There will always be a property rental market, as people require temporary accommodation for a host of reasons; it might be a work relocation, studying for a BA or even a long holiday. The fact of the matter is that rental accommodation is always going to be in high demand and in this article, we take an in-depth look at the property rental sector in terms of business and investments.
Real estate acquisition
Buying real estate with a view to rentals is an essential step to setting up a business; most would acquire rundown properties and renovate, which is typically the cheapest way to bring a property onto the market. If you are looking to buy a rundown house and renovate, there are auctions where you can bid on properties that require renovation.
Property insurance
You will need investment property insurance in order to protect your assets, which is part and parcel of minimising risks to the business. All company assets should be insured and with online property insurance providers, you can choose from a number of packages.
Forge an alliance with an established builder
You will need to form a working relationship with a local builder, who will be used to bring the property up to scratch and building maintenance is also a must. End-of-tenancy work is another essential aspect of rental properties and your relationship with a reliable builder is essential.
Registering the business
Consult with a business lawyer to prepare a business registration package and start the registration process with the Australian federal government. Much like any business, you have to maintain your accounts and pay your taxes and you should hire a bookkeeper/accountant at the very outset.
Property management company
Most rental property businesses partner up with an established property rental management company, which can provide many essential services.
A property management company can handle the following:
- Sourcing and screening potential clients
- Generating rental agreements
- Building repairs and maintenance
- Rent collection & transfer
- Tenant mediation/communication
- Legal advice & representation
- Property security
As your business grows and develops, your property management partner becomes more crucial, taking the strain from you and ensuring that all is well with tenants. An established property management company is very valuable to a rental property business, as their services are designed to assist such a business by handling many, if not all, of the processes.
24/7 legal hotline
One of the major advantages to using a property rental management company is that you can access legal experts whenever you have any tenant issues. Regardless of the time of day, you can consult with a legal professional, which is something you should do prior to responding to any complaint/enquiry from a tenant.
Write a business plan
Much like any business, a rental property company needs a firm plan of action; a good business plan would contain the following:
- Overview of the business
- Startup and running costs
- Marketing plan
- List of company assets
- Organisation flowchart
- 1-5 year projections
Your business plan should be your guideline to success and without one, your chances of success are greatly reduced.
Taxation
Of course, every business has to pay tax and by hiring an experienced tax consultant, you can minimize the amount of tax you pay. Hire a reliable bookkeeper at the very outset and they can record all transactions and ensure that you don’t pay more tax than you should.
Location is everything
Rental property is all about location; if you want the highest rents, you need to acquire property in the right locations. Sydney and Melbourne suburbs are prime areas, where working professionals wish to reside and the best way to acquire such properties is to attend auctions where banks sell repossessed houses.
House division
It can be very profitable to divide a house into 2 or maybe 3 apartments and while this would be a costly renovation project, you can charge top rentals. Of course, each separate apartment needs to have its own access and there are many regulations regarding fire and safety that you have to comply with. If you find a suitable property rental, you can do a feasibility study to calculate cost over income, and if the figures look good, buy the property and arrange for the building work to begin.
To conclude, establishing a Property rental business can be a very profitable venture, and you can certainly create a large business empire with the right preparations in place. A comprehensive business plan is essential to get you started and as long as you have access to the necessary funds and a firm plan in place, your property rental business should go from strength to strength.
