business plan template, what type of business is best for rental properties, what rental properties are the most profitable, is rental income taxable, is buying rental property worth it, how much profit should you make on a rental property, need help creating your rental property business plan, final thoughts, how can i measure my rental property profits, can you be rich from rental property, how many rental properties do you need to make a living, how much do landlords earn in the uk.

A goal without a plan is merely a wish. Therefore, for any rental property investment to fulfill its potential purposes and achieve its goals, it needs a business plan. This plan should outline the goals and expectations of the property, any associated risks, as well as what is to be done to achieve these goals. A rental property business plan also comes with multiple benefits, and this article will further elaborate on the essence of the plan. You will also get access to our unique template, which will serve as a guide on how to write a business plan for your rental property investment. 

If you wish to avoid this whole process, you can stick to our pre-made rental property business plan and get your business plan immediately, but if not, let’s proceed. 

A rental property business plan is a set of guidelines that can be used for a rental property investment to help analyze the benefits and risks associated with it, as well as outline what should be done to maximize its potential. The property rental business is a very vast industry in the UK and only a business plan can guarantee the success of this investment.

The essence of writing a business plan before starting any business is for you to have a blueprint of how you want to set up, manage, and expand your business. Having looked at this, let’s discover how to write a business plan for your rental property investment using the template below. 

How to Write a Business Plan for your Rental Property Investment

Most of the time, it is not really about the plan; instead, it is the planning itself. To own a professional business plan that can serve its full potential, you will need to follow some basic procedures that would show you how to write a rental property business plan for your investment. This guide will show you some elements that should be present in a business plan.

This is an important section that should contain a clear summary of what your whole business idea entails. The executive summary of your plan is mostly what your readers look forward to reading, so it should sum up other sections of your business plan and describe your ideas properly.

Just like the name implies, this should be about your company itself. This is where you should include the services you offer and also talk about your location and the management team. Talk more about the company’s history and its current status in the market. You can include some successful projects you have previously worked on.

Before you write on this section of your rental property business plan, you should run some research on your market to understand what you are signing up for and get valid information for this section. When you have completed your research, you will need to write down everything you found out about the market. You can include the market trend, target market, market position, and how you will reach out to your market. You can also include a competitive analysis.

For a business to be successful, it needs to be in constant sales mode. For this to happen, you need to have a clear marketing strategy that attracts customers to your rental property business. While doing this, you will need to have your target audience and market position in mind. You can create fliers, open social media platforms, and advertise in magazines just to create awareness.

Who handles your business with you? What are their roles and responsibilities? These questions should be answered in this section of your plan. You will need to talk about your management team and their roles in the company. 

This is one of the most crucial parts of your business plan and should be written with utmost importance. To make this section easy to comprehend, it is best to plan your finances to avoid having issues later on. This section of your rental property business plan should include your financial history , funding, cash flow statement, and balance sheet. 

You can determine if your rental property business is a good investment when your net cash flow remains consistently positive. In general, a good rule of thumb is if you can rent a property for 1 percent of the purchase cost, then it may be worth your investment. 

Aside from writing a plan, you also need a template checklist to verify that your investment is in check. The essence of this rental property business plan template is to ensure that you keep track of the whole processes involved in starting a proper rental property investment. These steps include:

• Join a real estate community
• Narrow down your niche
• Have a financial plan
• Get your management team
• Get a business plan
• Adopt a marketing technique 
• Manage the properties

When it comes to selecting the best rental property business to go for, it is advisable to choose a Limited Liability Company. Real estate investing is normally prone to high capital investments and facing risks, but with the presence of an LLC, you will be able to separate your private and business dealings. 

To get a full potential and profitable property investment, you should choose properties with a high ROI. An example of this ROI is Airbnb and traditional rental properties. With these properties, you will be able to earn a consistent monthly positive cash flow and achieve immense profit within a short period. 

Yes, rental income is taxable, but it doesn’t mean that every penny you collect from your tenants is taxable. You can reduce your rental income by subtracting expenses that you incur to get your property ready to rent and then maintain it as a rental.

Buying a rental property is worth it because it can be a lucrative way to increase your wealth and earn profits. On the other hand, handling a rental property can come with many difficulties and risks. But aside from those obvious challenges, rental property is a worthwhile investment when you understand the basics. 

You should be able to make at least 5-8 percent profit per month on any rental property you own. You can also earn more than the above number depending on your rental location, size, and home type. 

