How to Create a Property Business Plan for Your Investment

What Is a Property Business Plan and What Does it Consist of? 

Before you make any decisions, let’s quickly explain what a property investment business plan consists of, and why you should spend the time making one. 

Simply put, a rental property business plan outlines what you hope to achieve with your venture. 

It doesn’t have to be a 30-minute PowerPoint presentation or a 1,000-word essay. In fact, the most effective business plans are simple, concise, and easy to commit to memory. 

To make an effective one, there are three central aspects to make an ideal rental business plan. 

You’ll need to think about: 

1. Where you are now – this includes your available finances and how much money you’re willing to spend. 
2. Your goals – think about where you want to get to, which can include an accurate financial goal to help you achieve specific dreams. 
3. Your chosen strategy – by picking the right strategy that aligns with your goals, you’ll be able to bridge the gap between your current situation and your dream after real estate investing. 

We’ll discuss each of these, plus two effective tips, in the following five sections. 

Step 1: Assess Your Starting Point 

Every journey has a start point, and knowing yours will help determine exactly what sort of rental property investment you’re aiming for. 

To complete this step, there are a few questions you need to honestly ask yourself. 

1. How much money do you have to invest? 
2. How much time do you have available to manage your property? 
3. Do you have the needed skills and knowledge to be an effective landlord? 

The first point is likely the most important: Can you afford this investment? 

This includes assessing your available funds, thinking about how much you’re willing to spend, and working out how you will pay for your investment. 

The reality is property can be expensive, surpassing a record high in December 2021 of over £250k on average in the UK, after rising by over 10% in the last 12 months according to Nationwide – the highest growth in 15 years. 

In our blog post, how much money do you need to invest in property, we calculated that you’ll need about £30k as a minimum to buy a property worth £100k, which is on the lower end of the spectrum. 

That’s not to mention the ongoing costs you’ll likely need to contend with, including potential ground rent, property management costs, maintenance costs, and mortgage payments.  

Be sure to speak to a mortgage broker to determine what sort of finances you have available, and ensure you set some money aside (six months wages is recommended) in an emergency fund to help you enter your first property investment with a better sense of financial security. 

With a clear view of your finances in order, you can start accurately assessing opportunities on the property market and start fleshing out your rental property business plan. 

Step 2: Think About Your Goals 

Once you know what you’re starting with as an investor in terms of budget and knowledge base, the next step of your property business plan should look at your goals. 

Setting goals is an essential part of any property journey as it allows you to outline the reasons why you’re investing and paint a clear picture of what you hope to achieve. 

It goes without saying that the main reason that a lot of people invest is to make money, but it’s important to look a little deeper than that for your investment property business plan. 

When creating a property business plan, the most common investment goals are as follows: 

• Saving an attractive retirement fund. 
• Saving money for life events. 
• Increasing disposable income and passive income for financial freedom. 

But while having these goals in mind is important, the best way to develop your rental property business plan is to put actual numbers behind each goal. 

Instead of saying, “I want to have more money each month to fund my lifestyle” you should assess deeper and put a number behind this – let’s say £5k a month. 

By doing this, you can accurately assess your local housing market and start building your property portfolio to see what real estate will effectively contribute to this figure. 

You also should think about when you want to achieve your goals, which can have a huge impact on the type of property you choose. 

Let’s go over two example properties. 

1. A purpose-built student apartment in the city centre that is generating 10% annual returns through rental income, but won’t grow too much in value. 
2. A family home on the outskirts of a city that generates a 5% NET positive cash flow and has huge potential for further capital growth. 

In these scenarios, someone hoping to increase their monthly rental income over the next three years would be more suited to the first. 

However, those real estate investing for retirement funds would likely want to take the risk and wait for a long period to enjoy a huge cash payout on the family home. 

Aside from the money you will have generated, think about your personal goals. 

Do you want to be a skilled property professional who manages their rentals with a hands-on strategy and takes on landlords duties on a number of properties? Or do you want to own a portfolio of properties with a hands-off strategy, working with a rental/letting management company that takes care of all of the day to day duties? 

