Renting out a property is an effective way to generate some revenue while building up equity in an asset that has a tangible effect on your financial future. For a lot of people, it provides a source of extra money outside of their full-time job, but others spot the opportunity to scale those efforts, and perhaps even make it a real business. Here, we’re going to look at some of the steps that can help you treat owning rental property as a primary source of income, with eventual growth in mind.
Set Up A Company
The first thing that you want to do is establish a formal structure for your business. Setting up your business as an LLC or limited company helps you better separate your personal and business finances, reducing your liability as an individual, while also making it more credible in the eyes of any lenders you might seek funding from or potential partners. Setting up a company also simplifies accounts, tax deductions, and long-term planning. When you set your rentals up as a business, you’re able to pay yourself a paycheck, as well, which can ensure that you’re personally taking care of your financial needs while keeping as much revenue to put back into the business.
Getting The Funds To Buy More Houses
If you plan to turn being a landlord into a business, then you’re going to need more than the gains from one property. That simply isn’t enough to sustain most people as an income, never mind an entire company. As such, you should look at banks, angel investors, and other lenders for the funding you need. You could apply for traditional mortgages, buy-to-let loans, or business loans. Ensure that you have a strong credit profile, clear records of cash flow on any properties you own right now, and a solid plan on how you’re going to scale and maintain the profitability of your business to provide a more convincing case for lenders. This can help you fund the new purchases that can ensure you have a wide roster of rentals to earn from.
Identify Your Target Market
If you’re looking for the greatest success in your new rental business, then you need to be able to find the right rental market. Take your time to research demand in local areas, the kind of rental yields that properties with them can make, and common vacancy rates before you decide where to buy property. If you’re specifically targeting families, students, professionals, or short-term tenants, you can choose locations specifically suited to that audience and invest in improving properties to meet the kind of needs popular among those demographics. Which approach you take will likely depend on your area, and it helps you be more focused with property selection, pricing strategy, and marketing.
Screen Your Tenants Carefully
While you want to appeal to a broad range of tenants that could be suitable for your properties, you don’t want to let just anyone in. Selecting your tenants with care is going to become one of your most critical processes, potentially helping you avoid vacancies and common problems down the line. Tenant screening tools allow you to verify your tenant’s income, to get a better look at their credit history, employment, and other factors that could indicate their suitability for your property. You should also ask tenants to provide rental references to see if past landlords have had any problems with them. For a growing rental business, standardized screening saves time while improving decision quality
Keep Your Operations Streamlined With The Right Tools
If you’re planning to manage all of your properties by yourself, you need to find the most efficient way of completing a whole host of tasks, since you don’t have a rental management company to do it for you. There are a whole host of digital systems that can help with steps like renters agreement creation, automated invoicing, and rent collection that can make sure that both you and your tenant are keeping up your end of the deal, while reducing manual work and the risk of error. You can also use centralized landlord dashboards that can make it easier to track many of these functions across multiple properties, so you can be sure that you never miss a thing. This way, you can free up your time to work on growing your property roster and taking care of tenant needs, rather than paperwork.
Find Your Handy Helpers
In order to save money and to maintain better relationships with tenants, you might find yourself inclined to handle a wide range of property issues yourself. A little DIY can go a long way. However, you should also find the plumbers, electricians, handymen, inspectors, and cleaners that you can rely on when you need them. Building a vetted network of service providers can help you ensure that you’re giving the right care to the sensitive systems beneath your properties’ surface, keeping your tenants satisfied and ensuring that small issues don’t become much more expensive repairs down the line.
Consider Hiring A Team
As your business grows, it may become too much to handle all by yourself. When you reach a certain level of success, scaling the business is not only a wise idea, but it can be a necessity to ensure you don’t collapse under the administrative weight of it all. Consider hiring assistants, property managers, and operations coordinators to help field tenant communications, to take care of the admin work, and to ensure that properties are getting the maintenance that they need. Managing a team does come with its own new responsibilities, but it also opens up room to expand your operations further, building a solid roster of homes under you to start making some real profit.
It’s certainly possible to turn a rental side gig into a real business. It just takes dedication and, in a lot of cases, plenty of investment. When you’re able to build a solid portfolio of properties, however, it can result in solid profits, too.
