How to start and operate an apartment rental business (2023)

The United States apartment rental industry is booming! The market size of this specific type has grown 1% per year on average between 2017 and 2022. By 2023, it’s projected that revenue will reach $229 billion- which means there are plenty more opportunities for those looking to get into the rental property business or buy their first investment property unit as well!!

So, if you’re looking for a new business idea, consider starting an apartment rental business. This is a great opportunity to enter the housing market, and there are several things you need to do to get started. This article will discuss the basics of starting and operating an apartment rental business. We’ll also cover important topics such as licensing and insurance. So if you’re ready to get started, keep reading!

Plan ahead

Before buying or leasing a property, it’s important to do your due diligence. This will help you map out the important steps you need to take to get your business up and running. It will also give you an idea of what expenses you’ll need to cover and how much revenue you can expect to generate.

  • Understand what you’re getting into- The first step is to understand the ins and outs of the apartment rental industry. This includes learning about cap rate, NOI (net operating income), and other key financial concepts that will be important when making investment decisions.
  • Research the local market and find out what people are looking for in an apartment.
  • It’s also important to inspect the property thoroughly before making any decisions. This includes checking for potential damage, such as water leaks or mold.
  • It’s also a good idea to have a professional appraiser inspect the property to determine its value. This will help you set a fair price for rent and avoid overpaying for a property.
  • When you are expanding your business, you might need to find suitable office space. This can be challenging, especially if you’re on a tight budget. But it’s important to have a dedicated space for your business, even if it’s just a small office or studio apartment.
  • You’ll also need to factor in mortgage payments if you plan to buy a property. And if you’re renting, you’ll need to budget for utilities and property taxes.
  • Finally, you’ll need to set aside money for marketing and advertising. This is important to get the word out about your business and attract potential customers.

A business plan covering all of these aspects will help you get started on the right foot.

Decide if you want to be a property manager or an owner

One of the first things you need to decide when starting an apartment rental business is whether you want to be a property manager or an owner. Each option has pros and cons, so it’s important to weigh your options carefully before making a decision.

  • If you decide to manage your rental property yourself, you will be responsible for finding and screening tenants, collecting rent, handling maintenance and repair issues, and dealing with problem tenants. This can be a lot of work, but it can also be very rewarding because you will save the money that a manager can charge you for these tasks.
  • If you decide to be just the owner, you need to hire a property management company to take care of all operating tasks. You have to dedicate a portion of your monthly income to the managing company, but this also means you would have a lot of time to spend on market research, buying more rental units, and expanding your business.

So, which option is right for you? Of course, only you can decide that. But, whichever option you choose, there are some things you need to keep in mind to be successful.

Establish a good relationship with your local mortgage lender

As an apartment rental business owner, you’ll need to establish a good relationship with your local mortgage lender. This is important because you’ll need financing for your rental properties. A good relationship with your lender will help you get the best interest rates and terms for your loans.

It’s also important to have a good relationship with your lender because you’ll need to be able to refinance your properties when necessary. For example, if you’re trying to buy a new property but don’t have enough cash, you may need to refinance one of your existing properties to get the cash you need.

Get to know your local real estate market.

How to start and operate an apartment rental business (1)

As a real estate investor, getting to know your local real estate market is important. This will help you find the right properties to purchase. In addition, you’ll need to know about things like median rental prices, vacancy rates, and other factors that affect the demand for rentals in your area.

You can learn about your local real estate market by reading articles, talking to other landlords and property managers, and attending local real estate events. In addition, a trusted real estate agent can give you the upper hand as you start to look for properties.

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Register your business

You need to register your business with the state. This is typically done through the Secretary of State’s office. You will need to fill out a form and pay a filing fee. The form will ask for basic information about your business, such as the business name, address, and contact information. You will also need to provide a description of the business.

After your business is registered, you will need to get a business license.

Get a residential license.

In addition to registering your business with the state, you will also need to obtain a business license from the city or county where your business is located. The process for obtaining a business license varies from one location to another, but it typically involves filling out an application and paying a fee.

If you plan to have apartments in more than one city or county, you will need to obtain a business license for each one.

Check with your local zoning laws

Before renting out apartments, you must ensure that doing so is allowed in your area. Zoning laws vary from location to location, and some areas do not allow businesses to operate in residential areas.

If you’re unsure whether or not you are allowed to rent out apartments in your area, you can check with your local zoning office. They will be able to tell you what the laws are and whether or not you need to obtain a special permit to do business.

Get insurance

Another important thing to do when you start an apartment rental business is to get insurance. This will protect you in case something happens to your property or if one of your tenants gets hurt while on the premises.

