The real estate investment business can be a fun and profitable way to spend your time and build wealth. Like any business, creating a business plan provides an overview of what you need to be successful, and it can often be a requirement for lenders if you need financing. Here are some critical steps in creating a real estate rental business plan.
Contents of a Rental Property Business Plan
Your goal with a rental property business plan is to show a strategy for earning income as a landlord. This starts with your financials.
1. The Financial Pages
The financial information you’ll need to list in your plan include start-up expenses, a cash flow statement, and projections.
Start-up expenses can contain your down payment on the property, a renovation budget, zoning or land use issues, the creation of a lease agreement, the establishment of your corporate structure, legal fees, and the like. These are one-time expenses that you need to start the business.
Your cash flow statement will include the income you intend to generate and your ongoing expenses on a monthly, quarterly, or annual basis. You need to show that your income will exceed your expenses. Examples of expenses include property management costs, mortgage payments, taxes, insurance, utilities, maintenance and repairs, administration costs, contingency, and any seasonal costs such as landscaping or snow removal.
The projection statement of your rental property business plan shows how your income will grow over five years. This is a combination of increasing rental fees and decreasing expenses.
2. Operations Details
The operations plan tells lenders how you will manage the property, and who you will use to handle any repairs or emergencies. A good rule is to have three contacts for each service (i.e., electrician, plumber, general repairs) or have a handyman employee who will be responsible for managing the property.
3. Marketing Strategy
Your marketing strategy details the ideal tenant you are seeking and how you will find them for your residential or commercial rental property. Include how you will screen tenants and the responsibilities of each party in the lease.
4. Other Requirements
You can use a business plan template as a blueprint for what the plan should resemble once you have all the additional information such as an executive summary, specifics on the management team, a company description, and other details.
Flipping vs. Renting
Are rental properties worth it? Whether you’re building a flipping business or a rental property business, it’s important to assess your limits regarding financing, the duties of property ownership, and, in the end, your exit plan. Here is a brief look at how renting and flipping compare in some key areas:
| Renting (Buy and hold strategy) | Flipping (Buy and sell strategy) | |
| Type of Investment | Long-term investment; delayed ROI | Short-term investment; fast ROI |
| Financing | Traditional mortgage | Different short-term financing options |
| Process | One and done | Repeatable |
| Cash Flow Generation | Plan for the long-term | Cash flow immediately when you sell |
| Equity | Builds over time | Immediately upon sale |
| Responsibilities | Landlord commitments, government mandates, legal issues with tenants | Ensure property conforms to the neighborhood |
| Exit Strategy | Challenge to sell quickly if needed; proper notice to tenants if selling | Can hold property and build equity if the need arises or market as a rental property |
| Concerns | Tenant issues, property damage, legal disputes | Property doesn’t sell right away |
The HomeVestors® Franchise System
HomeVestors is a house-flipping franchise. Properties are purchased with the intention of renovating and reselling them in a short period of time. However, some of our franchisees also choose to maintain flipped properties as rental units. The HomeVestors franchise provides a steady stream of off market leads from motivated sellers, giving franchise owners more options for flipping or holding properties.
Regardless of your goals in building a real estate investment business, HomeVestors can be a way to fast-track your success by providing an efficient business model that saves you time and money when compared to building the business independently. We offer franchisees extensive support, proprietary property valuation software, a financing portal, excellent training, and a seasoned mentor to guide you in building your business.
You can join our network of more than 1,000 franchisees in as little as 90 days and can even start part-time in the franchise before growing into a full-time business. If real estate investing is something you’re interested in pursuing, connect with HomeVestors and see what we have to offer.
Learn About HomeVestors
We have an easy online form you can use to request more information from our franchise team. See how we can support you in running a rental property business, building a house-flipping business, or a combination of both!
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