business plan for buying commercial property

Business plan

Introduction to buying commercial real estate property for your business

January 30, 2024 | 5 minute read

Commercial real estate may be one of the best investments you ever make. Whether you’ve successfully built your small business from the ground up or you’re just starting out, a question you need to answer may surface eventually: Should you purchase property for your business? Purchasing commercial property can be very complex, even for insider pros. It’s not the same as buying a home. It takes time, research and planning.

Owning commercial property is also a decision that must be weighed very carefully, and each scenario is different for every business. In the right circumstances, it can be a wise investment, and the potential rewards can be great. In this article, we’ll highlight the possible benefits of buying commercial property, offer purchasing tips and suggest ways you can make it work for you and your small business.

Purchasing property for your business can be a good idea. When it comes to commercial real estate, the word “commercial” applies to any property that you use to grow or support your business. This can be anything from manufacturing facilities, general purpose offices or buildings, medical offices and more. With that in mind, there are many reasons to consider making such an investment. It’s a chance to build equity, make your expenses more predictable and possibly gain tax advantages. You may even realize a cost savings versus renting, depending on your current lease agreement and operational expenses.

Here are more reasons to consider purchasing commercial property:

Fixed rates

Enjoy the peace of mind of knowing what your costs will be month to month with a fixed-rate loan; there is no exposure to payment fluctuations like when market rents increase.

The costs involved in owning and running your business space can result in favorable capital gains treatment and expense deductions like mortgage interest, property taxes and more. Consult with your accountant or tax advisor before you decide to buy.

Total control

When you own, you call the shots. You have direct control of your investment, as well as any potential tenants or uses of the building. Think it’s time to renovate? Go ahead.

You have the freedom to customize and tailor your business as needed, which can really be a plus as your business evolves.

Public exposure

Show off your brand and establish the personality and culture of your business for all to see. Maintaining, customizing and improving the quality of the property helps represent your business and promotes strength and stability.

Tips for purchasing commercial real estate

Although there is no tried-and-true formula or one-size-fits-all strategy to buying commercial real estate, there are common guidelines that any small business owner can use to get started. Before you begin, you should be clear about your objectives and know what you want.

Ask yourself the right questions:

• What kind of property are you looking for?
• Is it for your own business? To rent out? To build equity?
• What area would be ideal?

Find the property that fits your business

Here are some things to think about when deciding where to buy:

This is the number one issue in purchasing commercial real estate. Where you set up shop can make all the difference, whether you want to be close to your customers; need access to rail, highway or shipping lanes; or other factors.

Legal considerations

From commercial office space to industrial warehouses, make sure local zoning allows for the type of business you’re bringing.

Physical condition

Have a thorough inspection done of the property and find out beforehand about potential environment or liability issues, such as asbestos or lead paint.

Limitations

Be familiar with all zoning laws or building codes because there may be conditions in place on whether you can make changes to the outside or inside.

Parking and easements

Make sure you have enough parking space, as well as up-to-date, disability access. Also review the property’s easement to local roads.

Flexibility

If you’re planning to grow your business, look for property that you can expand. Also consider the opposite scenario: If you don’t end up using all the space, can it be rented out?

Assemble a team of experts

Surround yourself with specialists who are experts in areas outside of your expertise.

Commercial broker

Consult a real estate broker to help you locate potential properties in your price range.

Bring in an expert who will advise you on what your business can afford, navigate you through tax benefits and forecast your operating budget.

Make the process easier on yourself with a legal representative to negotiate and complete the entire transaction.

Ways to make commercial real estate work for you

There are many ways your small business can benefit from owning commercial property, including:

Investment potential

Owning is an investment that can increase in value over time. Typically, and depending on the location, commercial properties could return between 6% and 12% each year. That’s much higher than the average 1% to 4% experienced with single-family residential properties.

Explore other income streams

Cross advertise with local or neighboring businesses, where it makes sense. Offer services to tenants. Make additional services available to purchase for those renting from you, such as premium parking spaces, trash removal and maintenance services.

Owning commercial real estate can really pay off

As a small business owner, the upside to owning commercial property can be very enticing. You become your own landlord and it can also boost your visibility to patrons and fellow business owners.

With the right amount of due diligence and research, buying commercial real estate can be a wise investment — and fertile ground for the growth and success of your small business.

The Small Business Community is now Small Business Resources .

• How To Purchase Commercial Property (RentPrep Guide)
• Real Estate

by Kristi Mergenhagen

February 14, 2023

Buying a business property for your business or investment needs is a complex process. In either case, finding a property that fits and fulfills your needs requires the coordination of many moving parts. It can be overwhelming when you don’t yet know how to buy commercial properties.

There are also substantial potential profits in buying commercial properties. On average, returns are higher than in residential real estate. Buying a business property might be the next investment opportunity that you’ve been looking for.

But how do you buy a commercial property for the first time? Today, learn with RentPrep about purchasing a commercial property, commercial investing, and more.

A Table Of Contents On Purchasing Commercial Property

Ready for returns that you can’t dream of with a residential property? It’s time to decide if commercial investing could be more up your lane. Start with the basics: learn how to purchase a commercial property with us today:

Types Of Properties

#1: business development, investing, and more: why are you buying, #2: how will you fund the purchase, #3: who will help you, #4: what do the numbers look like, #5: what type of deal will you offer.

• #6: Keep Learning!

How do I know more about commercial property investing?

How can i calculate the value of potential commercial deals, what is underwriting in commercial real estate, buying a business property: start your next steps now, what is considered commercial real estate.

Commercial real estate (CRE) is a large and varied industry. It includes spaces used for business purposes and properties such as office space and industrial buildings.

Apartment buildings that contain more than four units are also considered commercial properties. Keep in mind that the lease between the unit owner and the unit tenant will still be a residential lease , while the lease between the property owner and the building owner will be a commercial agreement.

There are five main types of commercial properties on the market today:

• Multifamily residential properties (i.e., apartment buildings, duplexes)
• Office spaces (i.e., high rises, medical offices)
• Retail spaces (i.e., stores, services)
• Industrial properties (i.e., warehouses, packing facilities)
• Hospitality properties (i.e., hotels, short-term rentals)

You can invest in multiple types of commercial properties or focus on a single type..

How To Buy Commercial Properties: A Step-By-Step Guide

Now that you know more about commercial properties and what qualifies as commercial, it’s time to get into buying commercial real estate. This type of real estate investing is confusing for the inexperienced, so don’t get overwhelmed if you don’t know much yet. We’re here to help.

Why are you getting into commercial real estate? Why do you want to buy a commercial property? What are your investment goals in this sector?

Bank of America data show that commercial properties more than double the average returns on residential property investments. This motivates many to get into commercial real estate, but there needs to be more to your business plan.

It’s essential to develop your business ideas before you buy any property. Knowing your goals upfront helps you make better decisions throughout the buying process. Before moving forward, take time to determine, research, and develop your ideas.

There are several types of commercial property investment used by investors and landlords:

• Land banking: purchasing land to tie money to a fixed asset
• Development: purchasing raw land to develop and grow value
• Flip: purchasing property, renovating it, and reselling or renting for a profit
• Wholesaling: purchasing property at below-market value to sell to a buyer
• BRRRR: buying, rehabbing, renting, refinancing, and repeating
• Passive investing: investing in real estate through more active investors
• Owner-occupied: purchasing a multi-unit commercial property and utilizing some of the space for your business

Investors often start by purchasing commercial property for personal use. The purchased property is used to run their business and becomes owner-occupied. Owning this property starts building equity as you plan future purchases, and you can utilize specific tax advantages in the process. You can begin renting those out while continuing to use the building if it has multiple units.

Investors often start their commercial property business with this type of project because it sets them up for future success as they gain experience.

Next, determine what lender you will use for your property purchase. Compare lenders as you work to secure financing. You’ll need to ensure you have a good credit score to secure a reasonable rate, and you’ll want to carefully read over terms on fees and penalties with all lenders.

The most popular loan types used by commercial investors are:

• Permanent loans
• Bridge loans
• Hard money loans

To secure business loans, you will need to provide a variety of documentation that covers your financial background and assets on hand, and touches on your plans for the property. These plans show the pros and cons of the investment so the lender can fully grasp any risks they are taking in the process.

Unlike residential investment, which can sometimes be managed as a solo entrepreneur, most commercial investors have a team they work with. Finding people who can help you accomplish your goals is essential even if these relationships are not contractual.

The types of individuals who will be essential to finding success as a commercial investor and landlord include:

• Real estate agent, preferably one with a degree in business or finance
• Attorney familiar with contract law and commercial leases
• Accountant well-versed in commercial account management
• Mortgage broker with good lender connections
• Reliable contractor specializing in commercial properties
• Property manager to assist with management, rent collection, and other essentials tasks

Analyzing every property that you consider investing in is essential. The numbers matter and you need to see the property value through those numbers.

As you research industry trends in your area, zoning laws, property design, growth trends, and more, you will become more familiar with what success in the commercial rental field looks like.

Every property needs to be evaluated and compared to similar properties. A commercial contract should accompany you to analyze the property and the cost of any necessary repair work. Whether you are building from scratch or improving, having these figures will help you make better investment choices .

Consider the cost of investment, potential income, number of units, the ratio of growth to cost, and industry trends when running the number of potential investment properties.

Making an offer on your first commercial property will be stressful, and that’s okay! Practice makes perfect on this front, and all you can do is try. Working with an experienced attorney, broker, and real estate agent will help the process go smoothly.

To offer to purchase a property, you typically write a letter of intent and provide specific terms through a purchase and sale agreement. Once your team reviews your copy, it will be submitted to the seller. After negotiation and readjustment, the seller may accept and finalize the sale.

#6: Keep Learning

No matter how you approach buying commercial properties, it’s vital to keep educating yourself. Stay up-to-date on the latest industry news, guides for landlords like you, and other exciting investment information with our newsletter and resources at RentPrep .

We’ve created these resources to educate the community and facilitate the spread of valuable information for landlords. The rental industry is an ever-evolving market, and we know it can be hard to keep up. With our resources and your ingenuity, you’ll be able to stay on top of your game and manage exponential growth.

How To Buy Commercial Properties FAQs

While our above guide covers many key points of buying a commercial property, there’s always more to learn. Here are answers to some of the most frequently asked questions:

The best way to learn anything is through experience, but that’s not to say that you should jump straight into commercial investing without knowing anything about it. You’re already on the right track by reading this complete guide, which gives you an ideal outline of the process of buying commercial property.

Keep researching, utilizing the following types of resources to ensure you find the most important information:

• Listen to real estate investment podcasts
• Read real estate books written by successful investors
• Watch YouTube videos about commercial investing
• Meet other investors, online or in your area, and discuss the work
• Find investor groups
• Try working at an investment group to familiarize yourself with the process

These are just some of the easiest ways to access more information about commercial investing and what it looks like. Once you feel confident that you have an excellent foundational knowledge of the commercial industry, moving forward with viewing properties, underwriting deals, and then actually purchasing a property is the best way to keep learning.

Remember, if you have a good team consisting of a broker, agent, attorney, and accountant on your side, they’ll be able to keep you on the right path as you proceed with your first few deals. Every deal will make you more skilled, which will be the path to generating expertise in the commercial rental industry.

Calculating the value of a commercial property is a massive part of finding success in this type of investing. It’s also one of the most challenging things to do, and many investors spend years working on discovering the correct equation for their investment preferences.

Many investors find or develop a spreadsheet where they can input specific data (such as the property value and predicted rent) to determine if it makes sense as an investment. By inputting particular numbers in this living document, you can quickly discover if a property is worth considering.

It’s also helpful to have a quick and easy formula to evaluate potential properties on the fly. Again, this should be a personalized formula for your financial needs and profit preferences. Some investors compare the asking price per square foot to the potential rental price per square foot.

Underwriters are financial industry professionals who analyze your financial assets to determine whether or not they’re willing to take on the risk of giving you a loan.

Practicing underwriting will help you to determine whether or not an investment makes sense. Underwriting for commercial properties involves reviewing property pros and cons, which allows investors to decide if properties are worth the risk even before a lender does.

If you know your investment criteria, taking time to underwrite deals regularly will help you figure out what types of properties are suitable investments to maintain your preferred profit margins.

Even if you’re feeling unsure at first, you now have the information to consider buying a commercial property and becoming a commercial investor.

While it might take some time to get to the actual purchase point, you can get going right now:

• Read more about each type of commercial investment property and strategy to determine what style suits your investment interests.
• Contact your future team. Meet attorneys, agents, property managers, bankers, and other individuals that will be essential to your process.
• Study underwriting, investment strategy, and your local commercial market.

Starting with these three steps will ensure you know what is necessary to make intelligent decisions from day one of buying commercial properties. As your information bank grows, you’ll be ready to purchase sooner than you might imagine.

How to Write a Real Estate Business Plan + Example Templates

Elon Glucklich

7 min. read

Updated February 7, 2024

Free Download:  Sample Real Estate Business Plan Template

Owning property – it’s one of the cornerstones of the global economy. And with real estate accounting for roughly $3.7 trillion worldwide, it’s no wonder so many people get into the real estate business.

But the real estate industry is constantly evolving, with new technologies and market trends shaping the way people buy, sell and manage properties. Whether you’re looking to start a home buying and selling business, a commercial real estate investment firm, a property management company or real estate investment trust, you need a well-thought-out business plan that not only outlines the steps to create a comprehensive and effective business structure, but also accounts for real estate’s unique challenges and opportunities.

A real estate business plan shares many similarities with a standard business plan. Here on Bplans, we’ve got a great guide already on how to write a traditional business plan .

In this article, we’ll outline the key points to consider when creating a comprehensive and effective business plan for your real estate business. You can also download our free real estate business plan template .

• Understand licensing requirements

Your business plan will certainly include a company description – this is where you’ll outline your business, including its legal structure, management team and more.

What’s your area of expertise?

Go into detail describing the area or areas of the real estate market you plan to operate in: residential sales, commercial leasing, property management, or more niche markets like luxury real estate or vacation rentals. Your business may want to mix two or more of these segments.

Once you’ve identified your niche, you’ll need to obtain any necessary licenses and permits. This process can be time-consuming and complex, so it’s best to research the requirements ahead of time and create a plan to ensure you’re compliant with all regulations. License and permit requirements vary by state and locality, so be sure to check with your local government to ensure you have all the necessary paperwork filed.

• Get a good team

Depending on the market segment or segments you’re targeting for your real estate business, you’ll need to identify the team members that will help you get your business off the ground.

Brokers, contractors, legal and financial advice

If your plan calls for purchasing properties, you’ll need a team of real estate agents or brokers. Document how they will help you find and acquire real estate, as well as how they can assist with marketing and selling properties once they’re in your portfolio.

You will also want to document how contractors and inspectors will help you assess the condition of properties you are considering purchasing, and provide estimates for repairs or renovations. 

Real estate markets are rife with legal hurdles, so you will want an experienced real estate attorney to help you navigate these issues. Document how you will be able to draft contracts and review lease agreements, and the guidance you will receive on zoning laws and regulations

Finally, an accountant can help you manage your finances, including bookkeeping, taxes, and financial planning. They can also advise you on the best business structure for your company.

• Plan for visibility in a crowded space

With so much competition, it’s essential to develop and document a strategic marketing plan for promoting your real estate services.

Your marketing plan should detail the channels and tactics you’ll deploy to reach your target audience and convert them into clients. Identify the most effective marketing channels to reach your target audience, such as social media, email marketing, search engine optimization (SEO), and content marketing.

Embrace online lead generation

These days, a vast majority of prospective buyers start their search online when looking for properties. So you’ll want to detail how you will optimize your web presence. You can also outline a content marketing plan that will position your company as an expert in the areas your target markets are interested in. These could include topical blog posts, articles, social media posts, videos and other content types to engage potential clients and showcase your expertise. All of these will make it easier for clients to find you.

Document your entire sales process

Of course, there will be plenty of in-person work to do, too.

With long sales lead times, you will also want to describe your sales process and how you will meet sales targets. This should include prospecting methods, lead generation techniques, and follow-up strategies. Establish a client relationship management (CRM) system to manage leads, schedule client consultations, property showings, offer negotiations and contract signings so you can demonstrate that you will be able to manage and transactions effectively.

• Show how you will stay ahead of the market

Demonstrating in your business plan that you have conducted a thorough market analysis is crucial. To conduct an effective market analysis for your business plan, you should investigate the current state of the real estate market in your target area, including property prices, sales volumes and inventory levels. You will also want to examine the competitive landscape in your target area by analyzing other real estate businesses offering similar services.

Understand your customers’ needs

Next, determine the economic conditions and needs of the specific customer segments you want to serve, whether they’re first-time homebuyers, luxury property investors or commercial property renters. The more you understand how your target audience feels about the real estate market in your area, the better you will be able to tailor your services.

You will also need to show your knowledge of external factors like mortgage rates, and local, state and federal government regulations that may impact the real estate market. These factors all contribute to market volatility, so showing how you will manage market shifts and adjust your strategies will better position you to mitigate potential risks by identifying them in your business plan and documenting contingency plans.

• Create a financial plan to secure funds

It’s hard to operate a successful real estate business without access to capital. And you can’t expect to receive any – whether through a bank loan or investment – without a detailed analysis of your financial projections and funding requirements.

Think long-term

A 3-5 year financial forecast will demonstrate that you have a long-term vision for your business. Be sure to base your financials on market research and up-to-date industry data. You may also want to consider different scenarios, like best-case, worst-case and most likely outcomes to account for potential fluctuations in the market.

The forecasts should include: profit and loss statements, which illustrate your business’s revenue, expenses, and net profit or loss over a specific period; cash flow projections, which help you determine your business’s ability to generate positive cash flow; and balance sheets, which provide a snapshot of your business’s financial health, including its assets and liabilities.

Speak the language of investors

If you are writing your business requires specifically to secure outside funding, you should clearly specify the purpose and amount needed in this section. Describe how the funds will be used, whether for purchasing property, hiring staff or launching a marketing campaign. And detail the type of funding you are seeking, whether it’s a loan, equity investment or a combination. Include information on your desired terms, repayment schedule and any collateral you can provide.

Above all, be transparent about your funding needs and show potential investors or lenders how their investment will contribute to your business’s success and generate a return on investment.

• Real estate business plan templates and examples

Because of the intense competition, changing market conditions and startup funding needed, it’s important to write a comprehensive business plan if you’re considering starting a business in the real estate industry. Taking the time to plan out your business before getting started will minimize your risk and maximize your potential for financial success. To help get you started, download our free home real estate business plan template . You can download this document in Word form and use it as a foundation for your own business plan.

In addition to these resources, you may want to brush up on how to write specific sections of a traditional business plan. If so, take a look at our step-by-step guide on how to write a business plan .

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Elon is a marketing specialist at Palo Alto Software, working with consultants, accountants, business instructors and others who use LivePlan at scale. He has a bachelor's degree in journalism and an MBA from the University of Oregon.

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7 Steps to Writing a Real Estate Business Plan (+ Template)

As a licensed real estate agent in Florida, Jodie built a successful real estate business by combining her real estate knowledge, copywriting, and digital marketing expertise. See full bio

• Do Agents Really Need a Business Plan?
• Write a Real Estate Business Plan in 7 Easy Steps
• Identify Who You Are as a Real Estate Agent
• Analyze Your Real Estate Market
• Identify Your Ideal Client
• Conduct a SWOT Analysis
• Establish Your SMART Goals
• Create Your Financial Plan
• Track Your Progress & Adjust as Needed
• Bringing It All Together

Are you ready to take your business to the next level? I’ve got just the thing to help you— a foolproof real estate business plan. But before you start thinking, “Ugh, not a boring business plan for real estate,” hear me out. I’ve got a template that’ll make the process a breeze. Plus, I’ll walk you through seven easy steps to craft a plan to put you ahead of the game and have you achieve your wildest real estate dreams in no time. Your success story starts now.

Key Takeaways:

• A well-crafted business plan is your roadmap to success. It guides your decisions and keeps you focused on your goals.
• Create a solid plan by defining your mission, vision, and values, analyzing your market and ideal client, conducting a SWOT analysis, setting SMART goals, and creating a financial plan.
• Regularly track your progress, review your key performance indicators (KPIs), stay flexible, and seek accountability to ensure long-term success.
• Remember, your Realtor business plan should evolve with your business. Embrace change and stay focused on your goals to make your real estate dreams a reality.

Do Agents Really Need a Real Estate Business Plan?

Absolutely. Your real estate agent business plan is your roadmap to success. Without it, you risk losing direction and focus in your real estate career.

A well-crafted business plan helps you:

• Understand your current position in the market
• Set clear and achievable goals
• Create a roadmap for success
• Track your progress and performance
• Make informed decisions and adjustments

Think of your real estate business planning as your GPS, guiding you from your current situation to your desired destination. It serves as your North Star, keeping you focused and on track, even in challenging times. Invest the time to create a solid business plan, and you’ll be well-positioned to succeed in your market and achieve your goals. Your future self will appreciate the effort you put in now.

