Even though there is no perfect blueprint for life, most people share the same goals. They want to finish school, find a job they enjoy, have their own home, and live happily ever after. That seems pretty basic, right?
While many of those goals remain the same, more and more people are skipping out on the “have their own home” part of the plan. These days, more and more people are opting to rent a home instead of making a big purchase.
That can be attributed to many reasons, such as high home prices, people waiting for the next economic downturn, or simply because renting is a more feasible option at the moment. Lots of people simply prefer rental properties because it doesn’t come with the real pressures of homeownership, like the sometimes costly expenses of maintaining a home.
This is great news in that it’s a great opportunity to jump into the rental property business. If you’re unfamiliar with this area of business, that’s okay. We’re going to run over some basic tips to help get you started.
Create a Comprehensive Business Plan
If you remember writing essays in high school, you might remember your teacher telling you to make an outline before writing a paper. It seemed arduous and annoying, but it definitely helped you get organized.
Having a business plan before you start your business is going to help you organize yourself, set goals, plan the budget, manage expectations, and research your market. Chances are you’re going to have to approach a lender to ask for a loan, and they’re going to want to see your business plan.
Make it thorough and think of every question that could be asked. You’d rather have more than less.
Plan Out a Marketing Strategy
You won’t just be managing properties and collecting rent money, but you’re going to have to learn how to market your business effectively. Marketing can be tricky, so you might want to turn to an expert to help get you started.
Part of marketing effectively is building up a solid brand and website. These are the first things people are going to see when looking at your business. Remember that first impressions matter!
Check Multiple Places for Financing
Unless you have a big pile of cash lying around, you’re going to have to search for financing in order to get everything started. Remember that most businesses don’t actually turn a profit until their second or third year of existence, so you need to estimate your carrying costs.
You, of course, need to factor in the price of your first rental property in all of this. You can’t very well run a rental property business without any property.
There are plenty of places besides banks to go look for financing. Check with online lenders who usually give you a faster turnaround and require less red tape than your local bank.
Don’t Forget About the Red Tape
Lost in all the excitement of starting a business is the red tape you have to go through. There are plenty of new tax laws to get acquainted with, real estate practices to learn, registering your business, and lots of other little things that are bound to pop up from time to time.
If you feel a bit overwhelmed, that’s okay. Reach out to experts, like an accountant or attorney to make sure you’re doing everything right. Try to meet up with other rental property business owners so you can get the lay of the land.
You’ll also have to check out various landlord insurance policies to make sure you’re covered in case the worst happens.
Be a Jack-of-all-Trades
Even though you have a vision of just managing your rental property or properties, you’re going to have to wear a ton of different hats during the early days. One of those hats is the business owner hat, which translates to investing in business insurance.
If you’re purchasing a rental property that is in obvious need of some fixing, it’s going to be much easier for you to do the upgrades instead of hiring a contractor. That being said, to be on the safe side, to protect your business and your tenants, insuring your business and protecting your tenants and property is going to help you run your business much more smoothly.
We already spoke about marketing, but even if you outsource that work early, you might want to learn enough of it to where you don’t have to fork over money each month for something you could eventually learn to do yourself. For example, you might not be the world’s greatest bookkeeper, but it’s important to learn some basic accounting principles in order to make sure you’re staying in the black.