Free Rental Property Business Plan Template (PDF, PPT)

0:00 many people approach owning rental 0:01 properties as a hobby or side business 0:04 and to a certain extent the concept is 0:06 pretty simple 0:07 you buy low you collect rent eventually 0:10 you sell 0:11 or some people actually don’t even plan 0:13 to sell they just plan to 0:15 buy and hold forever the issue is we 0:17 don’t actually live forever 0:19 so what happens when you die what 0:21 happens to your family when they have to 0:23 deal with this rental property that 0:25 you’ve been managing 0:26 if you want to set up your family for 0:27 generational wealth by being successful 0:29 with 0:30 real estate investing then you need to 0:32 start treating your rental properties as 0:34 a business 0:34 that have a business plan that’s why 0:36 today i’m going to talk about the four 0:38 phases of a rental property business 0:40 plan that you need to implement today 0:42 so stick around 0:43 [Music] 0:50 what’s up everybody john stiles here 0:51 with bridge realty helping people like 0:53 you 0:53 buy sell and invest in multi-family 0:56 properties in the twin cities thank you 0:58 so much for checking out this video i 0:59 really appreciate it 1:00 any successful rental property business 1:02 will have a 1:04 business plan now of course not 1:05 everybody treats the rental properties 1:07 as a business 1:08 but it is a best practice if you want to 1:11 experience the best results 1:12 a rental property business plan 1:14 typically has four phases Acquisition 1:17 phase one is acquisition there’s 1:19 actually a lot that goes 1:21 into this between marketing for deals 1:23 building relationships with brokers 1:25 establishing rapport with investors 1:27 getting qualified for your loan 1:30 underwriting deals and making offers it 1:32 can be a 1:33 long journey to actually acquire your 1:35 investment property 1:36 especially in today’s environment where 1:38 buying multi-family properties has 1:40 become 1:40 so popular to set yourself up for 1:42 success in this 1:43 phase you want to clearly define what 1:45 you’re looking for what neighborhoods 1:47 are you interested in 1:48 what asset class are you looking for 1:50 what property class are you looking for 1:52 what returns are you looking for what 1:54 type of client are you going to be 1:56 serving there are all sorts of 1:57 categories to define so that when you 1:59 see a good deal 2:00 you’ll know it sometimes achieving your 2:01 desired returns means you’re looking for 2:04 a distressed asset maybe it’s got really 2:06 low occupancy 2:08 maybe it’s got really high expenses 2:10 maybe it’s been mismanaged 2:12 and things are out of control with the 2:14 tenants there if you find a deal like 2:16 this 2:17 that can be a great way to solve those 2:19 problems and create a ton of value in 2:21 the process 2:22 now that seems to be the type of deal 2:24 that everyone is looking for so they can 2:26 be hard to find 2:27 instead you could buy a property that’s 2:29 already stabilized 2:30 and skip over phase 2 which i’m going to 2:32 talk about in a moment 2:33 if you buy a property that’s basically 2:35 plug and play it can be a lot easier to 2:37 manage 2:38 but you might expect lower returns 2:40 because of the high performance that the 2:42 property is already achieving 2:44 this might mean you need to plan for a 2:46 longer hold time 2:47 which is fine because with real estate 2:49 you’re gonna buy and hold Stabilization 2:51 phase two of the business plan is 2:54 stabilization 2:55 this is where a ton of value can be 2:57 created by forcing the value of the 2:59 property up 3:00 to get the property to its full 3:01 potential you’ll be making 3:03 improvements to the interiors the 3:05 exteriors the common areas and the yard 3:07 spaces 3:08 these might be simple cosmetic updates 3:11 or they very well can be major 3:13 renovations and remodels 3:15 the goal here is to show pride in 3:18 ownership so that you 3:19 attract residents that are proud to live 3:23 in this property this phase takes a 3:25 certain skill set of managing 3:27 contractors 3:28 managing subcontractors managing budgets 3:31 and managing timelines you definitely 3:34 don’t want to make this 3:35 process drag out for too long because 3:38 often 3:38 you’ll have vacant units and that means 3:41 you don’t have 3:41 revenue coming in for those units now 3:44 you should have plenty of reserves so 3:46 you can get by this period 3:47 of renovations but you don’t want it to 3:50 drag on too 3:51 long you also need to be able to balance 3:53 making high quality improvements without 3:55 over improving the property you need to 3:57 be familiar with the neighborhood 3:58 and what your clients are going to 4:00 expect in terms of finishes and 4:02 amenities Normal Operation 4:04 phase 3 of your rental property business 4:06 plan is normal operation 4:08 and this is when your property is 4:09 considered stabilized