Before we dive into this section, get our real estate business plan template ( click here to go back up to grab it ) and work through it as I explain each section. I’ll give you some direction on each element to help you craft your own business plan.

1. Identify Who You Are as a Real Estate Agent

Let’s start with your “why.” Understanding your purpose for choosing real estate is crucial because it is the foundation for your business plan and guides your decision-making process. Defining your mission, vision, and values will help you stay focused and motivated as you navigate your real estate career.

Mission: Your mission statement defines your purpose for choosing real estate. It clearly states what you’re trying to do, the problem you want to solve, and the difference you want to make.

Ex: Wanda Sellfast’s mission is to empower first-time homebuyers in Sunnyvale, California, to achieve their dream of homeownership and build long-term wealth through real estate.

Vision: Your vision statement focuses on the ultimate outcome you want to achieve for your clients and community.

Ex: Wanda Sellfast’s vision is a Sunnyvale, where everyone has the opportunity to own a home and build a stable, secure future, creating a more inclusive and prosperous community for all.

Values: Your core values are the guiding principles that shape your behavior, decisions, and interactions with clients and colleagues.

Ex: Wanda Sellfast’s core values include:

• Integrity: Being honest, transparent, and ethical in all dealings.
• Dedication: Being devoted to clients’ success and going the extra mile.
• Community: Building strong, vibrant communities and giving back.

Clearly defining your mission, vision, and values lays the foundation for a strong and purposeful real estate business that will help you positively impact your clients’ lives and your community.

2. Analyze Your Real Estate Market

As a real estate pro, you must deeply understand your local market. This knowledge includes knowing key metrics such as average days on market, average price points, common home styles and sizes, and demographic trends. When someone asks about the market, you should be able to confidently roll those numbers off your tongue without hesitation.

To quickly become the local expert, choosing specific farm areas to focus on is crucial. Concentrate your marketing efforts and build your local knowledge in a handful of communities and neighborhoods.

Some places to do research include:

• Your local MLS: Check your hot sheet daily
• Zillow: Check out the Premier Agents who show up in your neighborhood
• Social media: Who is targeting their posts to your area?
• Direct mail: Check your mailbox for flyers and postcards
• Drive by: Drive through your farm areas to see who has signs in yards

Once you’ve identified your target areas, start conducting comparative market analyses (CMAs) to familiarize yourself with the properties and trends in those neighborhoods. That way, you’ll provide accurate insights to your clients and make informed decisions in your business.

Remember to research your competition. Understand what other agents working in the same area are doing, who they’re targeting, and identify any gaps in their services. This understanding will help you differentiate yourself from your competition and better serve your clients’ needs. In our real estate business planning template, I ask you to examine and record:

• Trends: Track key metrics, such as days on market and average sold prices, to stay informed about your specific market.
• Market opportunities: Identify situations where there are more buyers and sellers (or vice versa) in the marketplace so you can better advise your clients and find opportunities for them and your business.
• Market saturation: Recognize areas where there may be an oversupply of certain property types or price points, allowing you to adjust your strategy accordingly.
• Local competition: Analyze your competitors’ strengths, weaknesses, and gaps in their services to identify opportunities for differentiation and possibilities to create a more meaningful impact.

Remember, real estate is hyper-local. While national and state news can provide some context, your primary focus should be on specific needs and trends within your target areas and the clients you want to serve. By thoroughly analyzing your local real estate market, you’ll be well-equipped to make informed decisions, provide valuable insights to your clients, and ultimately build a successful and thriving business.

3. Identify Your Ideal Client

When creating your real estate business plan, it’s crucial to identify your ideal client. You can’t be everything to everyone, no matter how much you think you should. And trust me, you certainly don’t want to work with every single person who needs real estate advice. By focusing on your ideal client, you’ll create a targeted marketing message that effectively attracts the right people to your business—those you want to work with. 

Think of your target market as a broad group of people who might be interested in your services, while your ideal client is a specific person you are best suited to work with within that group. To create a detailed profile of your ideal client, ask yourself questions like:

• What age range do they fall into?
• What’s their family situation?
• What’s their income level and profession?
• What are their hobbies and interests?
• What motivates them to buy or sell a home?
• What are their biggest fears or concerns about the real estate process?

Answering these questions will help you create a clear picture of your ideal client, making it easier to tailor your marketing messages and services to meet their needs. Consider using this ideal client worksheet , which guides you through the process of creating a detailed client avatar. This will ensure you don’t miss any important aspects of their profile, and you can refer back to it as you develop your marketing plan .

By incorporating your ideal client into your overall business plan, you’ll be better equipped to make informed decisions about your marketing efforts, service offerings, and growth strategies. This clarity will help you build stronger relationships with your clients, stand out from the competition, and ultimately achieve your real estate business goals.

4. Conduct a SWOT Analysis

If you want to crush it in this business, you’ve got to think like an entrepreneur. One of the best tools in your arsenal is a SWOT analysis. It sounds ominous, but don’t worry, it’s actually pretty simple. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It’s all about taking a good, hard look at yourself and your business.

By conducting a SWOT analysis as part of your real estate business plan, you’ll have a clear picture of your current situation and your future goals. And don’t just do it once and forget about it—review and update it regularly to stay on top of your game.

5. Establish Your SMART Goals

If you want to make it big in real estate, setting goals is an absolute must . But not just any goals— I’m talking about SMART goals . SMART stands for Specific , Measurable , Achievable, Relevant , and Time-bound . It’s like a recipe for success, ensuring your goals are clear, realistic, and have a deadline.

Your SMART goals are an integral part of your overall business plan for real estate. They should be stepping stones to help you achieve your long-term vision and mission. So, analyze your SWOT analysis, ideal client, and market, and craft goals that will help you dominate your niche.

Example Smart Goal: Close 10 transactions in the next quarter.

Make sure to provide as many details as possible behind your goals. Don’t just say, “I want to sell more houses.” That’s too vague. In the example above, the goal is specific: “close 10 transactions.”

If you can’t measure your progress, how will you know if you’re crushing it or falling behind? Ensure your goals have numbers attached to track your success or see where you need to focus more energy. “Close 10 transactions” has a specific number, so you have a way to measure your progress.

I know you’ve got big dreams for your real estate business , but Rome wasn’t built in a day. Set goals that stretch you beyond your comfort zone but are still achievable. This way, you’ll gain confidence, build momentum, and push yourself to new heights. Closing 10 transactions in a quarter is a lofty goal, but it’s still achievable. Your goals should stretch you but still be within your reach.

Relevant goals are the ones that actually move the needle for your business. Sure, becoming the next TikTok sensation might be a lot of fun, but unless TikTok generates most of your clients, it won’t help you close more deals. Your goals should be laser-focused on the activities and milestones that will help you grow your real estate career. In the example above, the goal is specifically related to real estate. 

Deadlines are your friend. Without a timeline, your goals are just wishes. Give yourself a precise end date and work backward to create a plan of action. In the example, the deadline for achieving the goal is the end of the current quarter. If you don’t achieve the goal, you can evaluate where the shortfall was and reset for the next quarter.

“Setting goals is the first step in turning the invisible into the visible.”

Tony Robbins

Remember, just like your SWOT analysis, your goals aren’t set in stone. Review and adjust them regularly to stay on track and adapt to business and market changes.

6. Create Your Financial Plan

Financial planning might not be your idea of a good time, but this is where your real estate business plan really comes together. Thanks to all the research and strategizing you’ve done, most of the heavy lifting is already done. Now, it’s just a matter of plugging in the numbers and ensuring everything adds up.

In this real estate business plan template section, you’ll want to account for all your operating expenses. That means everything from your marketing budget to your lead generation costs. Don’t forget about the little things (like printer ink, file folders, thank you cards, etc.)—they might seem small, but they can add up quickly. Some typical expenses to consider include:

• Marketing and advertising (business cards, website , social media ads )
• Lead generation ( online leads , referral fees, networking events )
• Office supplies and equipment (computer, printer, software subscriptions )
• Transportation (gas, car maintenance, parking)
• Professional development (training, courses, conferences )
• Dues and memberships (MLS fees, association dues)
• Insurance (errors and omissions, general liability)
• Taxes and licenses (business licenses, self-employment taxes)

Once you’ve figured out your expenses, it’s time to reverse-engineer the numbers and determine how many deals you need to close each month to cover your costs. If you’re just starting out and don’t have a track record to go off of, no worries! This planning period allows you to set a budget and create a roadmap for success.

Pro tip: Keep your personal and business finances separate. Never dip into your personal cash for business expenses. Not only will it make tax time a nightmare, but it’s way too easy to blow your budget without even realizing it.

If you’re evaluating your starting assets and realizing they don’t quite match your startup costs, don’t panic. This new insight is just a sign that you must return to the drawing board and tweak your strategy until the numbers line up. It might take some trial and error, but getting your financial plan right from the start is worth it.

7. Track Your Progress & Adjust as Needed

You’ve worked hard and created a killer real estate business plan, and you’re ready to take on the world. But remember, your business plan isn’t a one-and-done deal. It’s a living, breathing document that needs to evolve as your business grows and changes. That’s why it’s so important to track your progress and make adjustments along the way. 

Here are a few key things to keep in mind:

• Set regular check-ins: Schedule dedicated time to review your progress and see how you’re doing against your goals, whether weekly, monthly, or quarterly.
• Keep an eye on your KPIs: Your key performance indicators (KPIs) are the metrics that matter most to your business. Things like lead generation, conversion rates, and average sales price can give you a clear picture of your performance.
• Celebrate your wins: When you hit a milestone or crush a goal, take a moment to celebrate. Acknowledging your successes will keep you motivated and energized.
• Don’t be afraid to pivot: If something isn’t working, change course. Your real estate business plan should be flexible enough to accommodate new opportunities and shifting market conditions.
• Stay accountable: Find an accountability partner, join a mastermind group, or work with a coach to help you stay on track and overcome obstacles.

“It’s the small wins on the long journey that we need in order to keep our confidence, joy, and motivation alive.”

Brendon Burchard

Remember, your real estate business plan is your roadmap to success. But even the best-laid plans need to be adjusted from time to time. By tracking your progress, staying flexible, and keeping your eye on the prize, you’ll be well on your way to building the real estate business of your dreams.

How do I start a real estate business plan?

Use this step-by-step guide and the downloadable real estate business plan template to map your business goals, finances, and mission. Identify your ideal client so you can target your marketing strategy. Once you’ve completed all the business plan elements, put them into action and watch your real estate business grow.

Is starting a real estate business profitable?

In the most simple terms, absolutely yes! Real estate can be an extremely profitable business if it’s run properly. But you need to have a roadmap to follow to keep track of your spending vs income. It’s easy to lose track of expenses and overextend yourself when you don’t have a set plan.

How do I jump-start my real estate business?

One of the easiest ways to jump-start any business is to set clear goals for yourself. Use this guide and the downloadable template to ensure you have clear, concise, trackable goals to keep you on track.

How do I organize my real estate business?

Start by setting some SMART goals to give yourself a concrete idea of what you see as success. Then, make sure you’re using the right tools—customer relationship manager (CRM), website, digital document signing, digital forms, etc., and make sure you have them easily accessible. Try keeping most of your business running from inside your CRM. It’s much easier to keep everything organized if everything is in one place.

Now, you have a step-by-step guide to creating a real estate business plan that will take your career to the next level. Taking the extra time to map your path to success is an essential step in helping you achieve your goals. Spend the extra time—it’s worth it. Now, it’s time to do the work and make it happen. You’ve got this!

Have you created your real estate business plan? Did I miss any crucial steps? Let me know in the comments!

As a licensed real estate agent in Florida, Jodie built a successful real estate business by combining her real estate knowledge, copywriting, and digital marketing expertise.

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Buying a Commercial Real Estate Property For Beginners: Step-by-Step Guide

Commercial real estate has the potential to be an excellent investment, often more so than residential properties. Yet even if you’re an experienced real estate investor, it’s crucial to understand that the process of buying a commercial property isn’t the same as buying a house to live in. 

In this article, we’ll look at why you should consider buying commercial real estate, financing options available to you, and how to buy it.

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What Is Commercial Real Estate Property?

Any property or real estate that is used for business purposes is considered commercial real estate. This includes:

• Office space
• Industrial manufacturing property
• Storage space
• Housing and apartment rentals
• Retail units

Benefits of Investing in Commercial Property

Before you purchase a commercial property, it helps to know the pros and cons of this type of investment. 

Real estate investing brings the opportunity to realize a profit over time, but also brings risk, as any investment does.

If you’ve been leasing property for your business, you may find it more affordable to purchase it, since your monthly mortgage payments may be less than rent.

Types of Commercial Property

If you want to invest in commercial real estate, it helps to understand the different types of commercial properties. For example, commercial properties may include:

• Apartment buildings
• Office buildings
• Retail buildings
• Multifamily apartments
• Shopping centers
• Industrial buildings
• Mixed-use buildings

Finding The Right Commercial Property For Your Business

Determining what kind of commercial building or commercial land your business needs means asking yourself a few questions:

• Where do I want to buy? Location is one of the most important aspects of commercial real estate. Where the property is located will determine what kind of foot traffic you get, which employees you can hire or tenants you can lease to, what taxes you’ll pay, and what local and state laws you’ll need to follow. It will also help determine the resale value of the property if you’re looking to invest. You’ll also want to consider local zoning laws, which may restrict what kind of business you can legally operate in the area. 
• How much space do I need? Square footage is a concern for all types of real estate. The size of your property will depend on what type  of business you’re running. For instance, a manufacturing company will need room for equipment and warehouse space, while a software company may just want office space. If you’re looking to own a property to rent to tenants, the size of the space will determine how many tenants you can lease to. 
• How much can I afford to spend? Cost is a big part of real estate. Your ability to either pay in cash or qualify for commercial real estate loans will ultimately determine how much you can afford.

How to Buy Commercial Property

Now let’s go deeper into those steps to buying commercial properties.

1. Understand your motivations for investing in commercial real estate

Why do you want to invest in commercial real estate? It’s an important question to ask yourself before you start hunting for properties.

Do you want an apartment or office building that you can rent out to many tenants to help reduce the risk of non-payment? Are you searching for a property you can use, at least in part, for your own business?

Perhaps you’d like a larger property with the potential to appreciate and build equity over time. Maybe you’re looking to take advantage of tax benefits or scale your investment portfolio.

Whatever your motivation, it’s helpful to identify your “why” before you invest. Knowing why you want to purchase commercial property can help guide you as you search for the right investment opportunity.

2. Assess your investment options

Looking at the list of types of commercial property above and determine which best fits your needs. Will you be running your own business out of the property or having other tenants only?

3. Look at the real estate market

The real estate market goes up and down, so it can be a good idea to pay attention to it long before you are ready to buy. Paying attention to the ebbs and flows of the market could help you set yourself up for the opportunity to take advantage of a great price in a down market.

4. Secure financing

Before you find a commercial property you wish to buy, it’s wise to line up your financing options in advance. Step one to securing commercial real estate financing (and other types of business financing as well) is to check your credit.

Depending upon your lender and the type of loan you apply for, your business credit scores and reports could come into play. Some lenders may check your personal credit too.

You should review your credit and make sure that the information contained in your reports is accurate. You can check your personal and business credit scores for free when you set up an account with Nav.

Once you verify that your credit information is accurate (you can dispute errors if you find them), take an honest look at the type of financing you might qualify for now. Depending on your credit, the type of property, and other factors, you might consider the financing options we discuss later in this article.

• Apartment Loans (Fannie Mae, Freddie Mac, and FHA)
• Bank Balance Sheet Loans
• Commercial Real Estate Loans
• Small business Loans
• Hard Money Loans
• Seller Financing

Be sure to compare interest rates, fees, repayment terms, and other factors as you shop for the best financing option available to you. Nav is a great resource for reviewing business financing choices.

5. Partner with the right team

Buying commercial real estate involves a lot of moving parts. In other words, it can be complicated. Even experienced investors know that it’s important to surround themselves with the right team of experts to make sure their investment has the best chance of success. 

Here are some of the experts you may need to make sure your commercial real estate deal goes as smoothly as possible:

• Commercial Realtor
• Commercial real estate attorney
• Commercial real estate broker
• Tax attorney

Before you start shopping for potential properties, it’s wise to have your team already on hand. If you find the right help upfront, you’ll immediately know who to turn to when questions or problems arise. Assembling a team of pros might not be cheap, but it might save you from costly mistakes in the long run.

6. Find the right property in your market

Once you know your “why,” you understand your investment options, you’ve secured financing, and you’ve put together a team of experts, it’s time for the fun part. You’re ready to start shopping for the right property in your market.

Your commercial real estate agent can help you locate commercial or industrial properties that meet your criteria. Pay attention to important factors, like usable square footage and location. However, don’t be distracted by a good deal if it doesn’t satisfy your reason for investing. For example, it doesn’t matter how great an office building looks on paper if you’ve decided you want to add an apartment complex to your investment portfolio.

7. Do your homework

When you finally locate a property you may want to buy, it’s time for some heavy research. Again, your commercial realtor may be able to help you here, but it’s wise to make sure you’re personally doing your due diligence on the property as well.

Remember, you can never have too much information about a property you’re thinking about buying. Some questions you may want to ask or research include the following.

• What has the property been used for in the past? (Do you plan to continue using it for the same purpose?)
• If you wish to use the property for a different business purpose, is it appropriately zoned to support your plan? 
• Can you request a change in zoning, if needed? 
• How much income or rent does the property currently earn on an annual basis?
• Will the owner show you the rent rolls? Can you confirm that the units listed on the rent rolls currently have the tenants reported? 
• What are the property taxes? 
• Is the building in need of significant repairs now, or will it need repairs soon? 
• Is the property located in a desirable area? (Ideally, you should look for locations that have less than 5% vacancy if you want to command higher rents and enjoy potentially high appreciation rates.) 
• Does the deal make sense for your investment portfolio?

Buying a commercial property is quite different from purchasing residential real estate. Making a bad investment could be far more costly. If you’re new to the world of real estate investment, a wise place to begin is studying resources and real estate investment books from other successful investors. 

8. Make an offer and close the deal

When you find a property you want to purchase, it’s time to make an offer. Your commercial real estate agent will generally help you write up your offer to purchase, but it’s wise to have your attorney review it for good measure before you sign and submit it. Be prepared for the seller to ask for earnest money (potentially 1% of the purchase price, though sometimes more or less) when you go under contract.

Above all, make sure your offer has a due diligence period with an escape hatch if certain things go wrong (like zoning issues or the property failing to pass inspection). The technical term for this escape hatch is known as a contingency clause.

During your due diligence period, your lender may require an American Land Title Association survey (aka an ALTA) as a condition of closing. An ALTA survey can give you valuable information about the property, including boundary lines and the location of improvements, utility lines, and easements (if applicable). 

If all goes well with your ALTA survey and the rest of your due diligence, you can continue to move forward toward closing. Your commercial realtor and real estate attorney should be able to guide you through the many complex steps involved in this process. Again, it’s crucial to set up a reliable team of experts you can count on in advance, long before you draw near the closing table.

When to Consider Buying Commercial Property

Business owners who have been leasing office space might consider purchasing a commercial space to reduce what they pay each month. Alternatively, you could purchase a commercial building so that you have your office space but can also earn income through renting out the rest.

What Happens to Commercial Real Estate in a Recession?

​​When looking to purchase a commercial investment property, it is important to be able to determine what happens to commercial real estate in a recession to make an educated decision regarding the most you are willing to pay without jeopardizing your financial stability. In the United States, a recession can last anywhere from eight months to a year and a half on average, and it occurs around once every six years. 

At about the seven-month mark, the number of foreclosures reaches its highest point, making this a great opportunity to buy.

Is Now a Good Time to Invest in Commercial Property?

According to many experts, now is a great time to invest in commercial properties. The steady flow of revenue that is provided by rentals is among the most significant advantages of owning commercial real estate. Investments in commercial real estate can provide a steady, passive income since they are often secured by leases. This income can be counted on regardless of the market cycle.

2023 Trends in Commercial Real Estate Property Loans

Here are some commercial real estate property loan trends for 2023:

• Digital or online lenders are becoming more widely used
• Financial software development companies are using the blockchain technology
• Application Programming Interface (API) has been incorporated into applications to link banking servers
• Biometrics through fingerprinting and face recognition have become primary ways for identity verification 

Financing Options for Commercial Real Estate

As promised, we’ll now cover loan options you have to pay for your commercial real estate purchase.

Apartment loans

If you’re looking to purchase an apartment building, there are a few apartment loan programs to consider, as they specialize in multifamily occupancy properties. These include Fannie Mae, Freddie Mac, and FHA.

Commercial real estate loans

There are commercial real estate loans specifically for this purpose. Because they are secured by the property you are buying, they may have lower interest rates than other types of loans.

Small Business Loans

Also consider small business loans from a bank, credit union, or online lender. You’ll need good to excellent credit to qualify for a loan from a bank, though there are some online lenders like Smartbiz that may have less strict requirements to qualify.