There are a few different types of insurance you can get for your business, so you’ll need to talk to an insurance agent to figure out which kind is right for you.

Find the right property

Of course, you will also need to find a property you can rent. There are a few different ways to go about this. You can either buy an already existing apartment or convert single-family homes into an apartment complex.

If you decide to buy an existing apartment building, you will need to ensure that it is up to code and meets all the necessary safety requirements.

You will also need to ensure that the building is in a good location and reasonably priced. It’s fine to buy apartments in big rental buildings, but you don’t want to compete with corporate housing complexes.

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If you decide to convert a residential property into an apartment complex, you will need to make sure that the property is zoned for commercial property. You will also need the necessary permits and approval from the city or county.

Market your business

Once you have everything set up, you will need to market your business. There are a few different ways to do this. You can put up signs in the area, hand out flyers, or take out ads in the local newspapers. You can also list your business in online directories or on classified websites.

A professional approach to a good marketing strategy is by knowing your market. Do your research to see who are your potential customers.

Are you more interested in long-term tenants with fewer challenges, or would you like to attract short-term renters willing to pay more like business travelers?

Negotiate and sign leases with tenants

The first step in starting your own apartment rental business is to find tenants. You’ll need to negotiate and sign leases with them, which will outline the terms of their rental agreement. Be sure to review the lease carefully before signing it, as it will be binding on both parties.

If you already have a tenant, it’s always better to negotiate a rate increase with your tenants before looking for new ones. This is because it’s easier and cheaper than finding a replacement tenant while also avoiding the high cost of turnover that comes from having many empty apartments or rooms on your property at any given time.

You can use a few tricks to get your tenants into negotiating and signing new leases. First, make sure the rent is fair for both parties. So it doesn’t matter if you’re renewing or starting with someone new; chances are that once they’ve seen what kind of place this truly was in terms of location and amenities, then negotiations will start happening on behalf of all involved! You should also remember not only how important good communication is between oneself as well other involved parties such-as cleaners/handlers etc., but especially during talks surrounding any sort of agreement like an increase from $500-$550 per month ($10 extra), because sometimes these little things add up quickly if not kept in mind throughout the entirety of the conversation!

How to start and operate an apartment rental business (3)

Maintain the property and handle repairs/maintenance as needed

When you start and operate an apartment rental business, you need to maintain the property and handle repairs/maintenance as needed. This includes regularly scheduled cleaning and upkeep, as well as responding to tenant requests for repairs promptly. You also need to be prepared for larger-scale projects like repainting the exterior or repairing the roof, as well as any emergency repairs that may come up.

Having a good relationship with a local maintenance company can be helpful, as they can often provide discounts for regular work. You should also have a budget set aside each month for unexpected repairs. By being proactive about maintaining your property, you can avoid costly surprises down the road.

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Collect payments and provide customer service

When you own an apartment complex, you are responsible for collecting the rent. This can be done in person, by mail, or online.

But if your place is maintained by a property management company (Or individual manager), you don’t need to be worried about collecting the fees. The company will take payments and deposit them into your account. You can also set up an automatic payment system, where the money is withdrawn from the tenant’s bank account and deposited into yours on a certain day each month.

How to manage your finances and keep track of expenses

Starting an apartment rental business can be a great way to earn extra income, but it’s important to keep track of your cash flow and finances. Here are some tips for managing your finances and keeping track of expenses:

  1. Create a budget for your apartment rental business. This will help you track your rental income and expenses to see where your money is going.
  2. Keep track of all of your expenses, including rent, utilities, advertising, and repairs. This will help you keep tabs on how much money you’re spending each month.
  3. Make sure to set aside money for taxes. You’ll need to pay taxes on your income, so it’s important to save up for this. Talk to your accountant about tax deduction opportunities.
  4. Keep track of your tenant’s payments and security deposits. This will help you stay organized and ensure that you’re getting paid on time.
  5. Have a separate bank account for your apartment rental business. This will help you keep track of your finances and avoid mixing personal and business expenses.
  6. It’s also important to save a portion of your income in an emergency found in case repairs are needed, you have to evict a tenant, or you are just facing an economic downturn.
  7. If you have a large inventory, then a property rental management software makes your life easier.

Evict tenants who are not following the lease agreement

If your tenant is not following the terms of their lease agreement, you may need to evict them from your property. The eviction process can be complicated, so it’s important to understand your state’s laws and procedures before taking action. First, talk to your lawyer to know the general rules and explore the best ways to tackle this problem.

If you decide to proceed with an eviction, you’ll need to serve your tenant with a notice of eviction. This notice will state the reason for the eviction and give your tenant a specific amount of time to remedy the issue or move out of the property. If your tenant does not correct the issue or move out within the specified time frame, you can file for eviction with your local court.