It’s obvious you might have tried composing your business plan by yourself but it seems tough to handle, but don’t worry. The idea of writing a business plan might be fun but the process is daunting especially when it is your first time. 

A quick solution to this is opting in for a ready-made rental property business plan , and at Businessyield consult, we specialize in creating professional business plans for entrepreneurs like you. We have also helped multiple businesses stand on their feet with our unique business plan. 

What then is the wait for? Don’t you want to get your business running? Get access to your business plan here and keep those business ideas in check. 

A business plan is more than a document that outlines the goals and systems you can employ to achieve them, a business plan is more like a confidence booster that always gives you a feeling of certainty. Having a good business plan also comes with maintaining good finances and a proper marketing strategy. So whenever you are ready to start your rental property business, always start with a business plan. 

To measure your profits, there are four main ways you can apply to get a correct measurement. You can either use cash flow, a cap rate, cash-on-cash return, or ROI. Monitoring each of these metrics on a regular basis can help keep the financial performance of your rental property on track and help ensure that your long-term financial goals are being met. 

Absolutely yes, you can. When you own a rental property, you can get rich as a landlord. In some cases, it can turn out to be the opposite too. You can either earn massive profits or find yourself repairing leaning roofs and dealing with non-paying tenants. Owning a rental property comes with its own substantial risks. 

To make massive profits, you will need an average of 15 to 20 properties. Having this much property will cover up your losses and replace your income for the average person.

How much do landlords earn in the UK? UK landlords earn an average of £15,000 a year. In the UK you would find out that most rental properties are owned by private individuals and a few work as a part of an organization. And the private individuals before the deduction of taxes earn more than other landlords.

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Executive Summary of a Property Rental Business (Example)

• December 29, 2023
• Business Plan , Executive Summary

An executive summary for a property rental business, particularly one focused on short-term rentals like Airbnb, is a crucial component that outlines your business’s unique approach to property management and guest experience.

This summary is key in attracting investors and partners, as it concisely presents your business model, property portfolio, and market positioning. It should effectively communicate how your rental properties stand out in a market increasingly dominated by unique and personalized lodging experiences.

For the executive summary, a two-slide PowerPoint format is recommended. The first slide should detail the business model, property portfolio, and guest services offered. The second slide should highlight the management team’s expertise and the financial objectives of the business.

Property Rental Business Plan (Airbnb / VRBO)

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Executive Summary Page 1

Business Overview

The business overview should define the key characteristics of your rental business, including your approach to property selection, design, furnishing, and the tailored guest experiences you offer. Highlighting what sets your properties apart in the competitive short-term rental market is key to attracting interest and investment.

Example: “StayUnique Rentals,” a dynamic property rental business, has a portfolio of 7 unique properties, ranging from urban apartments to countryside cottages. Each property is meticulously designed and furnished to create a distinctive living experience. Beyond standard rentals, StayUnique offers personalized guest services like a 24/7 concierge, local experience packages, and tailored amenities, enhancing the overall guest experience.

Market Analysis

This section should analyze the short-term and vacation rental market’s size, growth trends, and competitive landscape . It positions your business within the industry and underscores its potential in meeting the growing demand for unique and flexible lodging options.

Example: StayUnique Rentals enters a US market valued at $19 billion, with a 1.49% CAGR. The business differentiates itself amidst various competitors by offering properties that provide unique, localized experiences, catering to a trend where travelers increasingly value authenticity and personalized services over traditional hotel stays.

Executive Summary Page 2

Management Team

Detailing the management team’s background and roles is essential. This part of the summary should emphasize their experience in real estate, hospitality, and operational management, highlighting their capability to lead the business to success.

Example: The CEO of StayUnique, with 15 years of experience in real estate and hospitality, leads the business strategy and expansion. The COO, an expert in hospitality management, focuses on operational efficiency and guest experience, ensuring each property maintains high standards of service and guest satisfaction.

Financial Plan

Clearly outlining the financial goals and projections is crucial. This section should include revenue targets and profit margins, offering insight into the business’s financial health and growth prospects.

Example: StayUnique Rentals aims to achieve $800,000 in yearly revenue with a 5% EBIT margin by 2028. Supported by a strategic approach to property management and marketing, coupled with exceptional guest experiences, the company is positioned for significant growth in the evolving short-term rental market.