Hard money loans

If you don’t qualify for any of the above, explore hard money loans . Rather than the money being lent by a bank or other financial institution, these loans come from individuals, who may not have the same stringent criteria to qualify. Be aware: interest and fees may be higher.

Seller financing

If the seller is open to it, you can work directly with them to finance the property. This might look like you paying a monthly fee until the property cost is paid off.

Buying Commercial Real Estate — More Questions to Ask

Before you make a commercial real estate purchase, it’s important to gather the right information. To accomplish this goal, you need to learn the right questions to ask. 

We’ve already covered a few questions you should ask above. However, there are a few more critical questions we haven’t discussed yet.  

What are the different types of commercial real estate (and why does the difference matter)?

Commercial real estate is defined as a property that’s used solely for business purposes. In addition to the different types of commercial properties listed above (e.g., apartment complexes, office buildings, retail space, etc.), there are different classes of commercial properties as well.

Office and apartment buildings are often classified as follows: 

• Class A properties are high-quality and generally represent lower risk. They’re often newer, demand higher rent, and tend to require few repairs or renovations (outside of routine maintenance). Class A properties may be managed by a professional property management company and can be easier to resell.
• Class B properties may be older and have lower rents compared with Class A buildings. They may have some deferred maintenance that requires attention as well. Class B properties are usually seen as higher risk and, therefore, might be available for a lower price.
• Class C properties feature the biggest risk for commercial real estate investors. As a result, they can usually be purchased for a much lower investment. They’re often 20+ years old and may be in need of heavy renovation. Class C properties often bring in significantly lower rent than Class A and B properties. 

Other types of commercial properties, such as industrial buildings, hotels, or retail stores, have different designations. Depending on the type of commercial property you intend to buy, it’s important to understand the different building classifications and what they mean for you as an investor. Understanding the difference in commercial real estate classifications can help you better grasp the level of risk involved with a potential investment. 

Why is the owner selling?

Once you find a property you like, it’s important to discover why the owner wants to sell it in the first place. Here are a few common reasons why owners sell their investment properties.

• The market is strong, and the owner thinks he or she can fetch a good price. 
• The owner wants to cash out funds for another investment. 
• There are tax advantages to selling. 
• Rental income has stalled or isn’t performing as hoped. 
• Long-term tenants are ending their lease. 
• The owner has a balloon payment coming due soon. 

The reason an owner wants to sell isn’t necessarily sinister. Nonetheless, knowing why the current owner wants to take the exit ramp could help you when it’s time to negotiate a purchase price. 

Is investing in commercial real estate better than investing in single-family homes? 

Becoming a landlord of single-family homes is a great way to get your feet wet when it comes to real estate investment. But if you want to grow your investment portfolio and potentially boost your cash flow, a larger commercial property may be a good investment.

According to Matt Larson , President of Cricket Realty Advisors, commercial real estate has an average annual return of 6-12% above the purchase price. Larson, writing for Nolo.com, says single-family homes average 1-4% by comparison. Of course, no real estate investment is a sure thing, whether it’s a commercial property or otherwise.

What is a Good Rate of Return on Commercial Real Estate in the Post Pandemic World?

The yearly return on the purchase price of commercial properties is normally between 6% and 12%, depending on the region, the economy, and one of the biggest factors, the pandemic. Currently, a good rate of return on commercial real estate post-pandemic is in the area of 5%.

Important Terms to Learn

The world of real estate is full of terms and acronyms most people don’t come across in their day-to-day lives. As a potential investor, it helps to have a grasp of these terms to guide you. 

Ad Valorem : A form of taxation based on the official valuation of a piece of property. 

Capitalization Rate (Cap Rate) : The rate of return a property generates divided by its total value. It’s calculated using the following formula. 

Cap Rate = Net Operating Income ÷ Appraised Property Value

Cash on Cash : Cash on cash is a measurement that applies to investors who buy real estate with financing. The term describes a property’s annual income over how much cash you actually invested. For example, the amount invested might be equal to the amount of your down payment.

Debt Service Coverage Ratio (DSCR) : A measurement of a property’s annual net operating income compared with its annual debt payments (aka debt service). It’s calculated using the following formula. 

DSCR = Annual Net Operating Income ÷ Total Debt Service

Loan-to-Value (LTV): A measurement of how much money you wish to borrow compared with the total value of the property you want to purchase. The formula for calculating the LTV ratio is as follows.

LTV = Loan Amount ÷ Appraised Property Value

Rentable Square Feet: The total area a tenant occupies from wall to wall, plus a portion of the common areas (e.g., hallways, stairwells, bathrooms, etc.). 

Usable Square Feet : The total area a tenant occupies, not including shared space. 

Vacancy Rate : The percentage of available units in a rental property that are unoccupied. 

Buying Commercial Real Estate FAQs

Is a commercial property a good investment?

A commercial property may be a good investment, but it depends on a number of factors, such as whether or not you can afford to buy the property, what kind of returns you can expect from the property, its location, and more. Overall, commercial real estate investments tend to have a good rate of return, and can be an easier investment than others because they generate passive income.

What type of commercial property is most profitable?

The most profitable commercial property is typically one that allows you to lease to the biggest number of people or tenants. This can include: -Storage facilities -Multifamily housing projects or apartments -Student housing or apartments  -Office space -Warehouse space -Mixed-use facilities

What is the best way to invest in commercial real estate?

The best way to invest in commercial real estate will depend on how much you can afford to spend and what your goals are. If you don’t have the time to spend on research or a lot of money to invest, you may consider real estate investment trusts (REITs), which will find, purchase, and manage commercial properties on your behalf as well as several other investors, which lowers the risk.

How can I invest in commercial real estate with no money?

If you have little or no money to invest in real estate, real estate investment trusts (REITs) may be a good option, because they work as a sort of aggregator, allowing multiple investors to invest in several properties and make money off of dividends.

Final Word: Purchasing Commercial Real Estate

Most real estate entrepreneurs start out small and work their way up to commercial listings as their investment strategy. However, that’s not always the case. Regardless of your past experience, a commercial property might represent a sound investment opportunity, if you take time and learn the ropes first. Nav offers various financial resources that can help you identify which small business loans or business credit cards are best for your business — depending on your business credit scores .

Of course, any investment — commercial real estate included — comes with risk. This risk is magnified if you try to jump into buying a commercial property without a solid plan in place. For this reason, it’s important to consult with professionals, assemble a trustworthy team, and do everything you can to protect your assets in the event of a problem.

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This article was originally written on December 19, 2019 and updated on February 17, 2023.

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Michelle Black

Michelle Lambright Black, Founder of CreditWriter.com and HerCreditMatters.com, is a leading credit expert with over a decade and a half of experience in the credit industry. She’s an expert on credit reporting, credit scoring, identity theft, budgeting, and debt eradication. Michelle is also an experienced personal finance and travel writer. You can connect with Michelle on Twitter (@MichelleLBlack) and Instagram (@CreditWriter).

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3 responses to “ Buying a Commercial Real Estate Property For Beginners: Step-by-Step Guide ”

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Real Estate Investing & Rental Management | How To

How to Write a Real Estate Investment Business Plan (+ Free Template)

Published September 22, 2023

Published Sep 22, 2023

REVIEWED BY: Gina Baker

WRITTEN BY: Jealie Dacanay

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This article is part of a larger series on Investing in Real Estate .

Get the templates and resources you need as a landlord

• 1 Write Your Mission & Vision Statement
• 2 Conduct a SWOT Analysis
• 3 Choose a Real Estate Business Investing Model
• 4 Set Specific & Measurable Goals
• 5 Write a Company Summary
• 6 Determine Your Financial Plan
• 7 Perform a Rental Market Analysis
• 8 Create a Marketing Plan
• 9 Build a Team & Implement Systems
• 10 Have an Exit Strategy
• 11 Bottom Line

A real estate investment business plan is a guide with actionable steps for determining how you’ll operate your real estate investing business. It also indicates how you’ll measure your business’ success. The plan outlines your mission and vision statement, lets you conduct a strengths, weaknesses, opportunities, and threats (SWOT) analysis, and sets goals in place. It’s similar to a business plan for any business, but the objectives are geared toward how you will manage the business, grow your investment, and secure funding.

We’ve created a free real estate investment business plan template for you to download and use as a guide as you read through the article and learn how to write a business plan for real estate investment:

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Free Real Estate Investment Business Plan Template

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1. write your mission & vision statement.

Every real estate investment business plan should begin with a concrete mission statement and vision. A mission statement declares actions and strategies the organization will use—serving as its North Star in achieving its business or investment objectives. A strong mission statement directs a real estate business, keeps teams accountable, inspires customers, and helps you measure success.

Before you compose your mission statement, you need to think about the following questions to do it effectively:

• What exactly is our business? The answer should encompass the essential functions of your real estate organization.
• How are we doing it? The response must explain your real estate goals and methods based on your core principles.
• Who are we doing it for? The response explains who your primary market is.
• What are our guiding principles? The “why” for your real estate company’s existence.

Mission statement example (Source: Oak Tree Capital )

The example above provides the mission statement of Oak Tree Capital. As a real estate investment business, it’s clear what its ultimate business objective is and how it will approach investing with integrity to maximize profit. Essentially, the investment company will drive monetary results—while maintaining its moral principles.

On the other hand, vision statements differ slightly from mission statements. They’re a bit more inspirational and provide some direction for future planning and execution of business investment strategies. Vision statements touch on a company’s desires and purpose beyond day-to-day operational activity. A vision statement outlines what the business desires to be once its mission statement is achieved.

For more mission statement examples, read our 16 Small Business Mission Statement Examples & Why They Inspire article and download our free mission statement template to get started.

If you want to write a vision statement that is truly aspirational and motivating, you should include your significant stakeholders as well as words that describe your products, services, values, initiatives, and goals. It would be best if you also answer the following questions:

• What is the primary goal of your organization?
• What are the key strengths of your business?
• What are the core values of your company?
• How do you aim to change the world as a business?
• What kind of global influence do you want your business to have?
• What needs and wants does your company have?
• How would the world be different if our organization achieved its goals?

In the example below from Aguila Real Estate, it hopes to be the preferred real estate company in its market.

Example of a vision statement (Source: Aguila Real Estate )

To make it easier, download our free template and follow our steps to create a vision statement for your small business. Take a look also at our 12 Inspiring Vision Statement Examples for Small Businesses in 2023 article to better understand how to create an impactful vision statement.

2. Conduct a SWOT Analysis

A SWOT analysis section of your real estate investing business plan template helps identify a business’ strengths, weaknesses, opportunities, and threats. This tool enables real estate investors to identify internal areas of improvement within their business through their strengths and weaknesses.

The opportunities and threats can assist with motivating a team to take actions that keep them ahead of an ever-changing real estate landscape. For a real estate business investor, the SWOT analysis is aimed at helping grow and protect investments over time.

Strengths & Weaknesses

Specifically for real estate investing, strengths and weaknesses correlate with the investment properties’ success and touch on items that will drive investment growth. The strengths can be the property’s location, condition, available amenities, and decreased vacancy. All of these items contribute to the success of a property.

On the contrary, the weaknesses include small unit sizes, excessive expenditures (finances to repair, upgrade, properties to acquire), low rents, and low cap rates. These weaknesses indicate less money is being collected and a lower overall return on investment (ROI). They are all factors that limit cash flow into the business and are internal factors that an investor can change.

See below for an example of strengths and weaknesses that could be included in a SWOT analysis:

Opportunities & Threats

Opportunities and threats are external factors that can affect an investment business. You don’t have control over these items, but you can maneuver your business to take advantage of the opportunities or mitigate any long-term effects of external threats. Opportunities relating to investment properties can be receiving certification with a city as a preferred development or having excess equity.

However, threats to an investment property do not need to be particularly connected to the property itself. They can be factors that affect your overall business. For example, interest rates may be high, which cuts your profits if you obtain a mortgage during that time frame.

An example of possible opportunities and threats for an investment business could be:

After creating your SWOT analysis, an investor can use these factors to develop business goals to support your strengths and opportunities while implementing change to combat the weaknesses and threats you anticipate. It also helps investors prioritize what items need to be addressed to succeed. These factors in a SWOT can change as the business grows, so don’t forget to revisit this portion and continuously reevaluate your SWOT.

3. Choose a Real Estate Business Investing Model

The core of real estate investing is to purchase and sell properties for a profit. How to make that profit is a factor in identifying your investment model. Different investing models are beneficial to an investor at different times.

For example, when interest rates are low, you may consider selling your property altogether. When interest rates are high and it is more difficult for people to obtain a mortgage, you may choose to rent out your properties instead. Sometimes, you must try a few models to see what works best for your business, given your area of expertise.

We’ve identified some investment business models to consider:

• Buy and hold: This strategy mainly involves renting out the property and earning regular rental income. This is also considered the BRRRR method : buy, rehab, rent, refinance, and repeat until you have increased your portfolio.
• Flipping properties : Flipping a property entails purchasing, adding value, and selling it higher than the investment costs. Many investors have a set profitability number they would like to hit but should consider market fluctuations on what they can realistically receive during the sale.
• Owner-occupied: Investors can live in the property while renting out extra units to reduce their housing costs and have rental income coming in simultaneously. This model is best if you own multifamily units, especially duplexes, triplexes, or fourplexes . It’s also a great way to understand the complexities of being a landlord. You can transition your unit to another renter when you want to move.
• Turnkey: Buying a turnkey property is the best option for investors who wish to enter the real estate market without having to deal with renovations or tenant management. It’s a practical way for seasoned investors to diversify their portfolios with fewer time commitments.

Investors don’t have to stick to one model, and they can have a few of these investment models within their portfolio, depending on how much effort they would like to put into each property. Before choosing an investment model, consider which will help you meet your investing goals most efficiently.

Read our Investing in Real Estate: The 14-Tip Guide for Beginners article to learn how real estate investment works and other investing business models. Also, if you’re new to real estate investing and are looking for foundational knowledge to get started or seeking information about the best online courses for real estate investing, look at our The 13 Best Real Estate Investing Courses Online 2023 article.

4. Set Specific & Measurable Goals

The next step to completing a real estate investment business plan for real estate investing is to set SMART goals. SMART is an acronym that stands for specific, measurable, achievable, relevant, and time-bound. Creating goals that contain all of the criteria of SMART goals results in extremely specific goals, provides focus, and sets an investor up for achieving the goals. The process of creating these goals takes some experience and continued practice.

An investor’s goals can consist of small short-term goals and more monumental long-term goals. Whether big or small, ideal goals will propel your business forward. For example, your end goal could be having a specific number of properties in your portfolio or setting a particular return on investment (ROI) you want to achieve annually.

Remember that your SMART goals don’t always have to be property-related just because you’re an investor. They can be goals that help you improve your networking or public speaking skills that can also add to a growing business.

Example of improving goals with SMART in mind:

Begin creating SMART goals with an initial goal. Then, take that initial goal and break it down into the different SMART components. SMART goals leave no room for error or confusion. The specific, measurable, and time-bound criteria identify the exact components for success.

However, the relevant and achievable parts of the goal require a little extra work to identify. The relevancy should align with your company’s mission, and extra research must be performed to ensure the goal is attainable.

Initial goal: Receive a 5% return on investment from the property

Smart goal:

• Specific: I want to achieve a 5% return on the 99 Park Place property.
• Measurable: The goal is to sell it for greater than or equal to $499,000.
• Achievable: The current market value for a two-bedroom in Chicago is selling for $500,000 and growing by 1% yearly.
• Relevant: I aim to meet my overall portfolio returns by 20% annually.
• Time-bound: I want to offload this property in the next three years.

5. Write a Company Summary

The company summary section of a business plan for investors is a high-level overview, giving insight into your business, its services, goals, and mission, and how you differentiate yourself from your competition. Other items that can be included in this overview are business legal structure, business location, and business goals. The company summary is beneficial if you want to involve outside investors or partners in your business.

​​Example company profile from Choueri Real Estate

A company summary is customizable to your target audience. If you’re using this section to recruit high-level executives to your team, center it around business operations and corporate culture. However, if you’re looking to target funding and develop investor relationships for a new project, then you should include investor-specific topics relating to profitability, investment strategy, and company business structure.

Partners and outside investors will want to consider your company’s specific legal business structure to know what types of liabilities are at hand. Legal business structure determines how taxes are charged and paid and what legal entity owns the assets. This information helps determine how the liabilities are separated from personal assets. For example, if a tenant wants to seek legal damages against the landlord and the property is owned by an LLC, personal assets like your personal home will not be at risk.

6. Determine Your Financial Plan

The most essential part of creating a real estate investing business is the financial aspect since much of the business involves purchasing, managing, and selling real estate. To buy real estate initially, you’ll have to determine where funding will come from. Funding can come from your personal assets, a line of credit, or external investors.

A few options are available to real estate investors when obtaining a loan to purchase properties. The lending options available to most real estate investors include the following:

• Mortgage: This is one of the most common means of obtaining financing. A financial institution will provide money based on a borrower’s credit score and ability to repay the loan.
• Federal Housing Authority (FHA) loans : This loan is secured by the FHA to assist with getting you a low down payment or lower closing costs, and sometimes easily obtain credit. There are some restrictions to qualify for this loan—but it could be suitable for newer investors who want to begin investing starting with their primary home.
• Home equity line of credit (HELOC) : If you currently have property, obtain a HELOC by using your current property to secure the line of credit and borrow against the equity in your property. As you repay the loan, your available balance on the line of credit gets replenished.
• Private lenders : These are lenders who are not financial institutions. These individual lenders typically have fewer restrictions than traditional lenders and will lend money to individuals who can grow their investments.
• Hard-money loans : This loan requires a hard asset to be leveraged for money. For example, you can put up the home you want to purchase as the asset for cash upfront, and the hard-money loan will be paid back once the home is sold or other funding is secured. This is great for short-term deals due to quick approval and little upfront money.

After funding is obtained to purchase property, financial projections help investors understand their financial standing. These projections can tell you potential income, profits, and when you may need additional funding in the future. Similar to lending options, these calculations are specific to your investing model. If you’re not planning to rent out the property, then calculations like gross rent multiplier are not applicable.

For more information on what is needed to obtain financing, read our articles Investment Property Financing & Requirements and 5 Best Crowdfunding Sites for Investors 2023 .

Additional Investment Calculations

In a rental property business plan, it’s important to use a rental property calculator to determine a property’s potential return on investment. The calculator considers various factors, such as purchase price, operating expenses, monthly income, or vacancy rates, to determine whether a property is a good investment.

Click on the tabs below for the other important calculations all investors should be aware of when purchasing and managing rental properties :

• Gross Operating Income
• Gross Rent Multiplier
• Vacancy Rate

The gross operating income (GOI) calculates the amount of rent and income received from a property minus any vacancy. It doesn’t take into account other expenses. It tells an investor how much income they’ll make after some assumed losses with vacancy.

GOI = Total rent + Other income – Vacancy losses

The capitalization (cap) rate calculates the return on investment (ROI) of a property. This equation is used to compare the return of one building to another. The higher the cap rate, the better since the purchase price is low.

Cap Rate = Net operating income / Purchase price

The gross rent multiplier (GRM) is a factor that helps determine a property’s potential profitability. It can be used to compare perspective buildings to determine which one is the better deal.

GRM = Property price / Gross annual income

The vacancy rate calculates the vacancy percentage of all your investment properties during a specific period. Percentage helps an investor determine how their property performs given current market conditions. If you have a high vacancy rate, you must determine the cause. Perhaps your asking rents are too high for the current housing market.

Vacancy Rate Formula = # of Vacant Units x 100 / Total # of Units

Cash flow is the movement of money in and out of your business, also known as net operating income. In an ideal scenario, investors will bring in more income than expenses, thus showing profit and a positive cash flow. Positive cash flow allows investors to decide how to use that profit. They can invest it in growing their portfolio or increasing their cash reserves for unexpected expenses.

Cash Flow = Gross rental income – Total expenses

Investors can use their current cash flow to forecast future cash flows, which will give you an idea of how much profit you will see over a specific period. Use past cash flow information to determine if there are any trends. For example, during the summer, your water expenses increase, or possibly every few months, you see an increase in property repairs. Consider these trends when estimating future cash flows and compare actual numbers to determine if your forecasting is accurate.

Use the template below to forecast future cash flow for six months and determine how much cash flow reserves you will have:

Cash Flow Template

💡 Quick tip:

In addition to the template, investing in property management software like TenantCloud will set you up for success. The free plan from TenantCloud will help you list apartments, collect rent payments, and screen applicants to maximize profits and minimize vacancies.

7. Perform a Rental Market Analysis

While determining what properties to purchase, investors should perform a rental market analysis (RMA) to gauge the investment potential of a rental property. The RMA consists of running comparables against current units on the market and collecting data that may affect your rental rate to understand if the rental property in question is a solid long-term investment. The analysis helps determine the average rental rate and future rent if you want to make any property upgrades.

Investors can use resources like Zillow to pull comparable property information and gather information on unit layout, building amenities, rental concessions offered, or listing prices. Once the information is gathered, the spreadsheet itemizes the average, median, highest, and lowest rent. When such information is available, it also provides an average price per square foot compared to the subject property. With this information, investors can decide whether the subject property is worth the investment.