Once you’ve filed for an eviction, the court will set a hearing date. At the hearing, both you and your tenant will have the opportunity to present your case. If the judge rules in your favor, they will issue an eviction order. This order will give your tenant a specific amount of time to vacate the property.

If your tenant still does not vacate the property after the eviction order has been issued, you can hire a professional to physically remove them from the premises. This process should only be used as a last resort, as it can be costly and time-consuming.

The eviction process can be complicated, so it’s important to understand your state’s laws and procedures before taking any action.

Legal considerations when running an apartment rental business

As a business owner, it’s important to be aware of the legal considerations when running an apartment rental business. Here are some things to keep in mind:

Zoning laws: Make sure you are familiar with the zoning laws in your area and obtain the proper permits before starting your business.

Fair housing laws: Be familiar with federal, state, and local fair housing laws. This includes understanding what types of discrimination are prohibited.

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Lease agreements: Make sure you have well-written agreements that protect both you and your customers. Be clear about expectations, rules, and regulations.

Safety: Take measures to ensure the safety of your tenants. This includes things like maintaining the property in a safe and clean condition, having adequate lighting, and providing security features like deadbolts and security cameras.

Insurance: Make sure you have the proper insurance coverage for your business. This includes liability insurance in case someone is injured on your property.

Always keep yourself updated about new rules and regulations that may affect your business. By doing so, you can avoid any legal problems down the road.

Tips for maintaining a good relationship with your tenants

When you’re a landlord, it’s important to maintain good relationships with your tenants. After all, they are the ones who are renting your units and keeping your business running.

1. Be responsive to their needs.

Tenants want to know that their landlord is responsive to their needs. If they have a problem with their unit, they want to know that you’ll be there to fix it in a timely manner. If you’re not responsive, they will start to feel like they’re not a priority and may look for another place to live.

2. Be fair.

They want to know that they’re being treated fairly. If you’re constantly changing the rules or increasing rent without notice, they will feel like they’re being taken advantage of. As the apartment owner, it’s important to be consistent and transparent with your tenants to maintain a good relationship.

3. Communicate often.

Tenants want to know what’s going on with their rental property. If there are any changes or repairs that need to be made, they should be the first to know. Keeping them in the loop will help them feel like they’re a part of the decision-making process and not just an afterthought.

4. Be understanding.

Tenants are human beings, and things happen. If a tenant is late on a payment or needs to break their lease, try to be understanding. Work with them to find a solution that works for both of you. Showing them that you’re willing to work with them will go a long way in maintaining a good relationship.

5. Be available.

Tenants should be able to reach you when they need to. If you’re constantly unavailable or hard to get ahold of, they will start to feel like you don’t care about their needs. Make sure you’re accessible and easy to reach when someone needs you.

Following these tips will help you maintain a good relationship with your tenants. Remember, happy customers are crucial to a successful rental business.

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Conclusion

Running an apartment rental business can be a great way to earn some passive income and provide housing for people in your community. However, there are a few legal considerations to keep in mind. Be sure to familiarize yourself with zoning laws, fair housing laws, and lease agreements. You should also take measures to ensure the safety of your tenants and have adequate insurance coverage. By following these tips, you can avoid any legal problems and maintain a good relationship with your tenants.

Do you have any other tips for running an apartment rental business? Share your thoughts. Send us a message, and we will try to answer your concerns as soon as possible.

FAQs

Do rental properties make money? ›

Rental properties can be a great way to generate income, so long as your operating expenses aren't too high and your rent price is competitive. Rent payments, security deposits, move-in fees, and pet fees can also help cover your monthly expenses and leave money left over to save for future costs.

What is the best way to make money with rental property? ›

5 Ways To Make More Money From Rental Properties
  1. Rent Out Fully Furnished Apartments and Rooms. ...
  2. Offer Additional Storage Space. ...
  3. Minimize Resident Turnover. ...
  4. Offer Additional Services and Amenities. ...
  5. Reinvest Your Rental Income Into More Rental Properties.
8 Oct 2021

What are 3 things you should do before renting an apartment? ›

Things to Know Before Renting
  1. Some Landlords Require Good Credit History. ...
  2. Rent Doesn't Help Your Credit Score. ...
  3. Your Rent Can Increase. ...
  4. You Can't Always Remove a Co-Signer or Joint Applicant. ...
  5. Get Renters' Insurance. ...
  6. Evaluate the Property and Neighborhood. ...
  7. Inspect the Property. ...
  8. Read Your Lease.

