How to Start a Business Renting Houses?

1. Manage your time and money expectations.

   Before you dive in too deep, you should figure out how you will make money.
   
   So, depending on how you choose to profit from your house rental business will map out your next steps. For example, you can choose to focus on a “cash flow” or “appreciation” strategy.
   
   The time you have to put into the property and manage it should be considered. Also, the costs poured into the home can tie up your cash flow.
    
   There are two train of thoughts: cash flow is guaranteed while appreciation isn’t guaranteed. However, real estate veterans will tell you that appreciation happens over the course of the years.
    
   So, you may not not become rich focusing just on cash flow or the profit per house rental. But if you buy a reliable property, then it’s not speculative. Because a solid investment property should appreciate.
    
   To sum it up, appreciation will bring you wealth over the long term. However, cash flow may keep money in your pocket in the short-term. But the cash flow strategy may not make you rich.
   
   On a side note, if you always chase the hottest market or the market with a highest ROI (return on investment). Then, you’ll always be chasing money and following the crowd.
    
   Instead, focus on the market that you’ll be the most successful in. Because at one point, a certain city was considered the “it market.” Trends changes, but good properties will consistently bring you value.
   
   Finally, you should focus on whether you have the time to devote to starting and managing a house rental business.
   
   If you can’t devote all of your time for whatever reason, e.g., full-time employment, then you should consider choosing certain types of properties, which you can adequately manage.

2. Identify any dealbreakers in the beginning.

   
   Before you put any money down on a property, you should identify any dealbreakers. This should save you a lot of time, money, and unnecessary headaches.
   
   Here are some questions that are meant to make you go hmmm…
   
   Does the property have a homeowner’s association (HOA)? Sometimes a HOA may be a dealbreaker.
   
   Does the market have any rules or regulations against short terms rentals? Is the city welcoming of short terms rentals or are they are frowned upon?
    
   Is this a market that has a chance for growth? Or does it have year over year growth?
   
   Will the rental property appreciate in value? You want to be able to make more gross revenue each year than the year before.
   

3. Choose a profitable location.

   When choosing your first location, you should choose something that’s no longer than 2 to 3 hours away. So, if there’s an emergency, you can get to the property quicker. You can also check up on the property, if needed.
    
   On the flip side, sometimes it does make sense to buy a property [long distance] if it’s a turnkey rental. Turnkey means it’s fully furnished.
    
   Of course, you’ll have fly out there and visit the property. So, for example, the Smoky Mountains has a lot of turnkey rentals where short terms rentals are encouraged.
    
   Here are some categories where you focus on picking your house rental property:
    
   1) National Parks and State Parks: Yosemite, Joshua Tree, Smoky Mountains, etc.
    
   2) Eclectic towns: small town that have some sort of appeal, e.g., Eureka Springs.
    
   3) Vacation destinations, e.g., national parks, beach towns, and ski towns.
   
   4) Places where kids want to go: people spend lots of money on their kids.
   
   5) Places where a lot of people have moved or migrated to, e.g., Texas in 2021.
   
   These categories are places where people travel the most. So, these places have can have a higher demand. 
   
   Other location factors
    
   1) Location likeability. Keep in mind that you should also choose a market that you would actually want to visit. You will need to visit the property at least once or twice a year.
    
   2) Vendor proximity. You should also look to see if there any available vendors nearby. For example, the cleaning company is a type of vendor.
   
   So, the market or location should have available vendors to service your rental property. For example, you need to be able to find companies that can do landscaping, cleaning, pest control, etc.
    
   3) Market Seasonality. You should look at the market’s seasonality. For example, beach towns may have hot months only to [have revenue] sizzle out during the cold months.
    
   So, you should anticipate the revenue you’d make in the slow months when considering your location decision.

4. Get money or financing for your rental property.

   There are many ways to get money for your rental property business. For example, you can apply for traditional loans, portfolio loans, commercial loans, private loans, etc.
    
   If you want to split the costs and responsibilities with another person, you start your business as a partnership. Keep in mind, that you should have a partnership agreement in place before any money exchanges hands.

5. Register your house rental business (optional).

   If you’re going to start your house rental business as a sole proprietorship, then you don’t need to register your business.
   
   However, if you’re starting your house rental business as an LLC or corporation, then you must register your business.

6. Get a business license & permit. 

   You’ll most likely need a business license to operate a rental property business in your state. Check the laws of your city and/or state to verify.
   
   For example, some states require a short-term rental license, which is separate from your business license.
   
   You may also need to get an occupation tax certificate (aka certificate of occupancy) for each unit or rental property. A certificate of occupancy ensures that the property meets all building and zoning codes. So, your rental property will need to be inspected.
   
   Keep in mind that you shouldn’t skip the business license and permits process if it’s required in your state and/or city. If you’re caught, your housing rental business may be shut down and you may get heavy fines.
   
   You should also let your insurance company know that you’re renting your property. If not, your tenants may not be covered.
   
   So, if an accident happens, you and your tenants are screwed.

7. Get renter leads.

   The next step is to find renters for your property. You can use popular websites such as Vrbo and Airbnb.
   
   The advantages of using these rental property websites is that you don’t have to do the heavy lifting when it comes to marketing your rental property.
   
   However, a lot of these websites requires fees and/or commissions. So, you can create a website instead, which will allow you to pocket most of your profit.
    
   However, you’ll need to invest in marketing so that short-term renters can find you.