What You Need to Know About a Real Estate Rental Business Plan

Elements of a Business Plan

  • Vision.
  • Mission.
  • Objectives.
  • Strategies.
  • High-Level Plans.
  • Daily Plans.
  • Finances.

Setting Passive Income Investing Goals

When creating the rental business plan, there are two questions that will need answering: How much passive income do you hope to earn on a monthly basis, and how much time and money are you in a position to invest?

As you consider the answers to these questions, keep in mind that your goals should be realistic in terms of the amount of time you have to invest and the money you hope to earn. If you plan to start out working part-time, your goals can be less ambitious as compared to having unlimited time to invest and financing is already in place. Keep the time frame realistic but don't be afraid to reach to make your dream of a successful business become reality.

Another question to consider is what type of rental property you want to focus on. Your options are:

  • Residential
  • Commercial
  • Multi-family

Determine what you want the end result to be. Then, work backward to help guide you to the best result.

Choosing Your Market

Determining the area/region you plan to invest in is an even more important decision than how much experience or capital you have to offer. The questions you'll want to research before answering include:

  • Is there a limit to the distance to the market you're investing in?
  • Do you have a team in the market area to handle daily operations, or will it be necessary for you to commute back and forth?
  • What will the cost of commuting and market research cost you?
  • Is the economy in the market you're considering stable and diverse?
  • Does the market offer various business sectors to help in keeping jobs and businesses?
  • Is there one main employer in a specific market?
  • What is the average market price for the acquisition of property?
  • What is the average price of a rental?

It isn't necessary that you reside in a market to invest in it, but you do need to know the ins and outs of a market to ensure it works to your advantage.

Financing and Expenses

A big hurdle you will face as a rental property investor is the financing of your business venture. Understanding what you need and how you will pay for the business can alleviate stress and bring clarity to finding solutions and/or alternatives to fund the company.

The business plan should clearly outline:

  • The amount of money needed to get started.
  • Plans to raise financing if you do not already have financing in place.
  • The amount of rehab construction to budget for.
  • An estimate of what monthly expenses will cost.

Marketing Strategies

Once you have a rental property, the next step is putting a plan of action into play to bring in tenants to generate cash flow. Some of the most common options include:

  • Local bulletin boards.
  • Local realtors.
  • Print media/newspaper.
  • Rental websites.
  • Social media.
  • Word of mouth.

The specific marketing channels you choose to use will depend on your selected market. The more specific you can be with marketing, the more you can budget for marketing costs accordingly.

Managing Your Rental Property

There are additional questions to ask and answer regarding the management of the rental property as well as maintaining the rental properties to keep them in good shape and to maintain a steady cash flow. This means having answers to these queries:

  • Do you plan to be a landlord or hire a property manager?
  • Who will have the task of finding and selecting tenants?
  • Will you perform repairs or hire a professional contractor?
  • Who will maintain the yard and other duties?

Your answers to these questions depend on several factors, such as the budget you have to work with and available time. Also, having the business plan mapped out with all management systems in place beforehand helps ensure there will be no last-minute surprises.

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