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How to write an effective business plan in 11 steps (with workbook)

February 02, 2023 | 14 minute read

Writing a business plan is a powerful way to position your small business for success as you set out to meet your goals. Landmark studies suggest that business founders who write one are 16% more likely to build viable businesses than those who don’t and that entrepreneurs focused on high growth are 7% more likely to have written a business plan. 1 Even better, other research shows that owners who complete business plans are twice as likely to grow their business successfully or obtain capital compared with those who don’t. 2

The best time to write a business plan is typically after you have vetted and researched your business idea. (See How to start a business in 15 steps. ) If conditions change later, you can rewrite the plan, much like how your GPS reroutes you if there is traffic ahead. When you update your plan regularly, everyone on your team, including outside stakeholders such as investors, will know where you are headed.

What is a business plan?

Typically 15-20 pages long, a business plan is a document that explains what your business does, what you want to achieve in the business and the strategy you plan to use to get there. It details the opportunities you are going after, what resources you will need to achieve your goals and how you will define success.

Why are business plans important?

Business plans help you think through barriers and discover opportunities you may have recognized subconsciously but have not yet articulated. A business plan can also help you to attract potential lenders, investors and partners by providing them with evidence that your business has all of the ingredients necessary for success.

What questions should a business plan answer?

Your business plan should explain how your business will grow and succeed. A great plan will provide detailed answers to questions that a banker or investor will have before putting money into the business, such as:

• What products or services do you provide?
• Who is your target customer?
• What are the benefits of your product and service for customers?
• How much will you charge?
• What is the size of the market?
• What are your marketing plans?
• How much competition does the business face in penetrating that market?
• How much experience does the management team have in running businesses like it?
• How do you plan to measure success?
• What do you expect the business’s revenue, costs and profit to be for the first few years?
• How much will it cost to achieve the goals stated in the business plan?
• What is the long-term growth potential of the business? Is the business scalable?
• How will you enable investors to reap the rewards of backing the business? Do you plan to sell the business to a bigger company eventually or take it public as your “exit strategy”?

How to write a business plan in 11 steps

This step-by-step outline will make it easier to write an effective business plan, even if you’re managing the day-to-day demands of starting a new business. Creating a table of contents that lists key sections of the plan with page numbers will make it easy for readers to flip to the sections that interest them most.

• Use our editable workbook to capture notes and organize your thoughts as you review these critical steps. Note: To avoid losing your work, please remember to save this PDF to your desktop before you begin.

1. Executive summary

The executive summary is your opportunity to make a great first impression on investors and bankers. It should be just as engaging as the enthusiastic elevator pitch you might give if you bumped into a potential backer in an elevator.

In three to five paragraphs, you’ll want to explain what your business does, why it will succeed and where it will be in five years. The executive summary should include short descriptions of the following:

• Business concept. What will your business do?
• Goals and vision. What do you expect the business to achieve, both financially and for other key stakeholders, such as the community?
• Product or service. What does your product or service do — and how is it different from those of competitors?
• Target market. Who do you expect to buy your product or service?
• Marketing strategy. How will you tell people about your product or service?
• Current revenue and profits. If your business is pre-revenue, offer sales projections.
• Projected revenue and profits. Provide a realistic look at the next year, as well as the next three years, ideally.
• Financial resources needed. How much money do you need to borrow or raise to fund your plan?
• Management team. Who are the company’s leaders and what relevant experience will they contribute?

2. Business overview

Here is where you provide a brief history of the business and describe the product(s) or service(s) it offers. Make sure you describe the problem you are attempting to solve, for whom you will solve it (your customers) and how you will solve it. Be sure to describe your business model (such as direct-to-consumer sales through an online store) so readers can envision how you will make sales. Also mention your business structure (such as a sole proprietorship , general partnership, limited partnership or corporation) and why it is advantageous for the business. And be sure to provide context on the state of your industry and where your business will fit into it.

3. Business goals and vision

Explain what you hope to achieve in the business (your vision) as well as its mission and value proposition. Most founders judge success by the size to which they grow the business using measures such as revenue or number of employees. Your goals may not be solely financial. You may also wish to provide jobs or solve a societal problem. If that’s the case, mention those goals as well.

If you are seeking outside funding, explain why you need the money, how you will put it to work to grow the business and how you expect to achieve the goals you have set for the business. Also explain your exit strategy—that is, how you would enable investors to cash out, whether that means selling the business or taking it public.