Read our 10 Best States to Invest in Real Estate (& 5 Worst) in 2023 article to better understand which states yield a positive cash flow, build equity, and have long-term profitability.

8. Create a Marketing Plan

Once you determine which property to invest in, investors should identify a marketing plan to list the vacant units. Some investors offload the marketing and advertising to real estate agents and brokerages, which will also collect a fee for renting out the property. Refer to some of the best real estate marketing materials to get started, or use our free real estate marketing plan template to lay out your objectives and tactics.

A real estate marketing plan should include your goals, budget, target market, competitors, feasible marketing strategies, and unique selling offers. In addition, it’s crucial to balance your strategy and split your potential marketing plans into categories, like print materials, online ads, email, and social media, so that you can be very specific with your goals and metrics.

Here are some of the real estate marketing mediums to include as you set your marketing goals:

• Real estate website and landing pages
• Email marketing
• SMS and text message marketing
• Real estate ads
• Social media marketing
• Print marketing materials
• Real estate signs

Download our marketing plan template by visiting our article Free Real Estate Marketing Plan Template & Strategy Guide .

9. Build a Team & Implement Systems

As a new investor, you may be unable to hire an entire team of employees to help perform research, run analysis, property management , and accounting duties. It is best to have a list of vendors you can rely on to assist you with purchasing, rehabilitating, and buying or selling your investment properties. Find vendors you trust so you can free yourself from having to micromanage them and know they have your best interest and the interest of your investments in mind.

Here are a few people you want to include on your team:

• Contractors
• Electricians
• Property managers
• Accountants

You should also utilize real estate investing apps and property intelligence software like Baselane that relieve you of manually performing daily duties to keep your investments profitable.

Automated rent collection feature (Source: Baselane )

Baselane is an all-in-one solution—from banking to rent collection, bookkeeping, reporting, and analytics. This software will help you efficiently manage your portfolio and eliminate the need for manual tasks. Learn more about how Baselane can make you a better property owner.

Visit Baselane

If you’re looking for more tools to help you get started, improve your portfolio management, and streamline your operations, read our 6 Best Real Estate Software for Investors 2023 article. We listed the six best software tools available for real estate investing based on affordability, customer reviews, features, and support to assist you in finding the best software that suits your needs.

10. Have an Exit Strategy

Since an investor’s money is tied up in the properties they own until they choose to sell, deciding when to sell or liquidate to get access to your money is part of an investor’s overall real estate exit strategy. The exit strategy for a real estate investment business is a plan for when an investor would like to remove themself from a deal or the business altogether. It helps weigh the different scenarios to minimize business risks and maximize the total return on investments.

A few exit strategy examples are:

The factors that an investor should consider when devising an exit strategy are minimizing financial loss, recouping as much of their original investment as possible, and avoiding any unseen fees that will cut into profits like tax consequences. An investor’s plan should always be to grow their original investment, but unforeseen circumstances may occur that will require you to plan on when to cut your losses as well.

Bottom Line

Before launching a successful real estate investment business, you must have an efficient business plan, aligning your strategies with your business objectives. Our real estate investment business plan template can help get you started. These plans act as a roadmap so you can focus on the steps required to grow your business. Business plans evolve, so continuously revisit and improve your strategies. There is no right or wrong way to write a real estate investor business plan as long as it is used to achieve your goals.

About the Author

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Jealie Dacanay

Jealie is a staff writer expert focusing on real estate education, lead generation, marketing, and investing. She has always seen writing as an opportunity to apply her knowledge and express her ideas. Over the years and through her internship at a real estate developer in the Philippines, Camella, she developed and discovered essential skills for producing high-quality online content.

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Buying real estate for your business: 6 essential things to know

Is buying property the next step in your business strategy? Keep these considerations in mind.

Owning commercial property can offer businesses many advantages—staking a claim in a strategic location, hedging against rising rents, or diversifying income and assets. Some leaders also look ahead to post-transition and plan to lease the property to secure an additional income stream.

With any successful business property transaction, however, there are numerous factors to consider. Even the best business real estate strategies can unravel when neighborhoods change, ownership costs (repairs and maintenance) explode, or the real estate market faces turbulence.

Real estate investment property looks different for every business—your reasons for buying may affect your decision. If you do start exploring a business real estate purchase, here are a few fundamentals to keep in mind.

1. Knowing where to start the process

If you’re currently in a lease, making a hasty move may expose you to penalties. It’s important to understand how moving to a new location could affect your revenue stream. Are you in a long-term lease? If so, what are your options for getting out of it?

Instead of breaking your lease agreement, consider subleasing the property to avoid fees for leaving before the rental term is up. Your lease agreement should include a clause stating your right to sublet, but it may require written consent from your landlord or property manager.

Between getting landlord approval, finding and screening prospective tenants, and executing a sublease agreement, this process may take a while. If your lease contains a holdover clause, it might be in your business’s best interest to be in your new office space before your lease ends. A holdover clause allows you to continue occupying the space beyond your lease term at a premium rate, which could negatively impact your operational cash flow or cost structure.

And maybe you don’t have to move at all. Some businesses could have a lease-to-own contract, which gives them the opportunity to purchase the property at the end of the lease. Evaluate your situation carefully to ensure you’re making the best decision for your business.

Tip: Communicating your buying plans to your landlord early may provide more options and help you maintain a positive relationship through the termination of your lease.

2. Evaluating property considerations

While every business has unique needs, common considerations include:

• Does your business rely on high traffic?
• Is your business a destination itself?
• Do customers visit your operating space? Or is most of your business done through e-commerce?
• Do visiting customers typically walk in or schedule appointments?

Tip: Locations with higher traffic tend to have higher prices. If you operate a business that doesn’t rely on traffic, paying a premium for location may be a waste of money.

3. Looking for specific qualities in a space

Here are basic traits that business owners look for in a property:

• Industrial property or warehouse – Ceiling heights, truck or tractor-trailer access, number of bays, floor bearing capacity, proximity to major transportation
• Retail property – Visibility, signage, ease of access, higher foot traffic, complementary and stable local businesses, adequate parking
• Office property – Similar considerations as retail, but with less emphasis on high-traffic location

Tip: A thorough analysis of your business processes and day-to-day needs will help you prioritize the qualities that will help you get the most from your new space.

4. Assembling your team

Navigating the world of commercial real estate and finding the right property can get complicated. As you continue your search, the guidance of knowledgeable advisors can be helpful.

Take real estate attorneys, for example. Retaining real estate counsel early in the process—and well before you execute a purchase contract—puts an expert in your corner who can advise on everything from how the property should be held to how to limit liability exposure. Real estate attorneys can write title insurance policies that protect your investment property, as well as handle funds transfers at the time of purchase.

You’ll need a skilled professional accountant to manage the tax implications of your commercial property investing strategy to make sure you’re maximizing your income stream.

Additionally, you’ll want someone to represent you in the transaction. The commercial real estate agent holding the property listing has a fiduciary responsibility to the seller, not you. They’re not looking out for your best interests, so you’ll want a buyer’s representative who can help broker the best deal for your business. A buyer’s representative can help you find properties that match your criteria, guide you on the merits of each property, and communicate with the seller and their agents on your behalf. They do a lot of the leg work in the transaction, so you have time to focus on your business.

The tax aspect of purchasing commercial property is complex—and tax software or books on tax planning aren’t enough to turn business owners into tax experts. You’ll need a skilled professional accountant to manage the tax implications of your commercial property investing strategy to make sure you’re maximizing your income stream. They can evaluate the financial benefits—and risks—of owning an investment property versus simply leasing office space. Plus, they can also help you understand the financial feasibility of making a purchase.

Lastly, a financial advisor who’s knowledgeable of your business—and the elements of a commercial property purchase—has the resources to assess your capacity for debt to finance the transaction.

Tip: Before starting your journey, find the right team of experts. These advisors can provide valuable guidance and help protect your business throughout this process.

5. Conducting due diligence

If you’ve purchased residential property, your commercial real estate purchase has many similarities. For instance, your contract should have a due diligence period for performing property inspections and examinations. The appraisal report will help determine whether the purchase price is fair, and an environmental report will assess the likelihood that the property has or will have environmental issues. Potential problems uncovered in advance can be considered in your purchase price and negotiation over responsibility for remediation or cleanup.

A property condition report can identify any deferred maintenance or systems deficiencies that need repair. Well-prepared business owners can factor those items into the property price, deduct repair costs from the sales price, or have the seller fix them before the sale is completed.

Tip: Don’t skip due diligence—lenders will require it to secure financing. Even if you’re not financing the transaction, you’ll still want to protect your hard-earned cash and equity from problems down the line.

6. Meeting financing standards

Financing guidelines vary by type of real estate purchased but generally require:

• A loan-to-cost ratio often up to 80%
• A debt-service coverage ratio often of at least 1.25
• A history of successful business operations

Personal loan guarantees supported by good personal credit for the owner

Tip: As you prepare to secure financing, verify that your business credit scores and reports are accurate and dispute any errors.

The decision to own or lease property depends on your business situation. By considering certain factors and working with a team of experts, you can make the right choice for your business.

Are you ready to buy?

Talk with your Truist relationship manager about how we can help finance your real estate purchase .

Related resources

Understanding How to Buy Commercial Real Estate

How to Buy Commercial Real Estate in 7 Steps

Buying commercial real estate is very different from buying a home , even if you plan on that home is going to be an investment property. There are things to consider before you move forward towards making an offer on a commercial property that you don’t have to worry about with a residential  one, such as who potential tenants are and how likely they are to fulfill the entire lease. Plus, the maintenance on commercial real estate is much more expensive.

Here are the seven steps you should take to buy the commercial property you’re wanting in your portfolio:

1. Select a Strategy

Commercial real buyers can pursue several different strategies based on the objectives they are after.  For instance, if stable income is the goal, retail tenants are more likely to sign long-term leases than office tenants. Another strategy might be to provide a business with quarters to house its own operations. Some types of commercial real estate may offer superior tax deduction opportunities than others. Before choosing to invest in real estate it’s important to choose one or more benefits as the primary goals of the investment, then make sure that later decisions fit this strategy.

2. Pick a Property Type

There are many ways to invest in real estate. There also are different types of commercial real estate, including suburban malls, high-rise offices, apartment buildings, distribution centers and factories. Office buildings are the most common type, followed by retail. Each property type has different characteristics and advantages. For instance, retail stores may invest significant amounts in decorating and customizing spaces. As a result, they may be willing to sign extended leases covering up to 10 or 15 years. This can reduce the owner’s risk of incurring a costly vacancy.

3. Arrange Financing

As with shopping for a home, it’s best to line up financing before looking at what’s available. Commercial real estate financing is unlike residential real estate financing, however. For instance, lenders considering a single-family home mortgage will look only at the creditworthiness, income and existing indebtedness of the owner-occupant. Commercial lenders look instead at whether the income generated by the property will be sufficient to pay back the loan.

Commercial property buyers also must provide larger down payments, typically 20% to 30% of the purchase price. Familiar names like the Federal Housing Administration can participate in financing multifamily residential properties. Financing for other types of commercial real estate can come from banks, hard-money lenders and sellers.

4. Assemble the Team

5. Identify Properties

An experienced commercial real estate broker with local market knowledge can provide invaluable assistance in identifying appropriate properties. Specialized commercial real estate directories, such as Loopnet.com, are often used for initial screening. As with any sort of real estate, location is the prime concern. The appropriate zoning, good access to transit and appealing prospects for price appreciation due to market trends are location traits often sought by commercial property investors.

6. Do Due Diligence

Analyzing the financial aspects of a buying opportunity is critical for successful commercial real estate buyers. Shoppers prepare pro forma projections of rental income , vacancy rates, costs to maintain and repair, taxes and more for each property under consideration. Buyers often look at many properties before finding one with a pro forma that fits their investment requirements.

Unlike appraised prices for residential property pricing, which are based on recent sale prices for comparable properties, commercial property pricing is based on a multiple of the expected net operating income the property is expected to generate. The multiple varies by market and property type.

7. Negotiate the Deal

Negotiating commercial real estate acquisitions can be straightforward compared to working out a deal to buy a single-family residence from an owner-occupant. That’s because commercial property owners don’t have emotional connections to their properties.

However, that doesn’t mean commercial property negotiations are easy. Appraisals , inspections and legal reviews of offers and contracts are essential for these demanding transactions. Most commercial buyers are careful to include a contingency clause that lets them back out of the deal if something comes up such as a problem with inspection or zoning.

Things to Consider When Buying Commercial Real Estate

Before you make commercial real estate part of your portfolio you should have a good idea of what you’re getting yourself into. Everything can be quite different than buying residential investment properties, from funding the deal to determining a long-term lease. Here are things you should consider if you’re not sure whether it should be part of your portfolio:

• Types of Properties:  Multi-family housing might be a good commercial property type if you’re used to residential properties, but all other types are going to be very different. The other main types include retail, office and industrial. Each brings separate challenges and things you must understand to be successful.
• Target Tenants:  Each type of property brings a different type of tenant that you’ll need to understand in order to properly fill your property.
• Leases:  Commercial properties tend to have more long-term leases and different articles with those leases than a residential property would.
• Understanding the Math:  Many properties will have a lot of considerations that could impact your bottom line. For example, an office building in your area might require you to pay for cleaning and security which you would need to factor into the rental costs. Calculating wrong can cost you a lot of money on the property.
• Financing:  Financing works very differently depending on whether you’re buying a multifamily development or an office building. You will likely need a business plan to get banks to invest in your project.

The Bottom Line

Tips on Buying Commercial Real Estate

• An experienced financial advisor is a vital part of the team any savvy investor uses to select, structure and manage commercial real estate acquisitions. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals ,  get started now .
• Part of doing your due diligence for a commercial real estate investment is calculating the mortgage. A free easy-to-use mortgage calculator can quickly give you an idea of the dollar amounts involved.

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How To Write A Real Estate Business Plan

What is a real estate business plan?

8 must-haves in a business plan

How to write a business plan

Real estate business plan tips

Success in the real estate investing industry won’t happen overnight, and it definitely won’t happen without proper planning or implementation. For entrepreneurs, a  real estate development business plan can serve as a road map to all of your business operations. Simply put, a real estate business plan will serve an essential role in forming your investing career.

Investors will need to strategize several key elements to create a successful business plan. These include future goals, company values, financing strategies, and more. Once complete, a business plan can create the foundation for smooth operations and outline a future with unlimited potential for your investing career. Keep reading to learn how to create a real estate investment business plan today.

What Is A Real Estate Investing Business Plan?

A real estate business plan is a living document that provides the framework for business operations and goals. A business plan will include future goals for the company and organized steps to get there. While business plans can vary from investor to investor, they will typically include planning for one to five years at a time.

Drafting a business plan for real estate investing purposes is, without a doubt, one of the single most important steps a new investor can take. An REI business plan will help you avoid potential obstacles while simultaneously placing you in a position to succeed. It is a blueprint to follow when things are going according to plan and even when they veer off course. If for nothing else, a real estate company’s business plan will ensure that investors know which steps to follow to achieve their goals. In many ways, nothing is more valuable to today’s investors. It is the plan, after all, to follow the most direct path to success.

8 Must-Haves In A Real Estate Business Plan

As a whole, a real estate business plan should address a company’s short and long-term goals. To accurately portray a company’s vision, the right business plan will require more information than a future vision. A strong real estate investing business plan will provide a detailed look at its ins and outs. This can include the organizational structure, financial information, marketing outline, and more.  When done right, it will serve as a comprehensive overview for anyone who interacts with your business, whether internally or externally.

That said, creating an REI business plan will require a persistent attention to detail. For new investors drafting a real estate company business plan may seem like a daunting task, and quite honestly it is. The secret is knowing which ingredients must be added (and when). Below are seven must-haves for a well executed business plan:

Outline the company values and mission statement.

Break down future goals into short and long term.

Strategize the strengths and weaknesses of the company.

Formulate the best investment strategy for each property and your respective goals.

Include potential marketing and branding efforts.

State how the company will be financed (and by whom).

Explain who is working for the business.

Answer any “what ifs” with backup plans and exit strategies.

These components matter the most, and a quality real estate business plan will delve into each category to ensure maximum optimization.

A company vision statement is essentially your mission statement and values. While these may not be the first step in planning your company, a vision will be crucial to the success of your business. Company values will guide you through investment decisions and inspire others to work with your business time and time again. They should align potential employees, lenders, and possible tenants with the motivations behind your company.

Before writing your company vision, think through examples you like both in and out of the real estate industry. Is there a company whose values you identify with? Or, are there mission statements you dislike? Use other companies as a starting point when creating your own set of values. Feel free to reach out to your mentor or other network connections for feedback as you plan. Most importantly, think about the qualities you value and how they can fit into your business plan.

Goals are one of the most important elements in a successful business plan. This is because not only do goals provide an end goal for your company, but they also outline the steps required to get there. It can be helpful to think about goals in two categories: short-term and long-term. Long-term goals will typically outline your plans for the company. These can include ideal investment types, profit numbers, and company size. Short-term goals are the smaller, actionable steps required to get there.

For example, one long-term business goal could be to land four wholesale deals by the end of the year. Short-term goals will make this more achievable by breaking it into smaller steps. A few short-term goals that might help you land those four wholesale deals could be to create a direct mail campaign for your market area, establish a buyers list with 50 contacts, and secure your first property under contract. Breaking down long-term goals is a great way to hold yourself accountable, create deadlines and accomplish what you set out to.

3. SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities, and threats. A SWOT analysis involves thinking through each of these areas as you evaluate your company and potential competitors. This framework allows business owners to better understand what is working for the company and identify potential areas for improvement. SWOT analyses are used across industries as a way to create more actionable solutions to potential issues.

To think through a SWOT analysis for your real estate business plan, first, identify your company’s potential strengths and weaknesses. Do you have high-quality tenants? Are you struggling to raise capital? Be honest with yourself as you write out each category. Then, take a step back and look at your market area and competitors to identify threats and opportunities. A potential threat could be whether or not your rental prices are in line with comparable properties. On the other hand, a potential opportunity could boost your property’s amenities to be more competitive in the area.

4. Investment Strategy

Any good real estate investment business plan requires the ability to implement a sound investment strategy. If for nothing else, there are several exit strategies a business may execute to secure profits: rehabbing, wholesaling, and renting — to name a few. Investors will want to analyze their market and determine which strategy will best suit their goals. Those with long-term retirement goals may want to consider leaning heavily into rental properties. However, those without the funds to build a rental portfolio may want to consider getting started by wholesaling. Whatever the case may be, now is the time to figure out what you want to do with each property you come across. It is important to note, however, that this strategy will change from property to property. Therefore, investors need to determine their exit strategy based on the asset and their current goals. This section needs to be added to a real estate investment business plan because it will come in handy once a prospective deal is found.

5. Marketing Plan

While marketing may seem like the cherry on top of a sound business plan, marketing efforts will actually play an integral role in your business’s foundation. A marketing plan should include your business logo, website, social media outlets, and advertising efforts. Together these elements can build a solid brand for your business, which will help you build a strong business reputation and ultimately build trust with investors, clients, and more.

First, to plan your marketing, think about how your brand can illustrate the company values and mission statement you have created. Consider the ways you can incorporate your vision into your logo or website. Remember, in addition to attracting new clients, marketing efforts can also help maintain relationships with existing connections. For a step by step guide to drafting a real estate marketing plan , be sure to read this guide.

6. Financing Plan

Writing the financial portion of a business plan can be tricky, especially if you are starting your business. As a general rule, a financial plan will include the income statement, cash flow, and balance sheet for a business. A financial plan should also include short and long-term goals regarding the profits and losses of a company. Together, this information will help make business decisions, raise capital, and report on business performance.

Perhaps the most important factor when creating a financial plan is accuracy. While many investors want to report on high profits or low losses, manipulating data will not boost your business performance in any way. Come up with a system of organization that works for you and always ensure your financial statements are authentic. As a whole, a financial plan should help you identify what is and isn’t working for your business.

7. Teams & Small Business Systems

No successful business plan is complete without an outline of the operations and management. Think: how your business is being run and by whom. This information will include the organizational structure, office management (if any), and an outline of any ongoing projects or properties. Investors can even include future goals for team growth and operational changes when planning this information.

Even if you are just starting or have yet to launch your business, it is still necessary to plan your business structure. Start by planning what tasks you will be responsible for, and look for areas you will need help with. If you have a business partner, think through your strengths and weaknesses and look for areas you can best complement each other. For additional guidance, set up a meeting with your real estate mentor. They can provide valuable insights into their own business structure, which can serve as a jumping-off point for your planning.

8. Exit Strategies & Back Up Plans

Believe it or not, every successful company out there has a backup plan. Businesses fail every day, but investors can position themselves to survive even the worst-case scenario by creating a backup plan. That’s why it’s crucial to strategize alternative exit strategies and backup plans for your investment business. These will help you create a plan of action if something goes wrong and help you address any potential problems before they happen.

