How to Create a Property Business Plan for Your Investment

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 over £285k in March 2023, which was £11,000 higher than in 2022.

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 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 £1,199 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 it 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 2024.

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.

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 who are looking 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 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.

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