How to Start an Apartment Rental Business

With property management expected to grow into a $22-billion industry by 2023, your entrepreneurial drive might make you consider to venture into the business. With that projected growth, you might be pressured to immediately invest.

However, just like in other businesses, it’s wiser to take everything into consideration first. Study the risks, gauge potential for revenue, and evaluate feasibility.

Diving blindly into a business you’re not completely familiar with is a recipe for disaster. You need to have enough knowledge because it’s not a business that everyone can handle.

There are many ways to get into the property management business. Renting out an apartment unit of your own is a popular option if you want to test the waters first before going big. It’s easier than managing properties that are not yours because you won’t have complete control.

If you want to start off this way, here are a few things to consider:

Capitalization, Loans, and Overall Financial Capacity

If you don’t own a property yet, you have to check if you have enough capitalization and if your risk appetite can handle it because even small apartment units can cost a lot. If you don’t have the capital, evaluate if you are eligible to be granted business loans from different financial institutions and if you have the capacity to pay it off with your expected income from the rent.

If you already own a property that is ready for tenant occupancy, then your capital requirement will be lower. This is a huge advantage.

Cost to Operate

Do you need to hire? What maintenance will you need to do on a regular basis? What are the monthly expenses of owning a unit? How much taxes will you owe the government? These are just a few question you need to answer to compute the cost of managing an apartment rental business.

Rules and Regulations

Carefully construct a set of rules that your tenants should follow once they begin occupancy. Make sure that the rules would protect your unit from irresponsible use. Be specific on the scope of each policy and the corresponding consequence for any violation. As a landlord, you should ensure that you will receive rent on time and your apartment will remain in good condition.

Rent and Security Deposits: Complying with the Law

Learn the tenant-landlord laws in your state especially regarding rent and security deposits. Setting rental amount is crucial for your business’ success. Given the estimated cost to operate, your tenant’s rent should be enough to cover operational expenses and still earn you profit.

It is also important that you are aware of the state laws regarding security deposits because it could differ from state to state. Know the amount of security deposit you are legally allowed to collect, how to handle it, and how it should be returned to the tenant.

Make it legal

Register your business legally. The process and requirements could vary depending on which state you belong. Nonetheless, you have to be sure that you would be able to operate without getting in trouble with the law.

Find Leads

After putting in all the time and effort to start the business, the next step for you is to find your tenants. Promoting your apartment in listings syndication and management platforms like Padleads.com will help you get quality leads in no time. Since Padleads generate leads by syndicating listings to various rental sites, your unit can easily get the attention of potential tenants in your area.