This section of a business plan should answer all of the “what if” questions a potential lender, employee, or client might have. What if a property remains on the market for longer than expected? What if a seller backs out before closing? What if a property has a higher than average vacancy rate? These questions (and many more) are worth thinking through as you create your business plan.

How To Write A Real Estate Investment Business Plan: Template

The impact of a truly great real estate investment business plan can last for the duration of your entire career, whereas a poor plan can get in the way of your future goals. The truth is: a real estate business plan is of the utmost importance, and as a new investor it deserves your undivided attention. Again, writing a business plan for real estate investing is no simple task, but it can be done correctly. Follow our real estate investment business plan template to ensure you get it right the first time around:

Write an executive summary that provides a birds eye view of the company.

Include a description of company goals and how you plan to achieve them.

Demonstrate your expertise with a thorough market analysis.

Specify who is working at your company and their qualifications.

Summarize what products and services your business has to offer.

Outline the intended marketing strategy for each aspect of your business.

1. Executive Summary

The first step is to define your mission and vision. In a nutshell, your executive summary is a snapshot of your business as a whole, and it will generally include a mission statement, company description, growth data, products and services, financial strategy, and future aspirations. This is the “why” of your business plan, and it should be clearly defined.

2. Company Description

The next step is to examine your business and provide a high-level review of the various elements, including goals and how you intend to achieve them. Investors should describe the nature of their business, as well as their targeted marketplace. Explain how services or products will meet said needs, address specific customers, organizations, or businesses the company will serve, and explain the competitive advantage the business offers.

3. Market Analysis

This section will identify and illustrate your knowledge of the industry. It will generally consist of information about your target market, including distinguishing characteristics, size, market shares, and pricing and gross margin targets. A thorough market outline will also include your SWOT analysis.

4. Organization & Management

This is where you explain who does what in your business. This section should include your company’s organizational structure, details of the ownership, profiles on the management team, and qualifications. While this may seem unnecessary as a real estate investor, the people reading your business plan may want to know who’s in charge. Make sure you leave no stone unturned.

5. Services Or Products

What are you selling? How will it benefit your customers? This is the part of your real estate business plan where you provide information on your product or service, including its benefits over competitors. In essence, it will offer a description of your product/service, details on its life cycle, information on intellectual property, as well as research and development activities, which could include future R&D activities and efforts. Since real estate investment is more of a service, beginner investors must identify why their service is better than others in the industry. It could include experience.

6. Marketing Strategy

A marketing strategy will generally encompass how a business owner intends to market or sell their product and service. This includes a market penetration strategy, a plan for future growth, distribution channels, and a comprehensive communication strategy. When creating a marketing strategy for a real estate business plan, investors should think about how they plan to identify and contact new leads. They should then think about the various communication options: social media, direct mail, a company website, etc. Your business plan’s marketing portion should essentially cover the practical steps of operating and growing your business.

Additional Real Estate Business Plan Tips

A successful business plan is no impossible to create; however, it will take time to get it right. Here are a few extra tips to keep in mind as you develop a plan for your real estate investing business:

Tailor Your Executive Summary To Different Audiences: An executive summary will open your business plan and introduce the company. Though the bulk of your business plan will remain consistent, the executive summary should be tailored to the specific audience at hand. A business plan is not only for you but potential investors, lenders, and clients. Keep your intended audience in mind when drafting the executive summary and answer any potential questions they may have.

Articulate What You Want: Too often, investors working on their business plan will hide what they are looking for, whether it be funding or a joint venture. Do not bury the lede when trying to get your point across. Be clear about your goals up front in a business plan, and get your point across early.

Prove You Know The Market: When you write the company description, it is crucial to include information about your market area. This could include average sale prices, median income, vacancy rates, and more. If you intend to acquire rental properties, you may even want to go a step further and answer questions about new developments and housing trends. Show that you have your finger on the pulse of a market, and your business plan will be much more compelling for those who read it.

Do Homework On The Competition: Many real estate business plans fail to fully analyze the competition. This may be partly because it can be difficult to see what your competitors are doing, unlike a business with tangible products. While you won’t get a tour of a competitor’s company, you can play prospect and see what they offer. Subscribe to their newsletter, check out their website, or visit their open house. Getting a first-hand look at what others are doing in your market can greatly help create a business plan.

Be Realistic With Your Operations & Management: It can be easy to overestimate your projections when creating a business plan, specifically when it comes to the organization and management section. Some investors will claim they do everything themselves, while others predict hiring a much larger team than they do. It is important to really think through how your business will operate regularly. When writing your business plan, be realistic about what needs to be done and who will be doing it.

Create Example Deals: At this point, investors will want to find a way to illustrate their plans moving forward. Literally or figuratively, illustrate the steps involved in future deals: purchases, cash flow, appreciation, sales, trades, 1031 exchanges, cash-on-cash return, and more. Doing so should give investors a good idea of what their deals will look like in the future. While it’s not guaranteed to happen, envisioning things has a way of making them easier in the future.

Schedule Business Update Sessions: Your real estate business plan is not an ironclad document that you complete and then never look at again. It’s an evolving outline that should continually be reviewed and tweaked. One good technique is to schedule regular review sessions to go over your business plan. Look for ways to improve and streamline your business plan so it’s as clear and persuasive as you want it to be.

Reevauating Your Real Estate Business Plan

A business plan will serve as a guide for every decision you make in your company, which is exactly why it should be reevaluated regularly. It is recommended to reassess your business plan each year to account for growth and changes. This will allow you to update your business goals, accounting books, and organizational structures. While you want to avoid changing things like your logo or branding too frequently, it can be helpful to update department budgets or business procedures each year.

The size of your business is crucial to keep in mind as you reevaluate annually. Not only in terms of employees and management structures but also in terms of marketing plans and business activities. Always incorporate new expenses and income into your business plan to help ensure you make the most of your resources. This will help your business stay on an upward trajectory over time and allow you to stay focused on your end goals.

Above all else, a  real estate development business plan will be inspiring and informative. It should reveal why your business is more than just a dream and include actionable steps to make your vision a reality. No matter where you are with your investing career, a detailed business plan can guide your future in more ways than one. After all, a thorough plan will anticipate the best path to success. Follow the template above as you plan your real estate business, and make sure it’s a good one.

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NAR Settlement: What It Means For Buyers And Sellers

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How to Buy Your First Commercial Property in 5 Steps

The basics to buying your first commercial real estate investment.

Today, I’m going to show you how to get started in commercial real estate investing with 5 steps to buying your first property .

In fact, it’s the same strategy that I used in 2019 to acquire 4 office buildings here in Nashville.

So, if you’re interested in commercial real estate investing, you’re going to love this step-by-step guide. 

Let’s dive on in. 

Step 1: Choose your niche and become the expert

Educate yourself.

You need to decide what you want to do and focus on that.

There are many “shiny objects” in commercial real estate - that’s one of the beautiful things about this industry! And while diversifying your portfolio is certainly an important aspect of commercial real estate investing, you need to dial in and become the expert on one specific type of investing, first.

Now, the most you’ll ever learn about commercial real estate is actually after you’ve done a deal - some parts of the investing process just can’t be captured in a book or video.

However, you need to have a decent understanding and road map for your investing strategy.

There are so many ways that you can go about educating yourself on commercial real estate:

You can listen to podcasts

Read commercial real estate books

Watch videos on YouTube

Have conversations with other investors. Learn from people who have done it already!

Join real estate investing groups. Joining a real estate investing group here in Nashville ( REIN ) was one of the first steps I took to becoming a real estate investor.

Not only do these groups offer educational classes and events, you can network with other investors to find deals.

You know what? You might even get a job in commercial real estate! That’s what I did - I got my start as an in-house leasing agent for a boutique development firm.

In the 4.5 years I was there, I learned how to build single family homes, develop townhome projects, manage office / retail / industrial properties, and how to masterplan communities!

It would’ve taken me a lifetime to learn that any other way and I got paid to do it.

Ok, so after you’ve educated yourself on commercial real estate investing, it’s time to choose a property type. And the reason that I recommend you choose your property type after you’ve educated yourself on commercial real estate, is that you don’t necessarily know which property type will be right for you before you get started. 

For example, if you’re a single-family residential investor, you’ve probably heard the next step is buying multifamily. But did you know that storage units, which are a subclass of industrial, pretty much operate the same way as multifamily without the headache of dealing with residential tenants? 

You may find another asset type that is more attractive to you as an investor.

Choose A Property Type

There are 5 primary types of commercial real estate that you can invest in:

Multifamily

That’s anything from a single duplex with two units, to hundreds of units spread out across a garden-style apartment complex.

Office buildings can be as small as a commercially zoned home housing an attorney’s office or a skyscraper downtown.

Retail real estate can be anything from that Starbucks around the corner from your house to a massive regional shopping center.

Industrial real estate is made up of warehouses and distribution centers of all sizes - think Amazon delivery!

Hospitality

Hospitality real estate are the hotels and motels that serve business and leisure travelers. Short-term rentals are often included here, too.

So after you’ve determined which commercial property type is right for you, it’s time to decide upon an investment strategy.

Your Investment Strategy

There are many different investment strategies and just like choosing a property type, it’s important to find a strategy that’s right for you . Depending on your goals and what piques your interest, you may find yourself:

Land Banking

Land banking is where you purchase larger tracts of land that are in the path of development with the hope that they will appreciate in value as the development moves your way.

Development

Commercial real estate development is where you take raw land and re-imagine what could be constructed on that property.

Fix & Flip

Just like it sounds, fix & flip in commercial real estate investing is the same as it is in residential where you buy a property, make any necessary repairs and upgrades, and then resell it.

Wholesaling

Wholesaling real estate is where you find a good deal, put the property under contract, and sell the contract to another real estate investor or owner-occupant.

Owner-Occupied

Similar to “house-hacking” in residential, owner-occupied commercial real estate investing is where you purchase a piece of real estate where you plan to run your business.

BRRRR (Value-Add)

The BRRRR strategy - this is my favorite investing strategy and one I have used time and time again. BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat.

Passive Investing

If you don’t have time to actually run and operate a deal, there are many benefits to being a passive investor in commercial real estate.

Step 2: Learn How To Underwrite Commercial Real Estate Investments

You need to know the math inside and out.

Get your underwriting tools together (you can create these yourself or you can find some templates online).

Most investors will use some variation of an Excel spreadsheet where they can type in various items, such as purchase price, estimated rehab, projected rent, and financing. These spreadsheets will then crank the expected returns for the investor on this deal.

You should also have a “back of napkin” formula that you can apply to any commercial real estate investment to determine whether or not it’s even worth underwriting.

This “back of napkin” formula can be any single metric that works for you and can give you a quick green or red light. For me, I like to look at the asking price per square foot of the investments I make. Having a background as a commercial real estate broker, I have in-depth knowledge of what market rents are per square foot. By utilizing the prices per square foot on the purchase and rent, I can quickly determine if the deal will make any money.

Now, I do recommend when you first get started that you underwrite every deal you possibly can. This way, you can actually learn what makes a deal work.

Don’t have an underwriting model? Check out our models below - we use these to underwrite every investment we make!

Quickly determine if a deal is worth pursuing or not.

Our go-to underwriting software for office, retail, and industrial real estate investments.

If you’re purchasing multifamily real estate, this spreadsheet is the underwriting tool to ensure you’re making the most informed decision possible.

If you’re looking to underwrite single tenant triple net (NNN) investments, look no further.

This model takes into account all costs associated with the project, including land acquisition, construction, and marketing expenses, as well as potential sales numbers and delivers you the return on investment metrics to help you make an informed investment decision.

The commercial and multifamily underwriting tools bundled together!

Get ‘em all.

Note that this bundle does not include the residential development and construction model.

Take a CCIM course and work for your designation

CCIM, which stands for Certified Commercial Investment Member, is a designation offered by the CCIM Institute . 

This commercial real estate designation is comparable to a CPA for an accountant and is basically a master-course on how to invest in commercial real estate. They teach you how to analyze project financials, research real estate markets, determine user criteria, and make investment decisions. 

While this designation won’t be important for everyone, the CCIM course is pretty in-depth and you’ll walk away knowing just about everything you need to know about investing in commercial real estate.

Step 3: Build Your A-Team

Find a broker that specializes in your chosen property type.

Get on their mailing list and review every email they send. Underwrite & tour every property that closely fits your criteria. But most importantly, have conversations with them about the properties.

Why do they like this site? What are the drawbacks? What is their anticipated OpEx?

Brokers want to bring you deals that will be successful so they can continue selling you properties in the future.

Find A Commercial Real Estate Attorney

Hiring an attorney that specializes in commercial real estate is an absolute must in my mind.

Not only do commercial real estate attorneys review and negotiate purchase and sale agreements on your behalf, they also check to make sure that the property doesn’t have any zoning restrictions, land-use issues, environmental issues, and they can also help you negotiate your loan agreements.

Find A Contractor That Specializes In Commercial Real Estate

Are you starting to catch on here with the commercial real estate specialty? Everything is different in commercial real estate than it is in residential real estate. You wouldn’t call the Fire Department to stop a bank robbery - the same goes for contractors that specialize in commercial real estate .

Your contractor will be able to walk through properties with you and help you get an idea of what the expenses will be if the property needs any maintenance & repairs - depending on your relationship with them, you may only be able to walk through while you’re under contract and not every single deal you tour.

Find A Commercial Property Management Company 

Having an outstanding property manager on your side makes all the difference when you’re investing in commercial real estate. I highly recommend keeping a property management fee in your underwriting, regardless of whether or not you intend to hire a management company . You never know what could happen and if the deal doesn’t work with a management fee, it probably doesn’t work at all.

Property managers will be able to walk through and assist you during your due diligence just like a contractor would. They can help, along with your broker, point out the pros and cons for tenants and any issues that may arise during your acquisition of the property.

Build Relationships With Commercial Lenders

Commercial lenders will have specific underwriting criteria, as well, and can also help you determine if a deal makes sense. Chances are good that if you’re unable to get approved but multiple commercial lenders, it’s probably not a deal.

Step 4: Underwrite At Least One Deal A Day

Practice practice practice..

The more you’re looking at deals, the better you’ll be at realizing what a good opportunity is. Underwriting a deal a day is a good habit to get into because it forces you to review the pros and cons of a property and why you would or wouldn’t pursue that as an investment. Michelangelo didn’t become an expert painter overnight - he practiced! Just like you need to do with your underwriting so you can become an expert at reviewing commercial investment opportunities.

Underwriting Is Probably One Of The Most Important Skills You Can Have As An Investor.  

In fact, underwriting properties is so important, I know individuals that will charge between $3,000 and $5,000 to underwrite larger commercial real estate deals for you. $3,000 to $5,000! I mean, if you’re willing to pay that, send me an email and I’ll underwrite your deals for you!

Yes, it can be a bear, I get it. Underwriting a project can be a very labor intensive process, especially if you do it correctly. But if the numbers don’t work, it doesn’t matter how amazing you think the property is or where it’s located, it won’t be a good investment.

Set Your Investment Criteria And Stick To It 

Having a set investment criteria that works for you is a very important part of underwriting commercial deals. If you want to get an 8% return on your money, don’t settle for 7.5%! Every piece of commercial real estate that you buy takes away from the capital that you can invest into a  deal that actually does fit your investment criteria.

Step 5: Make At Least One Offer Per Week

I Got This One From My Friend, Brandon Turner, Over At BiggerPockets .

If you’re not making an offer a week, you’re not looking at and underwriting enough properties! Commercial real estate investing is a numbers game and you may have to look at 100 properties just to find 1 that works. However, that 1 property will be worth it.

It doesn’t cost you a dime to put together a letter of intent and make an offer on the terms that work for you. You never know what could happen - that seller may be under a time crunch with his loan coming due or they may have another property they want to purchase with the proceeds from this sale. If you don’t make the offer, you’ll never know.

A quick recap on the 5 steps to buying commercial real estate:

Educate Yourself on Commercial Real Estate Investing

Learn How to Underwrite and Analyze Deals

Surround Yourself with a Qualified Team

Underwrite at Least a Deal a Day

Make at Least One Offer a Week!

Frequently Asked Questions About Buying Your First Commercial Property

How do you list commercial properties for rent.

Prepare the Property: Ensure the property is in good condition, clean, and ready for occupancy. Make any necessary repairs or improvements to enhance its appeal.

Set an Appropriate Rental Price: Research the local market and comparable properties to determine a competitive rental price that aligns with the property's value and location.

Create a Comprehensive Listing: Develop a detailed listing that includes key information about the property, such as its size, amenities, location advantages, lease terms, and contact details.

Promote the Listing: Utilize various channels to advertise the property, such as online listing platforms, social media, local real estate agents, and property management companies.

Screen Potential Tenants: Implement a thorough tenant screening process to ensure you find reliable and qualified tenants. This may include background checks, credit checks, and reference verification.

Of course, you could bypass all of these steps by interviewing and hiring a commercial brokerage team to manage the leasing of the asset, as well.

2. How to Find Commercial Real Estate For Sale

Engage a Real Estate Agent: Seek assistance from a reputable commercial real estate agent who specializes in the type of property you are looking for. They have extensive market knowledge and can help you navigate the buying process.

Network and Attend Events: Attend industry events, seminars, and networking opportunities to connect with other property owners, investors, and professionals who may have information about potential commercial real estate opportunities.

Utilize Online Listing Platforms: Explore online listing platforms dedicated to commercial real estate. These platforms often provide a wide range of property listings, allowing you to filter by location, price, property type, and other relevant criteria.

Consider Off-Market Opportunities: Stay open to off-market opportunities by actively networking with professionals in the industry. Off-market properties may not be publicly advertised, but connections and relationships can help you discover potential deals.

3. How to Find a Loan to Buy Commercial Property

Determine Your Financing Needs: Assess your financial requirements, including the amount of loan you need, your creditworthiness, and the terms you can afford.

Research Lenders: Explore various lending institutions such as banks, credit unions, and commercial mortgage lenders. Look for lenders who specialize in commercial real estate loans and have experience in your specific property type.

Gather Documentation: Prepare necessary financial documents such as tax returns, income statements, and property information to provide to lenders during the loan application process.

Submit Loan Applications: Approach multiple lenders and submit loan applications. Compare their terms, interest rates, and fees to determine the most favorable financing option for your commercial property purchase.

Work with a Mortgage Broker: Consider engaging a mortgage broker who can help you navigate the lending landscape, connect you with potential lenders, and assist with the loan application process.

4. How to Buy Commercial Property with No Money

Joint Venture: Partner with an investor or business entity that provides the necessary funds in exchange for a share of ownership or profits.

Seller Financing: Negotiate with the property seller to finance a portion or the entire purchase price, allowing you to make payments over time.

Creative Financing: Explore alternative financing options such as lease options, seller carryback financing, or private lending.

Real Estate Crowdfunding: Utilize online platforms that pool funds from multiple investors to collectively purchase commercial properties.

Seek Grants or Incentives: Research government programs, grants, or economic development initiatives that offer financial assistance for property acquisition.

Learn more about buying commercial property with no money .

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Cap Rates are an extremely important factor in the buying and selling of commercial real estate. If you’re investing, this article will give you a strong grasp on this concept! And check out our commercial real estate cap rate calculator, too.

If you are new to commercial real estate investing and lack the money to pay cash for an opportunity, you still have the option of acquiring one through various funding sources. That’s one of the most attractive aspects of investing in commercial real estate - using someone else’s money! Here’s how to get started in commercial real estate.

Investing in commercial real estate can be a lot of fun and it’s certainly rewarding, but coming across a good deal is often the most frustrating part of this process.

From what I’ve seen, however, most investors simply don’t take the right approach.

Here’s my beginner’s guide to finding commercial real estate deals.

The Cauble Group is pleased to announce the renewal of a commercial lease for 44,000 square feet of prime space at Space Park South by CRS Granite and Marble

When it comes to planning for retirement, every decision counts.  

But don’t worry, for there is a game-changing tool that can set you on the path to a secure financial future – the Individual Retirement Account (IRA). This investment account is a treasure trove of tax advantages, designed specifically for saving towards your golden years.

I’m going to show you how to get started in commercial real estate investing with 5 steps to buying your first property. In fact, it’s the same strategy that I used in 2019 to acquire 4 office buildings here in Nashville.

So, if you’re interested in commercial real estate investing, you’re going to love this step-by-step guide.

There’s a nearly endless amount of knowledge and experience you need to master in order to become a successful commercial real estate investor. Is there another way?

Commercial real estate marketing questions? Looking for a job in our industry? Are apartments a good investment for the future? In this curated article, our sources answer these questions (and more)!

Active or passive commercial real estate investing? Choose carefully, because the road you pick will affect your life more than almost any other decision you’ll ever make …

Where should you – a commercial real estate investor – do business in 2022? There is no definitive answer to that question, but there are some BIG clues to guide you

About The Author:

Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors as a board member for the Real Estate Investors of Nashville . Learn more at www.TylerCauble.com

615-854-7188 | [email protected]

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How to Create a Commercial Property Management Business Plan

Business plans are a crucial document for any company. They help map out the goals for your business, how you intend to achieve them and keep up with constantly changing customer needs.