What Renters should know? ›

Your responsibilities

paying the agreed rent on time. paying all other bills and charges as specified in your tenancy agreement. paying for any damage caused by you or your guests. providing they give you sufficient notice, allow your landlord access to conduct inspections and to do any necessary maintenance work.

What do apartments look for? ›

Applying to rent or lease an apartment can require a fair amount of disclosure. Landlords may look at your credit, rental history, income and criminal background—all to get a sense of what kind of tenant you would be.

What type of rental property makes the most money? ›

Here are the top three types of properties to consider, primarily because of the positive cash flow potential.
  • Income Property #1: Multi-Family Homes. ...
  • Income Property #2: Mobile Homes. ...
  • Income Property #3: Detached Single Family Homes on Sale. ...
  • #4: The Airbnb Rental. ...
  • Conclusion.
25 Sept 2017

Where do landlords make the most money? ›

Share this article
RankMetro AreaShort-term profit (annually)
1.Oklahoma City$6,431
2.Miami-Fort Lauderdale, Fla.$6,184
3.Tulsa, Okla.$4,753
4.Cincinnati$4,621
7 more rows
15 Aug 2014

What is the fastest way to make money in real estate? ›

  1. 7 Fastest Ways to Make Money in Real Estate. ...
  2. Renovation Flipping. ...
  3. Airbnb and Vacation Rentals. ...
  4. Long-Term Rentals. ...
  5. Contract Flipping. ...
  6. Lease to Buy. ...
  7. Commercial Property Rentals. ...
  8. Buying Land.

Can I get rich from rental income? ›

Yes, you can get rich as a landlord. You can go broke, too. And in between those two extremes, you can find yourself dealing with a bunch of problems like leaking roofs, non-paying tenants, and economic downturns. The risks of building wealth with real estate are substantial.

What are 2 ways in which an owner can make money off of rental properties? ›

6 Ways Renting Houses Makes Money
  • Cash flow. Positive monthly cash flow is the number one way to make money renting houses. ...
  • Appreciation. The second way to make money renting houses is from the appreciation in home value. ...
  • Amortization. ...
  • Inflation hedge. ...
  • Tax benefits. ...
  • Self-funding.
4 Aug 2022

How much profit is good on a rental property? ›

Many experts and successful investors consider ROI to be the most crucial factor to consider when it comes to evaluating the profitability of a real estate investment. There is no across-the-board number for a “good” ROI, but on average, it is recommended to aim for an ROI above 15%.

What do I need as landlord? ›

10 point landlord checklist before renting
  • Gas, fire, furnishing and electrical safety requirements. ...
  • Energy Performance Certificates (EPC) ...
  • Tenant vetting. ...
  • Inventory and schedule of condition. ...
  • Tenancy Agreement. ...
  • Correct buildings and contents insurance. ...
  • Dealing with late rent or rent arrears. ...
  • Tenancy Deposits.

What should you not do when renting an apartment? ›

9 Mistakes to Avoid When Renting an Apartment
  1. Renting Mistake #1: Not reading the lease carefully. ...
  2. Renting Mistake #2: Passing up renter's insurance. ...
  3. Renting Mistake #3: Ignoring the neighborhood. ...
  4. Renting Mistake #4: Renting the apartment without seeing the unit.

What do you pay before renting an apartment? ›

You'II usually have to pay your first month's rent in advance and a tenancy deposit. If you rent from a letting agent they'll usually ask you to pay a holding deposit. Ask about all payments before taking a property so you don't have to deal with any unexpected costs.

How can I attract better renters? ›

12 Apartment Showing Tips to Attract Quality Tenants
  1. Write a Thorough Listing. ...
  2. Schedule Individual Property Showings. ...
  3. Consider Timing. ...
  4. Have All Relevant Paperwork Handy. ...
  5. Create Handouts. ...
  6. Know All Area Amenities. ...
  7. Decide on Tenant Criteria Beforehand. ...
  8. Keep a Flexible Schedule.
7 Feb 2022

What qualities make a good landlord? ›

Before we sidle up to the bar and take a stool, let's check off some of the qualities that we think make a great landlord.
  • Good communication. ...
  • Clear documentation. ...
  • Stay on top of maintenance. ...
  • Provide great customer service. ...
  • Be transparent with past issues. ...
  • Be reasonable with requests. ...
  • Maintain a respectful distance.
28 Jul 2021

How do I look good as a landlord? ›

Landlords want to know that you will pay the rent on time and look after their property carefully.
...
Top tips on how to show a landlord you will be a good tenant
  1. Be organised. ...
  2. Take off your shoes. ...
  3. Ask responsible questions. ...
  4. Have your paperwork ready. ...
  5. Line up a guarantor (if needed)

What does a landlord look for in a tenant? ›

Landlords or agents usually make checks to see if you're a reliable tenant who can afford the rent. They must also check your immigration status.

