Investment properties are a great way to establish an additional source of income. They’re challenging projects, but the payoff is excellent. Between buying the property, finding a tenant, and creating a solid financial structure, the strain of starting a successful rental property business can be overwhelming.
You need a roadmap, a guide on how to start.
There is a list of basic milestones, goals that need to be met in order to get the ball rolling on your business. Once you’ve established these components, you’re set to have a successful business.
1. Formulate a Business Plan
With every well-oiled machine, there’s a blueprint. Buildings cannot stand without structure. The same can be said for your property business. Having the idea is what gets you started, but the framework is what propels you forward.
When creating a plan, allow yourself to be flexible. Not every theory needs to be a complete thought. You don’t have to map it out in any specific format. What’s important is that you outline a trajectory, and pinpoint resources that will help you journey from point A to point B.
Brainstorm a name for your company, jot down a few aims and goals, and outline your target audience. It’s good to be descriptive. Include external resources and examples; people and places that you pull your inspiration from.
Decide on what kind of property you want to own. Are you interested in renting out office spaces? Or would you like to own a few apartment buildings? There are several types of properties to choose from. Select whatever fits well with your lifestyle and business goals.
Once you establish a framework, a foundation, you can begin to build.
2. Get Funding
There is plenty of research to be done when it comes to finding the proper funding for your business. You need a lender that understands and believes in what you’re trying to build. It’s important to have your desired loan amount and interest rate in mind when negotiating with a lender. You need to decide on what your funding is going towards (cost of the property, utilities, renovations, etc.), and the duration of your loan.
Specialized Financing is particularly great for owners that want to improve their property portfolios. You need control over your rental business, and this requires the ability to structure your profits around a fixed budget.
Acquiring a rental property loan is a detailed process. Once you choose your lender, you will need to complete an application, and provide several pieces of information. Your lender wants to know what kind of borrower you are. Though this doesn’t require any of your personal financial information, you will need to give the lender access to your business info.
Once approved, you can purchase your desired rental property.
3. Renovate and Advertise
Once you’ve acquired your desired space, it’s time to prepare for your tenants. There are different types of building codes, permits, and regulations that need to be met and obtained before you can list your property for rent.
Hire a building inspector. They are in charge of surveying the property to make sure it’s safe for people to live or work. They will tell you what needs to be replaced or repaired.
Guidelines differ in every location. Do your research, and formulate a list. Your property may require a few renovations, or there might be some personal touches that you’d like to add. You can jump through the hoops and cut the red tape at your own pace, but make sure that everything’s up to par. You want to avoid any obstacle that can hinder your business, or negatively impact your reputation as a landlord.
4. Acquire Tenants
This is the most important step. Your ability to obtain renters will determine the success of your business.
There are several websites designed for property owners to post their listings. Be sure to take good photos of your property, list its assets, and your desired rent payment. If your listing is near any schools, grocery stores, or popular metropolitan areas, it’s good to highlight those attributes. Your tenants aren’t just renting the property, they’re interested in the community.
Be diligent when choosing your tenants. There are resources available for you to do credit score and background checks. You can also ask for references when potential renters are applying. You want to choose people that have promising rental history. Their financial intelligence directly affects your relationship with your financing company. If your tenants don’t pay their bills, you can’t pay yours.
As challenging as running a rental property business might be, it is also incredibly rewarding. You’re building a substantial foundation of wealth, providing a lucrative creative outlet, and setting the tone for a legacy; your legacy.
Build from the bottom up. All the best things have a beginning. Break ground on your dreams, and watch how successful they can become.