To help you build an effective commercial property management business plan , we’ve created a helpful resource that details the different sections to include.

What Makes an Effective Business Plan?

• The Core Element of a Business Plan

Company Overview

Industry analysis, customer analysis, competitor analysis, marketing plan, operations plan, financial plan, commercial property management specific elements of a business plan, screening tenants and clients, collecting rent and arrears, inspections and maintenance.

A well thought out business plan is crucial. It should cover all aspects of your business, from the top-level overview to the finer details such as financial forecasts and marketing plans. Go into detail — and then some. Treat it as if every one of your potential clients will read it and decide whether they should work with you.

An effective business plan keeps you on the right track and gives you something to measure progress against, but it also allows you to discover potential opportunities and identify any shortfalls.

You might be wondering how often you should create a business plan — there’s no right or wrong answer. Business plans should be created at the start of your business journey. After that, they should be reviewed regularly, typically once a year. If your business starts to go in a different direction, it might be time for a new business plan.

The Core Elements of a Business Plan

Several areas will feature in a business plan, no matter what industry you’re in. We’ll take a brief look at what’s included in each section. It’s worth keeping in mind that this list isn’t exhaustive — make sure your business plan caters for your specific needs.

The first place to start is the company overview. Think of this as a profile for your business. Include factors like the company name, company history, your current location and a summary of your commercial property management services.

Conducting industry analysis is essential so you understand the landscape you’re operating in. As the industry changes and progresses, this section should be continuously monitored and updated.

Talk about the property management industry as it stands — any trends, developments, economic conditions or wider societal impacts.

Your customers are what keeps you in business, so it’s crucial to identify who they are and how you’ll reach them. Identify your target market and customers in detail. 

Think about demographics, the types of property they own, how much property they own and where their property is located. It’s then worth segmenting your customers into different categories. This will ensure you’re tapping into the right customer needs with your marketing and operations efforts.

Conducting competitor analysis is important for creating your business plan. You should always know who your competitors are so you can monitor their activity and ensure you have a competitive edge.

List direct and indirect competitors within and outside the property management industry. Then consider your business — how do you compare to your competitors? Do you have any advantages or shortfalls? By answering these questions, you’ll identify ideas for growth, room for improvements, as well as determine what you do well and warrants the extra investment.

Next up is your marketing plan. While your marketing plan should always be adaptive and flexible to meet the needs and demands of your customers, it’s important to get as much information as you can into your business plan.

Think about your value proposition and the USPs your business offers to its customers. Consider the types of marketing activities you’re likely to invest in. Online marketing, networking, paid, organic and referrals are just some ideas to get you started.

The operations plan is a central part of your commercial property management business plan — it’s what keeps your business running.

Start with your people. Outline management, the roles and departments that make up your property management business structure.

Then take a look at how your business operates. What services do you offer? Do you use or plan to use any property management software ? Do you have specific processes that help your business run smoothly? Are there any key milestones to take into account?

We’ve now reached one of the most crucial parts of the business plan; financials. The financial plan should be as in-depth as possible. Not only will it allow you to plan your business activity effectively, but it’ll also ensure you’ve budgeted for every eventuality and considered revenue, reinvestments, budgets and any potential unexpected expenses.

Work with your finance team to prepare budgets, cash flow projections, revenue streams, cost drivers, profit and loss statements, forecasted growth and more.

While all of the above sections should be included and specific to your business, several extra sections are more applicable to property management businesses.

A large part of property management is screening potential tenants and clients. Making sure your clients are reputable and financially stable is important. Once you’re past this stage, you need to select the right tenants for their properties. 

Are they reliable at paying rent? Do they have sufficient funds for the deposit and rent payments required? Have they gained a positive reputation as tenants? This process should all be factored into the business plan.

Within property management, a robust, organised system is needed for collecting rents and arrears. This ensures your customers are paid on time and aren’t left out of pocket. Collecting rent and arrears can take up a lot of a property manager’s time, so identifying a smooth and efficient process will reduce any risks surrounding this area.

Finally, inspections and maintenance make up a large part of a property management company’s service offering. Your business plan should detail the inspection process, the criteria within the inspections and the timeframes for when they’re carried out.

You should also establish your maintenance plans. Do you have an in-house team? Or do you work with an external contractor? What’s the process for scheduling and carrying out maintenance works promptly?

Are You Looking for the Background Information to Help You Develop Your Business Plan?

Then you’ve come to the right place . The property management landscape is constantly changing and can be challenging to keep up with, especially when you’re already busy with your day-to-day tasks. Our report will help you stay up to date without taking up too much of your time. 

Simply click the link below to download your copy.

Commercial Property

The complete guide.

• 31-page guide about understanding & buying commercial property
• Comprehensive overview to regulations, funding & more
• Industry insights into demand & profits
• Useful tools to determine finance

Get your free Commercial Property Guide below.

What you’ll learn:

Click through our chapters.

• Introduction

What is commercial property?

Types of commercial property, leasehold vs. freehold, types of commercial property leases.

• Standards & regulations
• Rights & responsibilities of landlords & tenants
• The investment side of things

Investment options

• Advantages & challenges of buying commercial property
• How to calculate & increase the value of commercial property

How to turn residential into commercial property

Property costs, where to find commercial property.

• Finance options
• Loan calculator
• Industry insights
• Case studies

Useful links

Commercial property guide an introduction to the basics.

Commercial property investment can be challenging when compared to the residential market. There may be more variety in the types of properties investors can target, along with renters and/or buyers of their assets.

This commercial property guide will cover all the elements of the commercial world of real estate, to identify:

• The different types of commercial properties by sector,
• Go through the process of buying commercial property
• How commercial properties can fit within an investment strategy

We will break down these intricacies and provide investors with the tools they need to navigate commercial investments with confidence, within the current UK property market.

In the simplest terms, a commercial property is a building that is used for business purposes, and isn’t being used as a domestic dwelling common examples include: offices, retail units and warehouses.

The size of a commercial property will vary depending on the company’s nature. An office may need to house hundreds of employees, meanwhile, an automotive manufacturing plant will need several thousand square metres of space to produce vehicles. On the other hand, a dentist’s office may be converted into a commercial space from a residential property.

It’s also possible for commercial and residential property to co-exist under one roof and share a title*. These buildings are often referred to as either mixed-use or semi-commercial properties. An example would be a flat located above the pub.

*A title is related to the deeds of the property and will register whether the property is either a freehold or a leasehold property, and outlines who owns which sections of the land.

Commercial property usually falls within five core categories. Within these categories, there are many different types of properties and uses, which were originally broken down in the Town and Country Planning (Uses Classes) Order of 1987.

These 5 categories are:

Office space can be used by businesses of all shapes and sizes. A small accountancy firm, all the way through to a FTSE100 Blue Chip can house employees in an office. Offices may be large or small, depending on how many employees there are, and other factors.

2. Retail units

Retail commercial property is used for sale of goods and services directly to consumers (as opposed to wholesaling). This includes retail businesses such as department stores, the large shopping centres that may house them, and smaller shops.

3. Industrial property

Industrial property generally includes large warehouses, factories, and manufacturing hubs. These properties are used for a range of major business activities. Including the production and development of goods, research spaces for new technologies, wholesale warehouses, and distribution centres.

Leisure property is, as to be expected, a building to be used for leisure activities. Typically, these leisure activities involve the use of services, more so than physical products. Common examples include restaurants, pubs, hotels, cinemas, gyms.

5. Healthcare

Finally, there are healthcare properties. Obvious examples include hospitals and GP surgeries. But this category can also include nursing homes, pharmacists, clinics and more.

Its own kind

Outside of these main types of assets, you may also find “Sui Generis” properties. This translates to “of its own kind” and covers properties/businesses that do not typically fall into any of the previous categories. Examples may include launderettes or petrol stations.

When buying commercial property, investors will want to think about the type of property that’s right for their circumstances.

Commercial property use classes

Commercial properties are further categorised into use categories via legislation introduced in 1987, which was then updated majorly in 2020. Below you can find the main classes, but within teach section there are more splits:

• Class B: In Class B, for example, properties will either be “B2 General industrial”, or “B8 Storage or distribution”.
• Class E: Class E, for comparison, includes many more sub-categories, such as: “E(a) – display or retail sale of goods, other than hot food”, and “E(d) – Indoor sport, recreation or fitness”.
• Sui Generis

Property investors can “change the use” of their properties where desired, either within the same use class, or from one to another.

However, certain changes and projects will require planning permission from a Local Planning Authority (LPA). You can find the details of your local authority through the Planning Portal website. It’s worth contacting your local council before any major work commences to see if planning permission is required, and if there are regulations or restrictions.

All properties, including commercial properties, are usually freehold or leasehold.

• Freehold  grants an investor exclusive ownership of it, meaning they can do with it as they will
• Leasehold  means investors will not own the property, but have exclusive possession of the premises for a certain amount of time

Both options present pros and cons. Freehold property investment can bring with it more freedom and optionality. But investors will likely be responsible for all the maintenance and repairs for the building. They also tend to be more expensive than their leasehold counterparts. Leasehold commercial property can keep costs down. Short-term leases can also offer greater flexibility for certain types of businesses. However, leaseholders will not be able to alter the building to their needs without the owner’s permission. Leases also often come with regular rent review provisions, which could see monthly outgoings rise frequently.

Investors will need to determine which option is right for their circumstances.

There are several types of leases that commercial buyers need to be aware of, if they choose to invest via this route.

Gross leases

For short-term occupancies, gross leases will be common. These leases grant business tenants’ sole occupation of the property through a flat fee in the form of a rental payment. The freeholder and/or landlord involved will incorporate their costs into the rent.

With net leases, the commercial tenant will pay some or all of the costs of the property on top of the rent. Typically, this includes taxes and ongoing utility bills. Net leases are split into three categories:

• Single net leases: A single net lease will require tenants to cover the property’s taxes, while the landlord pays the other costs.
• Double net leases: With a double net lease, tenants will pay the property taxes and insurance costs.
• Triple net leases: Finally, with triple net leases, tenants will need to pay all the costs associated with the property, on top of the rent.

Absolute leases

Similar to triple net leases, there are also absolute leases. These place the vast majority of all the financial responsibilities onto the commercial tenant. Generally, the more costs a leaseholder covers, the more control and flexibility they’ll have.

Percentage leases

Percentage leases are also available. Here, the rent paid is dependent on the business’s performance. An agreed percentage of the business’s gross sales will be added onto the rent.

Often, a “breakpoint” will be included. This means that if the sales are below a certain threshold, only a base level of rent will be charged. With these leases, the agreement is tied to the success of the underlying business.

Sometimes, these leases may present themselves under different names. For example: Gross leases can be referred to as full-service leases. There are also modified gross leases, and absolute leases, which add further complication.

Before buying commercial property via a leasehold, investors will need to make sure they fully understand what the lease involves and requires of them.

Standards & regulations for commercial property

Generally, owning commercial property will come with certain responsibilities by law*, although most will be dependent on the lease involved.

Health and safety risk assessments must be carried out, and action needs to be taken where hazards are found. This usually involves:

• Fire safety
• Electrical equipment safety
• Managing asbestos.

Business tenants will also be responsible for providing:

• A reasonable temperature
• Enough space
• Ventilation and lighting
• Toilets and washing facilities
• Drinking water
• Safe equipment

Keeping on top of a building’s fire safety is particularly prudent. People are responsible for fire safety in a business, or other non-domestic premises, if they’re an employer, the owner, the landlord, an occupier, or anyone else with control of the premises.

It’s worth noting that commercial property investors can use CCTV to protect their assets. But they must follow data protection laws. If investors plan on utilising CCTV, they must:

• Put up a sign to let people know CCTV is being used and why
• In most circumstances, be able to provide images within 1 calendar month to anyone you’ve recorded
• Share images with the authorities, such as the police, if they ask for them
• Keep images only as long as your business needs them
• Pay a data protection fee

Also, they must have an Energy Performance Certificate (EPC) if they rent out or sell a business premises. They’ll also be needed where buildings under construction are finished or where there are changes to the number of parts used for separate occupation and these changes involve providing or extending fixed heating, air conditioning or mechanical ventilation systems.

Currently commercial landlords must have a minimum EPC rating of E, unless they have a valid exemption. A list of valid exemptions can be found on the government’s website.

*Guidance on these requirements can be found on the government’s website. Also, expert advice can be sought.

Rights & responsibilities as a landlord

Business property lettings aren’t as clear as residential letting. Therefore, there can be confusion as to who is responsible for a property’s safety and suitability – the landlord or the tenant. Often, their responsibilities overlap, making it difficult to find an obvious answer. As such, it’s often advised to clearly lay out responsibilities within individual leasehold agreements. Seeking expert guidance from legal firms can help with this.

Generally, though, landlords are often expected to be responsible for a property’s structural maintenance. They are also obliged to provide tenants with peaceable possession of the commercial property.

They mustn’t unlawfully interfere with the tenant’s use of the premises. What’s more, building insurance on commercial property is usually handled by the owner or landlord. Although, the costs of building insurance can be passed onto the tenant.

Where disputes arise between commercial landlords and their tenants, specialist solicitors can help mediate and resolve certain issues. Examples include dealing with claims for dilapidations and disrepairs, contested rent reviews, and terminating or renewing tenancies.

Should commercial tenants stop paying rent, landlords have several options available to collect what’s owed, or take other remedial actions. Chiefly, there is forfeiture. This enables landlords to end a lease where tenants fail to pay rent. An express right to forfeit can be laid out in a lease.

There is also the Commercial Rent Arrears Recovery (CRAR) statutory right. This allows commercial landlords to recover rent through the seizure, and sale of their tenant’s goods. Outside of these options, there are also payment agreements, debt recovery proceedings, statutory demands and more.

Each of the options available to commercial landlords have their advantages and disadvantages. To investors understand what may be best for their circumstances, they should seek out expert guidance.

Rights & responsibilities of the tenants

Responsibilities for commercial property will often be laid out in a tenancy agreement. This agreement will clearly identify who is responsible for what – the commercial landlord or the tenant.

Generally, commercial tenant’s rights are defined via the Landlord and Tenant Act of 1954. This act can give business tenants the right to “Security of Tenure”, while also regulating the way in which commercial leases can be ended or extended.

Security of Tenure provides commercial tenants with the right to renew their tenancies on the same terms when it ends. It also allows businesses to stay in the premises during the renewal process.

Even with (or if) Security of Tenure is in place however, landlords may still be able to refuse the grant of a new lease under certain statutory grounds. This is a complicated area and so investors should seek out expert legal advice for further guidance. Under an absolute lease, nearly all the property’s financial obligations will fall on the tenant. This means they’ll be responsible for the insurance costs, taxes, ongoing maintenance and more….

Evidently, combing through the details of a lease is essential for both commercial landlords and tenants. Commercial lease solicitors can help with this.

Another area in which commercial tenants need to be careful, are the rules concerning whether they can live in their commercial property. Regardless of why a commercial tenants may want to “sleep at the office”, it is probably unwise to do so. It may invalidate insurance, for starters, and could breach contractual agreements that are in place, planning use restrictions, and even trespassing laws.

Broadly, commercial tenants shouldn’t be living in their business premises. But of course, if it makes sense to do so, commercial buildings can be converted into residential properties.

Commercial property guide – the investment side of things

Commercial property can offer stability when it comes to income.

Take offices, for example:

• On average, the length of a lease for an office is around 8 years.
• Whereas the average number of years private renters stay in their homes in England sat at 4.4 years in 2022.

How much is paid in rent will also vary widely by location, and sector type:

• In the UK, the average rental cost for office space was around £35 per square foot per year in mid-2023.
• But, what’s paid could be as low as £18 per square foot per year in Newcastle, they could be as high as £100 in London.
• In fact, in the affluent area of Mayfair, renting office space will cost businesses around £1,000 a month per desk.

Despite the variation though, healthy yields can be found across many industries. The Savills all-sector prime yield sat at 5.95% in September 2023. Whereas prime equivalent yields were:

• 25% for shopping centres
• 5% for leisure parks
• 75% for high street retail assets

When it comes to buying commercial property, there are many options for investing.

1. Direct investment

Arguably the most obvious involves direct investment. Here, investors will purchase a commercial property with the aim of utilising it for a return. This can be done through several means. For example: Investors can rent the commercial space out to a business to generate income, sell the property on to another buyer for a profit, or convert the property to target a new market.

There are many options available to investors when it comes to financing these purchases. Should they have the capital available, commercial properties can be bought with cash. Otherwise, they can apply for a commercial BTL mortgage, or utilise more bespoke options such as a bridging loan .

2. Commercial property funds

Outside of owning a physical building outright, direct and indirect commercial property funds are available to investors.

Direct funds , also known as bricks-and-mortar funds, allow people to invest in commercial property through a collective investment scheme. Often, this involves a unit trust, or Open-Ended Investment Company (OEIC). These investment vehicles directly invest in a portfolio of commercial assets. Including: manufacturing hubs, retail stores, and other types of properties that may be directly inaccessible to smaller investors.

Indirect property funds also offer investors another way to collectively gain exposure to the property market. These collective schemes invest in shares of property firms that are publicly listed on the stock market. Typically, this may be done via an investment in a Real Estate Investment Fund (REIT).

Each one of these options presents risks and opportunities. A direct purchase, for example, will grant investors complete control over the property, but will likely be the most hands-on option. Whereas investing in property firm’s shares will put them at the whim of the stock market’s movements. When buying commercial property, investors will need to evaluate what’s right for their individual circumstances.

Advantages of investing in commercial property

There are many advantages to incorporating commercial property into a portfolio. Doing so will allow investors to diversify their holdings. There are several facets to the commercial property market.

There are the types of property – which includes offices, stores, warehouses and many more.

Then there are specific sectors to factor in. Investors could expand with an office for a soft drink company, all the way through to a major manufacturing hub for an electronics firm.

Commercial property can also present many income advantages . Leases tend to be longer, and yields could be higher, securing cashflow over the long-term.

There could also be fewer ongoing maintenance demands, in comparison to residential BTL investments. Commercial tenants, via a lease, are often responsible for the maintenance of the property. Meaning, owners may not be called upon to make repairs, sparing them costly upkeep bills in the process.

Download the Complete Guide

Challenges of buying commercial property.

While there are many benefits of buying commercial property, there are also challenges that need to be factored in.

From the outset, the initial investment is likely to be expensive. More so than it would be for a residential investment. Generally, commercial property costs can be higher than residential costs.

Commercial property may also involve more complex management when compared to residential property. Liquidity may also prove to be an issue. For many investors, residential properties may be their go-to choice; especially if they’re just entering the market.

There may be a smaller pool of investors for the commercial world. Meaning, owners may have difficulty in finding buyers should they choose to sell your asset down the line. On this, while long leases can bring in long-term rental income, they can also be restrictive when it comes to selling.

Ultimately, investors will need to weigh up the pros and cons of buying in commercial property, and decide if it works with their circumstances.

How to calculate the value of commercial property

There are multiple ways to calculate the value of commercial property. Before making any investment, investors should consider the:

• Location of where they want to invest
• Local economy
• Rental income potential
• Size and condition of the property they’re looking at

How they plan to invest and generate profit from their commercial property will affect the method of valuation used. Common valuation methods include:

The cost approach

A calculation of the approximate cost of a commercial property based on what it would cost to build a similar property on the same land. This method can be useful for new commercial properties where there may be limited sales data available.

The formula for this is:

Property Value = Land Value + (Building Costs – Depreciation)

The sales comparison approach

This involves comparing a commercial property to similar assets in the area that have been sold. Once these properties have been identified, investors can note any key differences between them and their property, and incorporate adjusted costs.

Say an investor analysed 3 similar commercial buildings in this way, the formula will be:

Property Value = (Building 1 + Building 2 + Building 3) / (Total Amount of Buildings)

The gross rent multiplier (GRM) method

This method is useful if an investor is focused on income. The GRM will tell them how long it will take to pay off a property based on the income it generates.

The formula is:

GRM = Property Selling Price / Annual Gross Rental Income

This will give an indication on when a commercial property investment will start being profitable. The lower the GRM, the more worthwhile an investment may be.

These are simple break downs of just some of the valuation methods available to investors. Income capitalisation, value per door, and general income approach methods are also available.

To help get a complete picture of a commercial property’s value, professional valuation services should be utilised.

How to increase value of commercial property

Commercial property values can be increased via several means.

Refurbishment and/or renovation could be a good place to start. By improving the aesthetics of a modern office, or adding the latest design features to a restaurant, investors could make their commercial property more desirable. As such, they may be able to generate higher rents from business tenants, or more substantial offers from potential buyers.

Investors could also expand, where possible. By increasing the “lettable floor space” of a property – the areas which could generate revenue if they’re turned into functional spaces – investors could have more tenants and/or charge more in rent.

Keeping an eye on demand in the market could also pay dividends. Say an investor owns a restaurant, but within the local economy there’s more demand for office space. By converting a property to adapt to this demand, investors may generate more interest in their asset.