If you have another career that you think will dominate a lot of your time and attention in the foreseeable future, your personal goals may be more fitted to an investment property business plan that allows you to juggle both your career and your investments. 

Step 3: Create Your Strategy 

Step three of your property venture journey is likely going to be your most important and is often the main factor that separates the most successful investors from the biggest failures. 

For most people’s goals, one property simply won’t be enough, with the average UK rental income valued at £1,060 per calendar month according to the HomeLet rental index. 

This is why it’s a smart idea to come up with a strategy to fulfil your long-term ambitions to flesh out your property portfolio. 

You can do this in several ways. 

1. You can save up your rent and reinvest the profit into a new real estate venture. 
2. You can buy properties with lower property prices, at auction or off-plan, to increase your purchasing power.  
3. You can flip houses, which means buying properties at a lower market value, adding value, and then quickly re-selling to boost your available cash.  

By having a clear vision like this, you will avoid getting stuck in an investment that doesn’t further your goals and can instead focus your time and money on making a good investment. 

Choosing a strategy can also involve specifically deciding what type of property you want to invest in. 

When it comes to real estate and creating a buy to let business plan, there are several different strategies you can consider in your investment decisions – each being differently suited to your skillset and investment goals.  

These can include: 

1. Residential buy to let – the most standard form of buy to let that involves buying a flat or house and renting to a tenant. This type of property usually offers the best blend of cash flow and capital growth potential. 
2. Purpose-built student accommodation – Another popular type of investment property that consists of buying a property and renting solely to student tenants. PBSA offers lower property prices and comparatively higher rent prices than traditional buy to let but has less capital growth potential. 
3. HMOs – a house of multiple occupancies is rented out to multiple tenants, increasing potential cash flow and ROI. However, HMOs can be complex, with a tonne of legislation in place that beginner investors may find intimidating. 
4. Commercial buy to let – involves the purchasing of an office block or retail space and renting to a company. Commercial properties have longer lease lengths than traditional buy to let, but can be much harder for investors looking to secure financing from buy to let mortgages. 

If you want to learn more about your options for choosing a rental property, be sure to check out our top 10 list of the best property investment strategies in 2022.  

Along with the investment strategy itself, you should also think about your exit strategy. 

An exit strategy outlines how and when you plan to exit your investment, which with a property business plan, will mean selling the property. 

Again, your investment goals will play a part in this decision. If you hope to generate as much money as possible for retirement, your exit strategy should look at selling the property sometime before you retire. 

Spend some time researching exit strategies to better incorporate this into your buy to sell or buy to let business plan. 

Step 4: Action Your Buy to Let Business Plan With a To-Do List 

Now that you’ve got a business model in place and have nailed the planning process, it’s time to action your business plan. 

But where to start? While it might seem daunting for many investors to action their solid plan, the best tip possible is to break down your goals into small actionable individual tasks. 

Although your overall goal may be to, say, earn £5,000 a month, you’ll need a series of achievable sub-goals in place before you can reach your golden number. 

These sub-goals could be anywhere from securing your first property within three months from now, finding tenants, or simply securing a mortgage broker. 

By setting out these goals, you’ll have a much clearer financial plan and vision for your rental property business.  

The best way to achieve these goals is to create a to-do list of every task you need to do, both one-off and recurring tasks. You should break some of these tasks into even smaller tasks, so you constantly feel like you’re making progress. 

For instance, let’s say you decide that you want to buy a city centre apartment for your first investment.  

You should firstly allocate the amount of time you want to do this each day, and break down your time into individual websites. 

As an example, your tasks could be: 

1. Search Rightmove for 20 minutes 
2. Search Zoopla for 20 minutes 
3. Search RWinvest for 20 minutes 
4. Bookmark/favourite any properties that catch your eye. 
5. Contact the estate agents/ sales agents to learn more about the properties. 

With this, you’ve got a clear pathway, know exactly what you’re going to do, and can tick off each task as it’s completed. Soon enough, you will find the perfect rental property for you and will be well underway to create the dream property business. 

It’s also important to address that not every task needs to be completed by you. In fact, while you could certainly achieve every aspect of property investment as an individual, if you don’t have the skillset, it would be a mistake to not outsource or reach out to others for help. 