4. Management and organization

Many investors say they bet on the team behind a business more than the business idea, trusting that talented and experienced people will be capable of bringing sound business concepts to life. With that in mind, make sure to provide short bios of the key members of your management team (including yourself) that emphasize the relevant experience each individual brings, along with their special talents and industry recognition. Many business plans include headshots of the management team with the bios.

Also describe more about how your organization will be structured. Your company may be a sole proprietorship, a limited liability company (LLC) or a corporation in one or more states.

If you will need to hire people for specific roles, this is the place to mention those plans. And if you will rely on outside consultants for certain roles — such as an outsourced CFO — be sure to make a note of it here. Outside backers want to know if you’ve anticipated the staffing you need.

5. Service or product line

A business will only succeed if it sells something people want or need to buy. As you describe the products or services you will offer, make sure to explain what benefits they will provide to your target customers, how they will differ from competing offerings and what the buying cycle will likely be so it is clear that you can actually sell what you are offering. If you have plans to protect your intellectual property through a copyright or patent filing, be sure to mention that. Also explain any research and development work that is underway to show investors the potential for additional revenue streams.

6. Market/industry analysis

Anyone interested in providing financial backing to your business will want to know how big your company can potentially grow so they have an idea of what kind of returns they can expect. In this section, you’ll be able to convey that by explaining to whom you will be selling and how much opportunity there is to reach them. Key details to include are market size; a strengths, weaknesses, opportunities and threats (SWOT) analysis ; a competitive analysis; and customer segmentation. Make it clear how you developed any projections you’ve made by citing interviews or research.

Also describe the current state of the industry. Where is there room for improvement? Are most companies using antiquated processes and technology? If your business is a local one, what is the market in your area like? Do most of the restaurants where you plan to open your café serve mediocre food? What will you do better?

In this section, also list competitors, including their names, websites and social media handles. Describe each source of competition and how your business will address it.

7. Sales and marketing

Explain how you will spread the word to potential customers about what you sell. Will you be using paid online search advertising, social media promotions, traditional direct mail, print advertising in local publications, sponsorship of a local radio or TV show, your own YouTube content or some other method entirely? List all of the methods you will use.

Make sure readers know exactly what the path to a sale will be and why that approach will resonate with customers in your ideal target markets as well as existing customer segments. If you have already begun using the methods you’ve outlined, include data on the results so readers know whether they have been effective.

8. Financials

In a new business, you may not have any past financial data or financial statements to include, but that doesn’t mean you have nothing to share. Preparing a budget and financial plan will help show investors or bankers that you have developed a clear understanding of the financial aspects of running your business. (The U.S. Small Business Administration (SBA) has prepared a guide you can use; SCORE , a nonprofit organization that partners with the SBA, offers a financial projections template to help you look ahead.) For an existing business, you will want to include income statements, profit and loss statements, cash flow statements and balance sheets, ideally going back three years.

Make a list of the specific steps you plan to take to achieve the financial results you have outlined. The steps are generally the most detailed for the first year, given that you may need to revise your plan later as you gather feedback from the marketplace.

Include interactive spreadsheets that contain a detailed financial analysis showing how much it costs your business to produce the goods and services you provide, the profits you will generate, any planned investments and the taxes you will pay. See our startup costs calculator to get started.

9. Financial projections

Creating a detailed sales forecast can help you get outside backers excited about supporting you. A sales forecast is typically a table or simple line graph that shows the projected sales of the company over time with monthly or quarterly details for the next 12 months and a broader projection as much as five years into the future. If you haven’t yet launched the company, turn to your market research to develop estimates. For more information, see “ How to create a sales forecast for your small business. ”

10. Funding request

If you are seeking outside financing such as a loan or equity investment, your potential backers will want to know how much money you need and how you will spend it. Describe the amount you are trying to raise, how you arrived at that number and what type of funding you are seeking (such as debt, equity or a combination of both). If you are contributing some of your own funds, it is worth noting this, as it shows that you have skin in the game.

11. Appendix

This should include any information and supporting documents that will help investors and bankers gain a greater understanding of the potential of your business. Depending on your industry, you might include local permits, licenses, deeds and other legal documents; professional certifications and licenses; media clips; information on patents and other intellectual property; key customer contracts and purchase orders; and other relevant documents.

Some business owners find it helpful to develop a list of key concepts, such as the names of the company’s products and industry terms. This can be helpful if you do business in an industry that may not be familiar to the readers of the business plan.