Before engaging with any residential-to-commercial property conversions (or vice versa), investors should check to see if planning permission will be required. This can be done by contacting the local planning authority through a council.

Should planning permission be needed, they’ll be able to guide investors on the process.

Investors should also check to see if their project is applicable for permitted development rights. Relatively new rules allow the conversion of certain commercial properties to residential properties without requiring full planning permission.

Once investors have their planning permission situated sorted, they can then get the ball rolling on the actual conversion project. To do this, they’ll want to engage with architects, designers, contractors, legal advisors, and the like…

Beyond this, investors can focus on attaining funding to support their plans. This can include their own capital, mainstream finance, and/or bespoke options.

Commercial property can bring with it many costs that need to be budgeted for.

If investors plan on buying commercial property with a commercial mortgage, they’ll likely need to have a deposit of 20%-40%. The specific amount will depend on the lender and be affected by a range of circumstances, including industry experience, the business type involved, and credit history.

Investors also need to consider estate agent, solicitor, and lender fees. These will vary greatly, but may each typically be charged at a small percentage.

Property management companies can also help with ongoing costs and admin, but will levy a charge for their services. These fees can run at between 4% and 12% – leaving a lot of space for different sized budgets.

There is also refurbishment and/or maintenance costs. Over time, through wear-and-tear, a commercial property will likely be afflicted with a number of defects. Typical examples include service pipes becoming clogged, or roofs needing repair. Collectively, these defects are known as dilapidations. The cost of amending these dilapidations could amount to £7.27 per square foot. The final bill could easily stretch to 6 figures.

Also, commercial property landlords are now obliged to hit a minimum EPC standard of E. Many appear to be falling short of the mark, as there are believed to be over 19,000 commercial buildings in the UK with non-compliant EPCs, according to recent research. If a property falls below the standard, costs will need to be budgeted to increase the rating to ensure it is legally accepted.

The analysis showed that, based on average commercial rents, commercial landlords could end up losing over £1bn in annual rents from non-compliance with the Minimum Energy Efficiency Standards (MEES). Upgrading a commercial property to be greener may be costly in the short-term, but the long-term costs of failing to act could be greater.

Commercial property is, generally, taxed differently than residential property. Some of the differences tend to be beneficial for property investors.

Capital Gains Tax (CGT), for instance, is often levied at a lower rate for commercial properties than residential properties. If an investor is a basic rate taxpayer, selling as an individual, they’ll pay 10% CGT on commercial property, whereas they’d pay 18% on residential property. For higher and additional rate taxpayers, it rises to 20% for commercial assets, and 24% for residential properties in 2024/25.

If investors sell their properties via a limited company, they’ll pay corporation tax instead of CGT, which is currently levied at 25%. Also, if an investor’s business is specifically to buy and sell property (developers for example) CGT won’t be due. Instead, they’ll pay income tax (if they’re sole trader or partner) or corporation tax.

Income tax is also likely to be paid by commercial landlords who receive income from tenants, Generally, individuals who receive an income from property are given a property allowance of £1,000. Also, people can receive an income of up to £12,570 before any income tax is levied – which is known as the personal allowance.

Stamp Duty Land Tax is also likely to be paid by commercial landlords who receive income from tenants, Generally, individuals who receive an income from property are given a property allowance of £1,000. Also, people can receive an income of up to £12,570 before any income tax is levied – which is known as the personal allowance. For leasehold sales, 1% is charged on the net present value of rent on the portion of the property between £150,001 and £5,000,000. Above £5,000,000, it’s 2%.

What’s more, while taxes such as VAT and council tax may not be applicable for these kinds of commercial interests, there are some circumstances where they could be levied.

Property tax is a complicated issue and as such, it is worth seeking advice from a tax professional and/or accountant. Not only will these experts be able to guide investors on what is due and when, they may also help them take advantage of any applicable allowances or tax perks.

Before buying commercial property, investors should at least be thinking about their financing options. While the option investors go for will depend on the eventual property they buy, and their circumstances, it may help having an idea of what’s out there ahead of time.

For instance, investors may want to think about what the rates are like in the current market for commercial mortgages vs bridging loans. Or, they could ask themselves if they’ll need funding for an auction purchase, rather than buying via an agent.

Beyond this, investors should research what market options are available, and which ones seem worthwhile in pursuing. This could start with the geographic location. Perhaps investors want to explore potential office demand in London, or leisure opportunities in Cardiff.

Investors may also want to think about timeframes. Do they want to secure long-term income from a business, or renovate an empty space for a fix-and-flip strategy?

Once they have found a suitable property, they will need to agree a purchase price with the seller involved. Typically, this will be done through an estate agent, who will help with the paperwork involved.

As a sale is agreed, the solicitors/conveyancers will get involved. The overall terms of the deal will be handled by the solicitors, with a contract package being sent by the seller’s solicitors to the buyer’s.

The buyer’s solicitors will then carry out their due diligence after this package has been received. This will include a review of the mortgage details, should a commercial mortgage be involved.

Finally, if the investor and their solicitor is happy with the details, the sale contract and transfer deeds will be agreed upon by both parties. When everything gets signed, the buyer’s solicitor will cover the deposit, and move the deal to completion.

Commercial property can be found through several means.

• Commercial property, to be bought or rented, can be found on some of most well-known property sites. This includes Zoopla and Rightmove. On these sites, it’s possible to narrow down a search to find the exact property one is after. For instance, investors buying commercial property via one of these firms can filter by location, property type, minimum size, and maximum price.
• There are also specialist property agents and/or advisors who solely deal with commercial properties. Examples can include John Payne Commercial, or Field & Sons Commercial.
• Some local councils will also sell industrial units and other commercial properties under their ownership. What’s more, debilitated or abandoned commercial properties often turn up in auction houses. Here, investors may be able to secure an asset at a reduced price.
• Certain residential properties hold the potential to be primed and converted into commercial spaces. A large block of flats could be turned into offices, for example. It may be worth keeping an eye on the residential market for a commercial strategy.

Commercial property finance options

Investors have many financing options available to them.

Commercial mortgages may be the logical first step for many, and these mortgages can help with investments in offices, shops, leisure centres and more. Generally, these mortgages come in two main formats:

• Capital repayment: With capital repayment mortgages, a portion of the capital borrowed along with added interest is repaid monthly. By the end of the loan’s term, the commercial property will be paid off in full.
• Interest only: With interest only mortgages, the interest is repaid monthly, but not the capital. By the end of the term, a lump sum will be needed to cover the capital in full.

Aside from mortgages, some lenders may also offer secured loans . These can be used for a commercial property, or for a deposit. As the name implies, investors will need to utilise an asset already owned as a security. Some lenders may also consider a third-party security instead of, or alongside other securities. A guarantee is a common example of this.

In the bespoke lending world, bridging loans can be used for investment in commercial property. These loans can come in many forms and be used for a range of circumstances. For example, bridging can be used to purchase, refurbish, or bid on a commercial property.

Remortgages are also available for commercial properties . This involves taking out a new mortgage on an owned commercial property to find better terms, or release equity. This can be done with mainstream lenders and/or bridging providers.

Outside of these possibilities, there are also other alternative options for financing a purchase.

Some local authorities will provide grants to help commercial expansions. Also, commercial properties can be bought via Self-Invested Personal Pension ( SIPP ) or a Small Self-Administered Scheme ( SSAS ).

Investors will need to determine what form of finance may be right for them.

Useful tool: Commercial property loan calculator

Buying commercial property can be complicated and costly. There can be many different fees involved, and an investor’s individual circumstances can add further complication.

To help with this, our bridging loan calculator can allow users to factor in a range of different financial elements that’ll show how much our loans may cost them, and if we’re the right lender for their situation.

This free, interactive tool allows users to enter several details of their investment. This includes:

• A property value
• Any outstanding mortgage
• The loan amount required
• The term length needed
• It also allows users to choose between various interest repayment plans, and enter an interest rate and arrangement fee

As these details are entered, corresponding results will be updated in real time. These results will show:

• How much the monthly payments may cost
• The LTV the investor is looking at
• Along with the gross and net loan amount

The results are calculated estimations, however. So, for exact figures, users will want to get into contact with our underwriters.

Industry Insights

“One in five landlords (19%) are considering diversifying into commercial property, with 37% of these citing ‘diversification’ as the key reason for doing so. Those who already own commercial properties are also planning to expand further, with 35% of landlords with commercial assets stating that they are looking to invest in more within the near future.” ( Property Reporter)

“36% of all landlords said that they have noticed the increase in demand for commercial property and view it as a good investment opportunity.” ( Property Reporter )

“In contrast to housebuilding, commercial building activity in the UK continued to expand in August with S&P Global/Cips UK Construction Purchasing Managers’ housebuilding sub-index reading 54.2 in August 2023.” ( Financial Times )

“There are nearly 28,000 sites with an estimated market value of over £1.5 billion located across England, primed to be converted from commercial use into residential property.” ( Property Industry Eye )

Case Study 1

A client with vast amounts of property experience reached out to us to help with a complicated case. The client wanted to expand their portfolio, consisting of multiple properties throughout London, with the help of specialist finance.

The investment consisted of several new properties, each having separate setups and end goals, with a mix of both commercial and residential units. All properties were in prime locations and given the different types of property involved, attention to detail was paramount. We were also facing pressure from tight deadlines being put on the borrower.

Our underwriter got to work. One of the properties was a fully commercial property, which had received interest from businesses looking to utilise the space.

Whilst the mix of residential and commercial purchases presented complication, each individual asset remained strong, with clear desirability from perspective tenants. As there was clear demand for the assets in question, we provided the required funding. ( Case study 1 )

Case Study 2

A borrower turned to us to support their plans to purchase a semi-commercial property. They had been running their business from the commercial unit of the property for some time, and a rare opportunity to purchase the property arose. It was perfect timing for the borrower, they just needed fast finance to secure their investment.

Our underwriter investigated the borrower’s background, along with their long-term business plans, to ensure the deal sat on solid foundations. The borrower aimed to purchase the mixed-use property consisting of a commercial unit, and a self-contained flat.

However, the property was attractive to external buyers, so our borrowers wanted to move quickly – both to secure the property for themselves, and ensure their business was able to continue as normal.

We reviewed the borrower’s situation internally, determining no problems would emerge. We also worked with the valuer to determine the prospects of this investment. They confirmed it held potential and with the borrower having a long-term plan in place, along with a solid refinancing exit strategy, we were able to deliver funding. ( Case study 2 )

Case study 3

A client turned to us as they required funding for a commercial property, but a number of issues had to be ironed out to progress.

During our checks and discussions with the client’s mortgage broker, there appeared to have been some adverse credit within the past 12 months. While a mainstream lender may have dismissed the case outright at this point, our underwriter looked for a solution.

They could see that the client was currently in a healthy position, and that the property being invested into held a lot of long-term potential.

What’s more, our funding would provide breathing space for the client. Allowing them to clear their debt obligation and remove the barrier to securing refinance later down the line.

With the strength of the underlying asset, coupled with the client’s solid planning, our underwriter was happy to issue the loan. ( Case study 3 )

• The Town and Country Planning (Use Classes) Order 1987
• The Town and Country Planning (Use Classes) (Amendment) (England) Regulations 2020
• Changes to the planning system in England: Permitted development rights and use classes
• Use Classes
• Find your Local Planning Authority
• Renting a business property: tenant responsibilities
• Asbestos regulations for your commercial property
• Fire safety in the workplace
• CCTV installation at your commercial property
• Landlord and Tenant Act 1954
• Planning permission
• Capital Gains Tax: what you pay it on, rates and allowances

Hopefully, this commercial property guide has answered some of the questions you have about investing in this corner of the market.

The commercial property world is going through something of a re-examination at the moment. With the pandemic behind us, and flexible working prevalent, many are thinking about what we should do with all our empty offices and department stores.

At the same time, there is still a clear need or demand for leisure spaces or manufacturing hubs. Some may be unsure of how best to progress, while others could spot an opportunity for conversion projects, or moving into new industries.

Regardless of what plans are followed though, we’ll have funding available to support a wide range of borrowers. Our loans can be used by individuals making their first commercial property purchase, through to experienced professionals expanding their portfolio.

All our commercial loans are underwritten from day one. So, no matter how complicated an investor’s situation may be, we want to hear from them.

MFS are a bridging loan and buy-to-let mortgage provider, not financial advisors. Therefore, Investors are encouraged to seek professional advice. The information in this content is correct at time of writing.

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How To Write a Business Plan for Commercial Property Leasing in 9 Steps: Checklist

By henry sheykin, resources on commercial property leasing.

• Financial Model
• Business Plan
• Value Proposition
• One-Page Business Plan
• SWOT Analysis
• Business Model
• Marketing Plan

Are you interested in entering the commercial property leasing industry? With the growing demand for commercial spaces, it's a lucrative business opportunity that can provide steady income. In fact, according to recent statistics, the commercial property leasing market in the US has experienced a significant growth rate of 5.2% over the past year, with an estimated market value of $425 billion .

However, starting a commercial property leasing business requires careful planning and strategic execution. To help you get started, we have created a concise checklist of 9 steps that will guide you through the process of writing a comprehensive business plan.

Firstly, conducting thorough research on the current market and industry trends is essential. This will help you gain insights into the demand and supply dynamics, rental rates, and emerging opportunities. Additionally, identifying your target market and understanding their demographics will enable you to cater to their specific needs and preferences.

Competitive analysis is another crucial step in the business planning process. By studying your competitors' strengths and weaknesses, you can identify unique selling points and strategies to differentiate your business from the competition.

Next, determining the optimal location and property type for leasing is vital. Analyzing the market demand and potential growth areas will allow you to make informed decisions and maximize your profit potential.

Of course, finance plays a significant role in any business, and commercial property leasing is no exception. Assessing your financial requirements and available resources will help you create a realistic budget and secure the necessary funding.

Developing a clear value proposition and unique selling proposition (USP) is crucial for attracting potential tenants. This involves highlighting the benefits and advantages of your properties, such as prime locations, modern facilities, or flexible lease terms.

Identifying potential partnerships and strategic alliances is another effective way to expand your business network and enhance your market presence. Collaborating with property management companies, real estate agents, or industry associations can provide valuable support and referral opportunities.

Analyzing legal and regulatory considerations is vital to ensure compliance with local laws and regulations. From lease agreements to zoning restrictions, taking these factors into account will help you avoid legal complications and maintain a smooth operation.

Finally, outlining your marketing and sales strategies is essential for attracting potential tenants and reaching your target market. Utilizing online platforms, social media advertising, and industry events can significantly enhance your visibility and generate leads.

By following these 9 steps and carefully crafting your business plan, you will be well-prepared to embark on your commercial property leasing journey. Stay tuned for our upcoming posts, where we will delve deeper into each step and provide valuable insights to help you succeed in this dynamic industry.

Research The Current Market And Industry Trends

When starting a business in the commercial property leasing industry, it is crucial to conduct thorough research on the current market and industry trends. This step will provide you with valuable insights into the demand for commercial spaces, rental prices, and competitive landscape.

Here are the key aspects to focus on during your research:

• Market Size and Growth: Understand the size of the commercial property leasing market and its growth trajectory. This will help you determine the potential for profitability and scalability of your business.
• Market Segmentation: Identify the different market segments within the commercial property leasing industry. This could include retail spaces, office spaces, industrial spaces, and more. Analyze the demand and competition in each segment.
• Emerging Trends: Stay updated on the latest trends in commercial property leasing. Are there any new property types or leasing models gaining popularity? Are there any technological advancements that could impact the industry?
• Demographic Analysis: Understand the demographic profile of your target market. Analyze factors such as population growth, income levels, and employment rates to determine the demand for commercial spaces in specific areas.
• Competitor Analysis: Identify your key competitors in the market. Analyze their strengths, weaknesses, and market positioning. This will help you differentiate your business and identify potential gaps in the market.
• Utilize industry reports, market research studies, and government data sources to gather reliable information about the current market and industry trends.
• Network with professionals and experts in the commercial property leasing industry to gain valuable insights and learn from their experiences.
• Follow relevant publications, blogs, and online forums to stay updated on the latest news and trends in the industry.

By thoroughly researching the current market and industry trends, you will be equipped with the knowledge to make informed decisions regarding your commercial property leasing business. It will help you identify opportunities, understand customer needs, and develop effective strategies to stay competitive in the market.

Identify The Target Market And Demographics

When writing a business plan for commercial property leasing, it is crucial to identify the target market and understand their demographics. This step is essential for tailoring your leasing strategies and meeting the specific needs of potential tenants.

Research: Begin by conducting extensive research on the local market and industry trends. This will help you identify the demand for commercial properties and gain insights into the preferences of potential tenants. Look for data on vacancy rates, rental prices, and the types of businesses thriving in the area.

Demographics: Analyze the demographics of the target market to determine the type of businesses that are likely to be interested in leasing your commercial properties. Consider factors such as age, income levels, education, and industry preferences. This information will help you define your ideal tenant profile and tailor your marketing efforts accordingly.

Identify niches: Look for specific niches within the market that are underserved or have specific needs that your commercial properties can fulfill. This could be a particular industry, such as healthcare or technology, or specific business types, such as startups or established corporations. Identifying these niches will allow you to focus your efforts and differentiate yourself from competitors.

Tips for identifying the target market and demographics:

• Utilize online market research tools, such as demographic data platforms, to gather accurate and up-to-date information.
• Engage with local business organizations and industry associations to gain insights from professionals in the field.
• Conduct surveys or interviews with potential tenants to get direct feedback on their needs and preferences.
• Stay updated on current economic trends and changes in the local business landscape to anticipate shifts in the target market.

Identifying the target market and understanding the demographics is a critical step in developing a successful business plan for commercial property leasing. By tailoring your strategies to meet the specific needs of potential tenants, you can increase your chances of attracting and retaining long-term tenants, ultimately maximizing the profitability of your commercial properties.

Conduct Competitive Analysis

When leasing commercial property, it is crucial to understand the competitive landscape. Conducting a comprehensive competitive analysis allows you to identify your competitors, their strengths and weaknesses, and how your offering can stand out in the market.

Start by identifying your direct competitors, those who are leasing properties similar to yours in the same geographical area. Research their lease terms, rates, and any unique features they offer. This information will help you determine how competitive your leasing terms and prices are in comparison.

Additionally, analyze your competitors' target market and demographics . Determine who they are attracting and whether there are any gaps or untapped opportunities you can leverage. Understanding your competitors' customer base will enable you to refine your target audience and tailor your marketing strategies accordingly.

Another aspect to consider is your competitors' marketing and branding strategies. Look at their online presence, advertising campaigns, and social media platforms . Take note of what seems to be working well for them and determine how you can differentiate your property leasing business through effective marketing and branding.

Tips for conducting a competitive analysis:

• Use online tools and resources to gather information about your competitors, such as industry directories, property listing websites, and market research reports.
• Research customer reviews and feedback on your competitors' properties to gain insights into tenants' satisfaction and areas for improvement.
• Consider conducting mystery shopping to experience the process of leasing from your competitors firsthand.
• Stay updated on industry news and trends to be aware of any new entrants or disruptive changes that may impact your competitive landscape.

By conducting a thorough competitive analysis, you will be equipped with valuable knowledge to help you position your commercial property leasing business for success. It allows you to identify your unique selling points, refine your marketing strategies, and ensure that your lease terms remain competitive in the market.

Determine The Optimal Location And Property Type For Leasing

Choosing the right location and property type is crucial for the success of your commercial property leasing business. Research the local market to identify areas with high demand and growth potential. Look for neighborhoods or business districts that are experiencing economic development or have a shortage of commercial spaces.

Consider the target market and the type of businesses that are likely to lease your properties. Identify the property types that align with the needs and preferences of your target market. For example, if you are targeting retail businesses, look for properties with high foot traffic and visibility. If your target market is professional service providers, consider office buildings with modern amenities and convenient access to transportation.

Tips for determining the optimal location and property type:

• Consult with local real estate agents or property management companies to gain insights into market trends and demand.
• Conduct a thorough analysis of the demographics, including population density, income levels, and business growth projections in the area.
• Consider the accessibility and proximity to major highways, public transportation, and other amenities that are important to your target market.
• Assess the supply and demand dynamics in the market to identify potential opportunities or challenges.

Once you have narrowed down your options, evaluate the financial feasibility of leasing properties in different locations and property types. Calculate the potential rental income, operating expenses, and return on investment for each option. This analysis will help you make an informed decision and ensure that your leasing business remains profitable.

Remember, the location and property type you choose will shape the success of your commercial property leasing venture. Take the time to thoroughly research and analyze your options to maximize your chances of attracting high-quality tenants and achieving long-term success.

Assess The Financial Requirements And Resources

One of the crucial aspects of writing a business plan for commercial property leasing is assessing the financial requirements and resources. This step involves thoroughly understanding the financial implications of leasing commercial properties and ensuring that adequate resources are available to meet those requirements.