What factors affect apartment approval? ›

Tenant screening gives you a well-rounded view of who they are, their ability to pay, and whether renting to them is a risky move.
...
Let's take a look.
  • Credit Score. ...
  • Credit Report. ...
  • Income. ...
  • Criminal History.
15 Sept 2016

How long does the rental process take? ›

If all forms are not completed properly first-time tenants can expect delays of up to three weeks before being allowed entry into their new property. On average first-time renters who do things by the book typically wait around one week before they are able to move into their first rental property.

What type of business should I start for rental property? ›

A limited liability company (LLC) is an ideal business structure for rental property owners.

How profitable should a rental property be? ›

The exact amount of profit a rental property generates depends on a multitude of factors, most notably your expenses. While any profit is good, you should aim for making at least $100 profit per property. This amount of income might not seem like much at first.

What kind of rental company can I start? ›

16 Most Profitable Rental Business Ideas to Make Money in 2022
  • Party rental business. ...
  • Wedding & event rentals. ...
  • Camera & lens rentals. ...
  • Bike rental store. ...
  • E-bike rentals. ...
  • Ski & snowboard rentals. ...
  • Baby equipment rentals. ...
  • Canoe & kayak rentals.
6 May 2019

How much profit should you make on a rental property? ›

The 1% Rule

This is a quick and easy tool to help investors evaluate the potential of a property. The 1% rule says that the amount grossed through monthly rent should be at least 1% of the final property purchase price.

Which is the best rental business? ›

Most Profitable Rental Business Ideas in 2022
  • Air conditioning renting business.
  • Apartment renting business.
  • Houseboat rental.
  • Car rental business.
  • Furniture leasing and renting for babies.
  • Coffee machine renting.
  • Conference and hotel room booking.
  • Renting on office equipment.
27 May 2022

Is rent to rent a good business? ›

There's no question that 'rent to rent' is a risky business model, but many landlords are drawn to its promises of easy money and hassle-free letting. Rent-to-rent continues to be popular among landlords, especially in London.

How do rental properties get you rich? ›

The most popular way is to buy an investment property and slowly build up your portfolio. Generally, there are two primary ways to make money from real estate assets — appreciation, which is an increase in property value over a period of time, and rental income collected by renting out the property to tenants.

How much profit do most landlords make? ›

Landlords Have an Average Income of $97,000 a Year

While landlords might bring in cash from several sources, their income levels tend to be solid.

What is the 2% rule in real estate? ›

The 2% rule states that the monthly rent for an investment property should be equal to or no less than 2% of the purchase price. Here's an example of the 2% rule for a home with the purchase price of $150,000: $150,000 x 0.02 = $3,000.

What are the most rented things? ›

So, without further ado, let's get stuck into what the most rented items of 2022 have been so far!
  • Bikes. ...
  • Party equipment and inflatables. ...
  • Camping and hiking equipment. ...
  • Tools and Construction Equipment. ...
  • Suits and Wedding Dresses. ...
  • Water sports equipment. ...
  • Winter sports equipment. ...
  • Toys and baby equipment.
27 Jul 2021

What tools get rented the most? ›

The construction industry is on the rise, making now a great time to open an industrial tool rental business.
...
The Most Rented Construction Equipment
  1. Scaffolding Rental. ...
  2. Forklift Rental. ...
  3. Trencher Rental. ...
  4. Lift Rental. ...
  5. Scissor Lift Rental. ...
  6. Auger Rental. ...
  7. Mini-Excavator Rental. ...
  8. Excavator Rental.
26 Jan 2022

What are start up costs for a rental? ›

Common start-up expenses for landlords include: minor or incidental repairs to get a rental property ready to rent. outside office expenses paid for before a rental business begins, such as office rent, telephone service, utilities, office supplies, and office equipment rental. home office expenses.

Do you pay tax on rental income or profit? ›

As a landlord, you pay tax on your net rental income, which means your total income minus any allowable expenses. HMRC will view multiple properties as one business and work out your tax bill accordingly.

Is it more profitable to rent or flip? ›

For short-term investors hoping to make money quickly, flipping and renting is probably the better option. However, if you need a regular income and have more time and money to invest, you could consider buying a rental property.

Is renting property a good investment? ›

Investing in rental property is one of the safest ways to invest in 2022 thanks to numerous factors. It combines a consistent cash flow of monthly rental income with a continuously rising capital appreciation.

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