Stepping into the entrepreneurial world is exciting—and a bit scary. But unlike trying to invent the next as-seen-on-TV phenomenon, starting a property rental business is a pretty safe bet for first-time business owners. People always need housing, and the market almost always works in your favor.
But how exactly do you get your own company off the ground? No matter where in the world you live, there are a few key steps you need to take to ensure the cash keeps flowing.
If you don’t just have a couple hundred thousand dollars lying around, it’s critical that you find some financing to get your rental business off the ground. Consider leveraging your own home by either renting it out while you move elsewhere or using the equity to make a down payment on another property.
When you’re first diving into starting your own business, it’s a good idea to keep things small. Grandiose plans are fun to dream about, but smart business people don’t build an empire overnight.
If you don’t want to leverage your own home, take out a mortgage from the bank to pay for your new project. This is a great way for beginners to get their toes wet because utilizing a mortgage will give you a higher cash flow rate as you pay back the loan.
Research Ideal Tenants
Before purchasing a property, think about who you would want to lease to. College students? Suburban families? Low-income communities? It’s important to think about the needs of the demographic you want to target and then cater your property towards that.
A family of five would want a nice yard for the kids and close access to a shopping mall, while young professionals don’t need as much space and would prefer to be closer to the business district. Once you’ve determined who you want to rent to, you can then make the big step of purchasing the property.
Another factor to consider is whether you want tenants who will remain on a fixed lease or temporary tenants, such as Airbnb visitors. While the first option provides a steady income, the second can sometimes be more lucrative. You just have to decide which rental style is right for you based on how involved you want to be on a day-to-day basis.
Register Your Property
Depending on where you live, there are different rules for how and where to register your rental property. Whether you live in San Francisco or New York, the city and state will want to know about your business for tax and rent control purposes.
If you don’t register your property, you could face some pretty severe fines. And there’s no reason to owe more money than you have to! While being a landlord might not be your fulltime job, you should always treat it seriously and comply with any local or federal rules regarding rental properties.
Start the Screening Process
Now comes the time to find the right tenant for your first-ever rental property! Advertise your property on sites like Trulia or put up flyers in businesses around the property to attract local renters. Give tours to all applicants who are interested so you can get to know them on a personal basis. When you have a renter (or several) who seem like a good fit, ask for a background check.
There are plenty of services that offer a free rental history report so you can determine whether the prospective tenant will be reliable with their payments. Make sure to check their criminal record, whether they’ve ever filed a lawsuit against a landlord, and their credit score. This is your first venture into the rental property market, and you want to make it a good experience for everyone involved.
No matter where you live or what your day job might be, owning your own business can be a dream come true. You call the shots, you make the big decisions, and you see the profit. If you pay attention to trends in the rental market, talk with other successful landlords, and establish yourself in the community as an honest business person, you should have no problem finding success.