there aren’t 4:11 any major renovations going on and your 4:14 focus is more on 4:15 managing the ongoing operations of your 4:18 rental property your goal here is to 4:20 maintain the property and provide 4:22 great customer service to your residents 4:24 you want to make sure that you have 4:25 efficient management systems so that 4:28 things aren’t getting overlooked 4:29 and you’re not overpaying for routine 4:32 expenses you also need to plan for 4:34 expected 4:34 capital improvements because everything 4:37 in the property has a certain life cycle 4:39 from the roof the boiler 4:42 the windows they all are going to break 4:45 down eventually so you need to plan and 4:47 budget for these 4:48 upcoming improvements later on down the 4:50 road you want to prevent your property 4:52 from becoming distressed or dilapidated 4:54 otherwise you’re going to be the one 4:56 selling your property under market value 4:58 phase 3 is often where people fall 5:00 asleep at the wheel they’ve done the 5:01 heavy lifting 5:02 previously and now they think they’re 5:04 just going to coast 5:05 into retirement but you have to remember 5:08 that things naturally break down 5:10 you have to pay close attention to 5:12 what’s going on in your property 5:14 with the residence and with the 5:16 condition of the property 5:17 otherwise it’s going to spiral out of 5:19 control and you’re not going to be able 5:21 to attract the type of residents that 5:23 you want to have 5:24 at your property by paying close 5:26 attention to your property 5:27 and addressing concerns right when they 5:29 come up you’ll be able to provide 5:31 great customer service to your residents 5:33 and increase 5:34 tenant retention this is going to reduce 5:37 your turnover costs 5:39 and increase your net operating income 5:42 and since multi-family properties are 5:45 largely valued 5:46 based on net operating income and cap 5:49 rates 5:50 this is gonna highly improve your 5:53 property value 5:54 now i’ll get into cap rates and property 5:57 valuations 5:58 in another video but this is something 6:00 that’s really important to pay attention 6:02 to 6:02 the other thing that you need to pay 6:03 attention to in this phase 6:05 is making sure that your rents are 6:07 continually optimized 6:09 many owners don’t raise rents on their 6:11 tenants because they don’t want to risk 6:12 having a turnover 6:14 however this can result in a drastic 6:16 difference between your rents 6:18 and the market rents and this can play a 6:20 big role 6:21 in your valuation of the property when 6:24 you decide to sell Selling Disposition 6:26 the fourth phase of a rental property 6:28 business plan 6:29 is selling or disposition and if you 6:32 want to achieve the highest price 6:33 possible 6:34 then you need to make sure you paid 6:36 close attention during phases one 6:37 two and three it’s a good idea to work 6:40 with an experienced 6:41 real estate professional throughout all 6:43 of the phases of owning the rental 6:44 property 6:45 so that when you get to phase four 6:47 you’re not surprised by things that you 6:49 missed during one two and three 6:51 i’ve seen a lot of property owners who 6:53 have to delay their sale for months 6:55 because they have deferred maintenance 6:57 the rents are under market 6:59 and the property just hasn’t been 7:00 managed to its fullest potential 7:02 oftentimes it’s life circumstances that 7:05 have 7:05 changed that initiate a sale of a 7:08 property 7:08 maybe you’re ready for retirement maybe 7:10 you need to devote your time 7:12 energy and money to other places in your 7:14 life that’s why it’s so important to pay 7:16 attention 7:17 in phase three of normal management so 7:19 that when you decide you’re ready to 7:21 sell 7:21 you don’t have to delay another 7:23 consideration is where we are 7:25 at in the market cycle you see sometimes 7:27 the market favors sellers 7:29 and sometimes the market favors buyers 7:31 unfortunately it’s 7:32 really difficult to time the market 7:34 correctly and that’s why you should pay 7:36 more attention to optimizing your 7:38 management systems 7:39 and getting your property ready for sale 7:41 at all times 7:43 rather than trying to watch the market 7:45 and see if the market is going to 7:47 influence 7:48 your sale so those are the four major 7:50 phases of a successful 7:52 rental property business plan if you 7:54 thought i missed anything or wanted to 7:55 add to any of this be sure to use the 7:57 comment section below 7:59 and i’ll be happy to continue the 8:00 discussion there if you want to see 8:02 more videos about business mindset and 8:05 investing in multi-family real estate be 8:08 sure to subscribe to my youtube channel 8:10 real estate styles and hit that bell so 8:12 you’ll get notified when the next video 8:14 comes out 8:15 and remember your reality is your 8:18 decision 8:19 so let’s get out there and make it 8:24 happen 8:27 [Music] 8:35 you