Tips for creating an effective business plan

Use clear, simple language. It’ll be easier to win people over if your plan is easy to read. Steer clear of industry jargon, and if you must use any phrases the average adult won’t know, be sure to define them.

Emphasize what makes your business unique. Investors and bankers want to know how you will solve a problem or gap in the marketplace differently from anyone else. Make sure you’re conveying your differentiating factors.

Nail the details. An ideal business plan will be detailed and accurate. Make sure that any financial projections you make are realistic and grounded in solid market research. (If you need help in making your calculations, you can get free advice at SCORE.) Seasoned bankers and investors will quickly spot numbers that are overly optimistic.

Take time to polish it. Your final version of the plan should be neat and professional with an attractive layout and copy that has been carefully proofread.

Include professional photos. High-quality shots of your product or place of business can help make it clear why your business stands out.

Updating an existing business plan

Some business owners in rapidly growing businesses update their business plan quarterly. Others do so every six months or every year. When you update your plan make sure you consider these three things:

• Are your goals still current? As you’ve tested your concept, your goals may have changed. The plan should reflect this.
• Have you revised any strategies in response to feedback from the marketplace? You may have found that your offerings resonated with a different customer segment than you expected or that your advertising plan didn’t work and you need to try a different approach. Given that investors will want to see a marketing and advertising plan that works, keeping this section current will ensure you are always ready to meet with one who shows interest.
• Have your staffing needs changed? If you set ambitious goals, you may need help from team members or outside consultants you did not anticipate when you first started the business. Take stock now so you can plan accordingly.

Final thoughts

Most business owners don’t follow their business plans exactly. But writing one will get you off to a much better start than simply opening your doors and hoping for the best, and it will be easier to analyze any aspects of your business that aren’t working later so you can course-correct. Ultimately, it may be one of the best investments you can make in the future of your business.

Business plan FAQs

What are common mistakes when writing a business plan.

The biggest mistake you can make when writing a business plan is creating one before the idea has been properly researched and tested. Not every idea is meant to become a business. Other common mistakes include:

• Not describing your management team in a way that is appealing to investors. Simply cutting and pasting someone’s professional bio into the management section won’t do the trick. You’ll want to highlight the credentials of each team member in a way that is relevant to this business.
• Failing to include financial projections — or including overly optimistic ones. Investors look at a lot of business plans and can tell quickly whether your numbers are accurate or pie in the sky. Have a good small business accountant review your numbers to make sure they are realistic.
• Lack of a clear exit strategy for investors. Investors may want the option to cash out eventually and would want to know how they can go about doing that.
• Slapdash presentation. Make sure to fact-check any industry statistics you cite and that any charts, graphs or images are carefully prepared and easy to read.

What are the different types of business plans?

There are a variety of styles of business plans. Here are three major types:

Traditional business plan. This is a formal document for pitching to investors based on the outline in this article. If your business is a complicated one, the plan may exceed the typical length and stretch to as many as 50 pages.

One-page business plan. This is a simplified version of a formal business plan designed to fit on one page. Typically, each section will be described in bullet points or in a chart format rather than in the narrative style of an executive summary. It can be helpful as a summary document to give to investors — or for internal use. Another variation on the one-page theme is the business model canvas .

Lean plan. This methodology for creating a business plan is ideal for a business that is evolving quickly. It is designed in a way that makes it easy to update on a regular basis. Lean business plans are usually about one page long. The SBA has provided an example of what this type of plan includes on its website.

Is the business plan for a nonprofit different from the plan for other business types?

Many elements of a business plan for a nonprofit are similar to those of a for-profit business. However, because the goal of a nonprofit is achieving its mission — rather than turning a profit — the business plan should emphasize its specific goals on that front and how it will achieve them. Many nonprofits set key performance indicators (KPIs) — numbers that they track to show they are moving the needle on their goals.

Nonprofits will generally emphasize their fundraising strategies in their business plans rather than sales strategies. The funds they raise are the lifeblood of the programs they run.

What is the difference between a business plan, a strategic plan and a marketing plan?

A strategic plan is different from the type of business plan you’ve read about here in that it emphasizes the long-term goals of the business and how your business will achieve them over the long run. A strong business plan can function as both a business plan and a strategic plan.

A marketing plan is different from a business plan in that it is focused on four main areas of the business: product (what you are selling and how you will differentiate it), price (how much your products or services will cost and why), promotion (how you will get your ideal customer to notice and buy what you are selling) and place (where you will sell your products). A thorough business plan may cover these topics, doing double duty as both a business plan and a marketing plan.