For example, if you have a full-time job or don’t have the necessary skills to fulfil your landlord responsibilities, you could hire a property manager. By doing this, a property manager will handle all day-to-day duties and can find tenants on your behalf. 

Step 5: Choose the Right Location for Your Target Tenant 

The next step in creating an ideal real estate investment group business plan is to decide on what location you’re investing in. 

While many landlords fall into the trap of buying a property that’s close to where they live, this could be a mistake, with the UK rental market notorious for having huge regional variations. 

These regional variations can impact every aspect of a property venture, with variations in the rent price you can charge, the purchase price of the property, rental demand, and capital growth. 

You’ll want to target the best area possible and consider rental properties with the highest chance of attracting your target tenants. 

For starters, let’s discuss how to evaluate if an area is worth an investment. You can do this in a few ways. 

1. Research the average property price in the area – You can do this using sites like Zoopla, Rightmove, or the UK House Price Index. 
2. Research the average rent in an area – This will be a good indicator of how much you can expect to charge, and you can find this on sites like Zoopla and the HomeLet rental index. 
3. Look at past house price growth as an indicator of future growth potential – You can find this on the UK House Price Index, which shows average house prices every month, all the way back to 1968. 
4. Think of tenant demand – This is a harder measure to find, but a good indicator is looking at how many rental properties there are in an area and the population, with lots of young people a good indicator of a strong rental market. 
5. Familiarise yourself with future capital growth potential – You can achieve this by looking at the latest market predictions from experts like Savills or JLL. 

Based on these criteria, the current best locations for rental property include Liverpool, Manchester, Birmingham, Leeds, and Luton. You can learn more by checking out our top 10 list of the best places to invest in property. 

If you live away from any of these areas but still want the benefits involved with starting a rental business there, you can always hire a property management company to fulfil all your landlord responsibilities. 

Here at RWinvest, we have helped a huge amount of foreign investors that look to invest in areas like Liverpool and Manchester. 

Remember, though, that you should avoid buying too many similar properties in one area, no matter how attractive it seems. This is because if a local property market tanks, you don’t want all your eggs in one basket.  

To avoid this, it’s a smart idea to diversify your portfolio. You can do this by buying a mixture of student properties and residential properties, and buying them in different areas like Liverpool or Manchester. 

Thinking of Your Tenant 

While picking the right location is an important step in your rental property business plan, it’s not enough to guarantee a successful investment. For this, you’ll need to think about what your tenant wants from their home and pick a property that aligns with these wishes. 

This is true whether you’re buying single-family homes or a city centre apartment targeting young professionals. 

Covid-19 and the resulting lockdowns have changed a lot of tenant priorities, with research from Benham and Reeves finding that high-speed WiFi, outside space, and proximity to outside green space is now the top three demands from tenants. 

This is significantly different to previous rankings, which saw nearby transport links, fast broadband, and onsite security as the prior top three. 

While it’s a good idea to have a property that offers all tenant priorities, it’s essential you provide the top three desires to maximise your success potential.  

Step 6: Consider Forming a Limited Company 

The final step in your rental business plan is to decide if you’re going to form a limited company.  

Forming a buy to let company has become incredibly popular over the last few years, with 2021 breaking the record for the number of new companies set up by buy to let landlords. 

This is for a good reason, too, with limited companies allowing some investors to save thousands on taxes by paying corporation tax instead of income tax and having access to more mortgage interest relief. 

However, there are several downsides to starting a limited company, which includes being taxed for taking money out of the company, no capital gains tax allowance, and difficulties securing a buy to let mortgage. 

While forming limited companies isn’t usually beneficial for those only owning a single property, investors looking to build a property empire could see far higher profits from forming one. 

You can learn more about this by reading our full guide on buying property through a limited company. 

Conclusion 

We hope you’ve enjoyed this article about how to write a rental property business plan. 

In summary, an effective plan is simple, has a clear intent, and is broken down into smaller tasks. 

You can create a property business plan in just six steps. 

• Assess your starting point 
• Think about your goals 
• Create your strategy 
• Action your buy to let business plan with a to-do list 
• Choose the right location for your target tenant 
• Consider forming a limited company