Explore more

Editable business plan workbook

Starting a new business

1 . Francis J. Green and Christian Hopp. “Research: Writing a Business Plan Makes Your Startup More Likely to Succeed.” HBR. July 14, 2017. Available online at https://hbr.org/2017/07/research-writing-a-business-plan-makes-your-startup-more-likely-to-succeed.

2 . CorpNet, “The Startup Business Plan: Why It’s Important and How You Can Create One,” June 29, 2022.

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Lawmakers and advocates make last-ditch push to extend affordable internet subsidy

Sen. Peter Welch, D-Vt., speaking about the Affordable and Connectivity Program, ACP, at the Shaw Library in Washington, Tuesday, April 30, 2024. Advocacy groups and policymakers are pushing for Congress to fully fund the ACP, because April 2024 marks the last month of full funding. (AP Photo/Pablo Martinez Monsivais)

Sen. Peter Welch, D-Vt., is seen leaving after speaking about the Affordable and Connectivity Program (ACP) at the Shaw Library in Washington, Tuesday, April 30, 2024. Advocacy groups and policymakers are pushing for Congress to fully fund the ACP, because April 2024 marks the last month of full funding. (AP Photo/Pablo Martinez Monsivais)

Sen. Peter Welch, D-Vt., reading over his remarks as he waits to speak about the Affordable and Connectivity Program, ACP, at the Shaw Library in Washington, Tuesday, April 30, 2024. Advocacy groups and policymakers are pushing for Congress to fully fund the ACP, because April 2024 marks the last month of full funding. (AP Photo/Pablo Martinez Monsivais)

FCC Commissioner Anna M. Gomez, speaking about the Affordable and Connectivity Program, ACP, at the Shaw Library in Washington, Tuesday, April 30, 2024. Advocacy groups and policymakers are pushing for Congress to fully fund the ACP, because April 2024 marks the last month of full funding. (AP Photo/Pablo Martinez Monsivais)

Chris Lewis, President and CEO of Public Knowledge, speaking about the Affordable and Connectivity Program, ACP, at the Shaw Library in Washington, Tuesday, April 30, 2024. Advocacy groups and policymakers are pushing for Congress to fully fund the ACP, because April 2024 marks the last month of full funding. (AP Photo/Pablo Martinez Monsivais)

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WASHINGTON (AP) — Twenty-three million families in the U.S. will have bigger internet bills starting in May. That’s because a federal broadband subsidy program they’re enrolled in is nearly out of money.

Dozens of people joined Biden administration officials, advocates and U.S. Sen. Peter Welch, a Democrat from Vermont, at a Washington public library on Tuesday to make a last-ditch plea to extend the Affordable Connectivity Program, a subsidy created by Congress and touted by President Joe Biden as part of his push to bring internet access to every U.S. household. The program, which is set to expire at the end of May, helps people with limited means pay their broadband bills.

“They need access to high-speed internet just like they need access to electricity,” Sen. Welch told the gathering. “This is what is required in a modern economy.”

The Affordable Connectivity Program, which Congress created with $14.2 billion through the bipartisan infrastructure law, provided qualifying households with a subsidy of $30 a month to help pay their internet bills. Households on tribal land received up to $75.

That help will be slashed starting in May, when enrolled households will only receive partial credits toward their internet bills. Barring any Congressional action to infuse the Affordable Connectivity Program with more cash, the subsidies will end completely at the end of the month.

“The money has run out,” FCC Commissioner Geoffrey Starks said at the event hosted by a group called Public Knowledge, a nonprofit proponent of broadband access. “Many households will have to face a tough choice: confront that rising internet bill or disconnect them and their household from the internet.”

Nearly 80 percent of households enrolled in the program said they would have to switch to a lower-tier plan or cancel their internet service altogether without the benefit, according to a survey conducted by the FCC at the end of 2023. Many have come to depend on internet access to complete homework assignments, work from home and meet other basic needs.

“This is not about can we find the money,” Sen. Welch said. “It’s about, are we committed to the priority and well-being of really wonderful people who are struggling?”

Welch and other lawmakers from both political parties introduced legislation earlier this year to extend the program through the end of the year with $7 billion. The White House has pushed for an extension but it has not happened so far.

Harjai is a corps member for The Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.