First and foremost, conduct a detailed analysis of the costs involved in leasing commercial properties . This analysis should include factors such as property acquisition or lease fees, property maintenance and repairs, property taxes, insurance, and any other relevant expenses. It is essential to have a clear understanding of these costs to accurately determine the financial resources needed to start and sustain your commercial property leasing business.

Assess your available financial resources and determine if they align with the identified requirements . This includes evaluating your personal savings, investment capital, loans, or any other potential sources of funding. A comprehensive evaluation allows you to gauge whether your financial resources are sufficient to cover the initial investment and ongoing expenses.

Consider seeking financial assistance if necessary . If your available resources do not align with the identified requirements, explore options such as securing additional funding through loans or partnerships. It is important to have contingency plans in place to ensure that your business can sustain itself financially throughout the leasing process.

• Work with a financial advisor or accountant to accurately assess the financial requirements of your commercial property leasing business.
• Create a realistic budget that incorporates all the anticipated financial obligations and factors in potential fluctuations or unforeseen expenses.
• Develop a financial projection model to estimate future income and expenses, enabling you to make informed decisions about financial resources.
• Build relationships with potential lenders or investors early on to increase the likelihood of securing financial assistance when needed.

Remember, a solid understanding of the financial requirements and resources is essential for a successful commercial property leasing business.

Develop A Clear Value Proposition And Unique Selling Proposition

When it comes to leasing commercial properties, having a strong value proposition and unique selling proposition is essential. This will not only differentiate your property from the competition but also attract potential tenants and generate interest in your offerings.

1. Clearly define the benefits: Start by clearly outlining the unique benefits and advantages that your property offers. Consider factors such as location, amenities, accessibility, and potential for growth. Clearly communicate how these features will add value to the tenant's business and contribute to their success.

2. Understand your target market: Conduct thorough research to understand the needs and preferences of your target market. Determine the key pain points your potential tenants might have and position your property as the solution to their problems. Tailor your value proposition to address these specific needs and differentiate yourself from competitors in the market.

• Conduct surveys or interviews with businesses in your target market to gather insights.
• Stay updated on industry trends and incorporate them into your value proposition.
• Highlight any unique features or amenities that set your property apart.

3. Demonstrate your expertise: Showcase your expertise in the commercial leasing industry to build credibility and trust with potential tenants. Highlight your track record of successful leases, positive tenant relationships, and any relevant certifications or awards you have received. This will reassure potential tenants that you have the knowledge and experience to meet their needs.

4. Provide exceptional customer service: Emphasize your commitment to providing exceptional customer service throughout the leasing process. Clearly communicate how you will support tenants from the initial inquiry to lease execution and beyond. Offer personalized assistance, prompt communication, and proactive problem-solving to create a positive leasing experience.

• Train your leasing team to be knowledgeable and friendly.
• Implement efficient communication channels to address tenant inquiries and concerns promptly.
• Consider offering additional services or resources that can further support tenant businesses.

5. Showcase success stories or testimonials: Incorporate success stories or testimonials from previous tenants to showcase the positive experiences they have had in your property. Highlight how your property has helped businesses grow, improve efficiency, or achieve their goals. This social proof can be a powerful tool in convincing potential tenants of the value your property provides.

6. Continuously evaluate and refine your value proposition: The commercial property leasing market is dynamic, and tenant needs and preferences may change over time. Regularly evaluate and refine your value proposition to ensure it remains relevant and competitive. Stay current with market trends and feedback from tenants to identify areas of improvement and make necessary adjustments.

Developing a clear value proposition and unique selling proposition for your commercial property leasing business is critical in attracting the right tenants and maximizing your leasing potential. By understanding your target market, showcasing your expertise, providing exceptional customer service, incorporating success stories, and continuously evaluating your value proposition, you can position your property for success in the competitive leasing market.

Identify Potential Partnerships And Strategic Alliances

When creating a business plan for commercial property leasing, it is crucial to consider potential partnerships and strategic alliances that can enhance your operations and fuel growth. These collaborations can provide numerous benefits, such as access to new markets, shared resources, and increased credibility. Here are some steps to help you identify and establish these partnerships:

• Research Potential Partners: Begin by researching companies or organizations that align with your business objectives and target market. Look for partners who can complement your offerings and bring added value to your customers.
• Assess Their Reputation and Track Record: Before entering into any partnership, thoroughly evaluate the reputation and track record of potential collaborators. Seek out references, reviews, and case studies to ensure that the partnership will be beneficial and reliable.
• Identify Mutual Benefits: Clearly define the mutual benefits that each party can gain from the partnership. This can include sharing resources, reaching new customer segments, expanding geographic reach, or leveraging expertise.
• Establish Open Communication: Effective communication is essential for successful partnerships. Prioritize establishing open lines of communication with potential partners to ensure alignment of goals, transparent decision-making processes, and timely feedback.
• Consider Complementary Skills and Expertise: Look for partners who possess complementary skills and expertise that can enhance your business. This can include technical knowledge, market insights, or operational capabilities that fill gaps in your existing capabilities.
• Create Clear Agreements: Develop clear and thorough partnership agreements that outline responsibilities, expectations, and the specific terms of collaboration. Seek legal counsel to ensure that all parties are protected and that the agreement reflects the mutual goals and objectives.

Tips for Identifying Potential Partnerships and Strategic Alliances:

• Attend industry events and networking opportunities to meet potential partners.
• Utilize online platforms and directories to search for companies with complementary offerings.
• Consider partnering with companies that share similar values and a compatible corporate culture.
• Regularly evaluate and reassess partnerships to ensure they continue to align with your business goals.

Analyze Legal And Regulatory Considerations

When leasing commercial properties, it is crucial to analyze the legal and regulatory considerations to ensure compliance and avoid potential legal issues. Here are the key aspects to consider:

• Tenant Laws: Familiarize yourself with the tenant laws in your target market. Each state may have different laws regarding eviction procedures, security deposits, lease termination, and tenant rights. Understanding these laws will help you protect your rights as a landlord and establish fair and legal lease agreements.
• Zoning and Land Use Laws: Research the zoning regulations and land use laws in the location where you plan to lease the commercial property. Ensure that the property is zoned for the intended use and comply with any restrictions or regulations imposed by local authorities. Violating zoning laws can lead to fines, penalties, or even the closure of your business.
• Building Codes and Safety Standards: Understand the building codes and safety standards applicable to the commercial property you wish to lease. Ensure that the property meets all the necessary safety requirements, such as fire codes, accessibility standards, and health regulations. Failure to comply with these codes can result in costly fines, legal disputes, or even endanger the well-being of the tenants.
• Environmental Regulations: Environmental regulations play a significant role in commercial property leasing. Ensure that the property complies with any environmental laws and regulations, especially if it falls under a specific industry that may have environmental implications. Conduct any necessary environmental assessments to identify any potential risks or liabilities.
• Contract Law: Seek professional legal advice when drafting lease agreements or any other contracts related to the leasing process. A strong understanding of contract law is crucial to ensure that your agreements are legally binding and protect your rights. Include provisions for rent payments, lease terms, maintenance responsibilities, and dispute resolution mechanisms.
• Insurance Requirements: Research the insurance requirements for commercial property leasing in your area. Consider obtaining appropriate insurance coverage to protect yourself from potential liabilities, such as property damage, personal injury claims, or natural disasters. Consult with insurance professionals to determine the types of coverage you may need.
• Consult with a legal expert specializing in commercial real estate to ensure compliance with all applicable laws and regulations.
• Stay updated on any new or changing legal requirements in the commercial property leasing industry.
• Maintain proper documentation and records to demonstrate compliance with legal and regulatory obligations.
• Consider joining industry associations or organizations that provide resources and guidance on legal and regulatory matters.

By thoroughly analyzing the legal and regulatory considerations, you can mitigate potential risks, maintain a strong legal position, and create a secure and compliant commercial property leasing business.

Outline The Marketing And Sales Strategies

Once you have conducted thorough research and analysis, it is time to outline the marketing and sales strategies for your commercial property leasing business. A well-developed marketing plan will help you attract potential tenants and effectively promote your properties. Here are key considerations to include in your marketing and sales strategies:

• Determine your target audience: Identify the specific industries or businesses that you want to target for leasing your commercial properties. Understanding their needs, preferences, and budget will help you tailor your marketing efforts.
• Create a strong online presence: In today's digital age, having a compelling online presence is crucial. Develop a professional website that showcases your available properties, includes detailed photos and descriptions, and provides contact information. Utilize search engine optimization (SEO) techniques to improve your website's visibility in search engine results.
• Utilize social media platforms: Leverage social media channels such as LinkedIn, Facebook, and Twitter to reach a wider audience and engage with potential tenants. Consistently update your social media profiles with relevant content, including property listings, industry news, and helpful tips for businesses.
• Network and build relationships: Attend industry events, join local business organizations, and participate in community activities to meet potential tenants and build strong relationships within the business community. Establishing a network of contacts can lead to valuable referrals and partnerships.
• Offer incentives and promotions: To attract tenants, consider offering incentives such as reduced rent for the first few months, flexible leasing terms, or additional amenities. Promote these incentives through your marketing channels to generate interest and entice potential tenants.
• Collaborate with local real estate agents or brokers to expand your reach and tap into their existing networks.
• Invest in professional photography and virtual tours of your properties to showcase their unique features and attract potential tenants.
• Implement a lead generation strategy by offering downloadable resources or conducting webinars that provide valuable information for business owners in your target market.
• Monitor and respond to online reviews and inquiries promptly to build trust and demonstrate your commitment to tenant satisfaction.

By outlining clear marketing and sales strategies, you can effectively position your commercial property leasing business in the market, attract the right tenants, and maximize your leasing opportunities. Regularly evaluate and refine your strategies to adapt to market changes and stay competitive.

In conclusion, developing a comprehensive business plan is crucial for success in the commercial property leasing industry. By following the nine steps outlined in this checklist, potential property owners can ensure they have thoroughly researched the market, identified their target demographic, and considered all financial, legal, and marketing aspects. Incorporating the net lease model, which provides a balance of responsibility and control for both landlords and tenants, can be a profitable strategy. With careful planning and execution, commercial property leasing can be a lucrative venture in the ever-growing real estate market.

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How to create a rental property business plan (and why you need one)

Last updated: 21 October 2022

Take it from someone who’s spoken to a lot of investors over the last few years: almost everyone who achieves great success started out with a solid plan.

All businesses start out with a plan . Even if that plan is just “I think I can buy this widget for £1 and sell it for £1.50”, it’s still a statement of what the business will do and how it will make a profit.

But many – in fact, most – wannabe property investors start out without even the most basic of plans. Often, people have nothing more than vague thoughts like “ property prices go up, so it’s a good investment ” or “ most wealthy people seem to own property ”.

It might feel like sitting around planning is just delaying you from getting out to look at properties and start making money. But take it from someone who’s spoken to a lot of investors over the last few years: almost everyone who achieves great success started out with a solid plan.

(Or to put it another, more painful way: almost everyone who didn’t start with a plan ends up disappointed with where they end up – however much effort, money and time they put in.)

What does a rental property business plan look like?

It certainly doesn't need to be 100 spiral-bound pages of projections and fancy charts. In fact, the best plan would be so simple that it fits on the back of an index card – meaning that you can commit it to memory and use it to drive every decision you make.

In order to get to that simplicity though, you might need to do some seriously brain-straining thinking first.

It's not easy, but it is simple: your plan basically just needs to set out…

Where you are now

• Where you want to get to, and
• What actions you're going to take to bridge the gap

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To give a cheesy analogy, you can't plan a route unless you know where you're starting from.

Working out your starting point is the easiest part, because it involves information that's either known or easily knowable to you.

You'll need to be clear about:

• The amount of money you've got to invest
• The amount of savings you can allocate to property investment in future years
• The time you can invest each week or month
• The skills and knowledge you can apply to your property business

Note that I said it was the easiest part, but still not easy – because it involves honesty about what you can commit, and self-knowledge to determine where your strengths lie.

Knowing how much money you've got to invest should be straightforward, but it's probably worthwhile speaking to a mortgage broker to check that you'll have borrowing options – because this will determine your total investment figure. A broker will also be able to tell you about your options around releasing equity from your own home, if that's something you want to consider.

I'd also strongly encourage you to consider what “emergency fund” you want to keep in cash, and deduct that from your total investable funds. I suggest having at least six months' expenses in the bank at all times: the last thing you want is to plough every last penny into investments, then lose your job the next day and be unable to pay your bills.

Where you want to get to

So now you know where you're starting from, where do you want to end up? In other words, what's your goal?

Yes, you want to be “rich”, or “secure”, or “build a future” – but what does that actually mean, in pounds and pence terms, for you?

And just as importantly, when do you want to have achieved that?

You might be surprised by how much thought is involved in answering these questions properly. It's easy to throw around terms like “enough to fund my lifestyle” and assume that it might involve an income of £10,000 per month, but it's another matter entirely to look honestly at your ideal lifestyle and determine what a genuinely meaningful figure is.

The same is true for “when” – and it's an often-ignored factor that actually cuts to the heart of the most basic of investment decisions.

For example, take a choice between two properties:

• Property 1 will give a return on your investment of 15% but will probably never increase in value
• Property 2 will give a return of 7% but has the potential to double in value over the next decade.

If your goal is to create a certain monthly income within three years, the Property 1 is likely to be a better choice. Growth is unlikely to happen to any great extent over that time, so you need to optimise for cash in the bank right now.

On the other hand, if you have a decade before you want to have achieved your goal, Property 2 is probably the better bet. It very much is a “bet” because you're taking something of a gamble on capital growth, but it's got a lot of time to happen – and when it does, your returns will dwarf the higher rental income you'd have made from the other property.

That's just one example of why making even simple decisions in your property business are impossible without having that most basic ingredient of your plan: where you ultimately want to end up, and when.

So, by this point in the plan you need to:

• Assess your finances to build up an honest picture of where you are now
• Put some serious thought into where you want to get to, and when

If you need help with this goal-setting process, I co-own Property Hub Invest which offers free strategy meetings . It's often easier to work this stuff out in conversation with someone who knows their stuff, rather than doing it all in your own head.

That's a great start, but for most people it'll produce an uncomfortable insight: the gap between where you are and where you want to be seems impossibly large! With the resources you've got now, how are you possibly going to reach your goal in a sensible period of time?

Well, that's where it's time to start thinking about the details of the third step: the strategy you'll use to pursue your goal.

A strategy to bridge the gap

The steps you take to get from Point A to Point Z are what's commonly referred to as your strategy – and strategy is a vital component of your business plan.

The way I like to think about strategy is the way you compensate for a lack of cash . It's an unusual way to look at it, but I find it useful – because it tells you (given your timeframe and your goal) how much heavy-lifting your strategy will need to do to keep you on track.

Think of it like this: if you had £10m in the bank and your goal was to make an income of £5,000 per month within a year, you wouldn't need any strategy at all . You could just use your £10m to buy any properties, anywhere – you wouldn't need to maximise the rent, manage them well or even keep them all occupied at all times! You'd be able to buy so much property that you really couldn't fail.

Sure, it'd be a pretty stupid thing to do – you should really have had a more ambitious goal – but you get the point.

Obviously, most of us aren't in that position – and that's why we need a strategy.

So, just what position are you in?

A rule of thumb

A handy way of looking at it is to take the amount of money you've got to invest in property, and assume that you can get a 5% annual return on that money (ROI) – which is a rough rule-of-thumb for a normal property bought with a 75% mortgage.

So, if you've got £100,000, you can generate a (pre-tax) profit of £5,000 per year – or £416 per month.

That's unlikely to be enough to hit most people's goals – but then there's the time factor. If you save up the rental income for 20 years, you'll be able to buy another batch of properties just like the first – so you'll now have income of £832 per month.

If you're happy with that, then you've already got your strategy: buy properties that will give you your desired ROI, then wait!

Portfolio-building strategies

But most people will want more than that: we've hardly been talking about life-changing sums, and 20 years is a long time to wait before you can buy again!

This is where more of an advanced strategy comes in, allowing you to get better results, faster.

This might include:

• Buying properties and adding value, so you can refinance at the higher value and buy your next property more quickly ( learn more about this strategy )
• Buying properties at a discount, allowing you again to refinance at the higher value and move on to the next one
• Turning properties into HMOs, so you can generate a higher ROI on them
• “Flipping” properties for a profit, so you can replenish your cash more quickly ( read my guide to flipping )

…or something else entirely.

I go into different strategies in enormous detail in my book, The Complete Guide To Property Investment .

Simply appreciating the need for one of these strategies from the start is a really big deal.

Most people don't: they'll rush in, use all their money to buy properties that generate (say) £500 profit per month, then…what? They'll be stuck – because they didn't go in with a plan for how they were going to get to their target number . They'll effectively be starting from scratch, having to scrape together the money to go again.

It's extremely common, and it doesn't surprise me – but it does frustrate me. If they'd started with just a bit of time making a plan, they wouldn't have made this mistake – because it would have become very obvious that they wouldn't reach their goal without applying some strategy.

Any of the strategies I listed (or a different one, or a combination of several of them), when applied effectively, can get you to where you need to be. But that's not to say that all of them will be equally good for you. Each of them has different risk factors, requires different time commitments, are suited to different skill sets, and so on.

That's why this is your business plan: copying someone else's homework isn't going to do you any good, because their skills, attributes and preferences will be different from yours.

For example, one person's plan might be to get their hands dirty by renovating properties for resale – completing two projects per year, and using the profits to buy an HMO. Within five years they'll have five HMOs, which will give them all the income they need.

Someone else might be hopeless at anything hands-on, but a master negotiator. Their plan could be to buy at enough of a discount that they can pull at least half of their funds back out again by refinancing – and keep doing that until in ten years' time they have 15 single-let properties giving them their target income figure.

(That's why when someone emails me asking if their strategy “sounds good”, I have to say that I don't know: usually it sounds like on paper like it would work for someone , but I have no idea if they're the right person to execute it.)

So, coming up with your strategy involves:

• Starting with an assessment of where you are now
• Deciding where you want to get to, and by when
• Seeing how far you'll fall short by just buying “normal” properties
• Thinking about your own skills, time and preferences to choose which strategy (or strategies) you'll use to fill in the gap

It might take a while, and that's OK – it's not an easy decision . To take the pressure off though, remember: your plan isn't set in stone. It's important to start with a clear vision and not get distracted by every new opportunity that comes your way, but every plan is just a starting point: you'll be seeing what works, reviewing and adjusting course along the way.

Once you've got a strategy down on paper, that's a huge step – and you should congratulate yourself, because it's a step that most people will never make (and will suffer for).

But of course, the act of writing the plan isn't going to magic it into existence: you need to get out there and execute on the plan.

Turning your property business plan into action

Having an appropriate goal and a solid strategy to get you there are essential, sure – but nothing is going to happen until you actually take the steps that are necessary to execute that strategy.

If you don't take the time to identify the steps and make a plan to carry them out, you'll end up in “pulling an all-nighter the day before your homework is due in” mode. And you don't want that: it's no good setting a five-year goal, feeling all virtuous for being such a strategic and big-picture thinker, then realising in four years and 364 days that you've not actually got any closer towards making it a reality!

So let's get those steps in place. And the good news is…it's really simple. (The best things usually are.)

Breaking it down

However big, ambitious and far in the future a goal seems to be, all goals are achieved in exactly the same way : by breaking them down into individual tasks, and working through those tasks one by one.

As you work through those tasks, it’s important to have sub-goals as “checkpoints” along the way.

Sub-goals are how you stay on track: by setting a deadline for each sub-goal, you can make sure that your progress is fast enough. They also keep you motivated, because it means you’ll always have a small “win” on the horizon: you won’t just be looking at the main goal (potentially) years off in the future. Think of them as mile markers at the side of a marathon course.

To put it another way:

Small task + Small task + Small task = Sub-goal Sub-goal + Sub-goal + Sub-goal = Overall goal

It's those small daily tasks that are the foundations of your achievement. And that's the beauty of a good plan: all you need to concentrate on is ticking off your tasks each day, and your overall goal is achieved automatically!

So, this final step in your plan is about breaking that big goal down into sub-goals, and those sub-goals down into bite-sized individual tasks. That's it!

As you break it down, there are a few things I find are useful to think about…

One-off tasks v recurring tasks

Your business will have two types of task:

• One-off tasks , like finding a mortgage broker
• Recurring tasks , like viewing properties and making offers

These two types of task will both appear in your weekly, monthly and quarterly to-do lists. A useful way of planning your time is to start by filling in your recurring tasks – like going through portals to find new potential acquisitions every day, and calling agents to follow up on offers once per week – then adding your recurring tasks on top.

By thinking about both types, you'll make sure you're not dropping the ball on the important day-by-day stuff, but you're also not ignoring the big-picture one-offs that are going to make a huge difference to your business in the long run.

The first, simplest step

Just like you break a goal down into sub-goals and sub-goals down into tasks, I favour breaking every one-off task down into the smallest possible unit .

For example, “find a mortgage broker” could be an important one-off task for you, but it's not something you can just sit down and do until it's done. Because it seems nebulous and you can never identify a block of time when you can do it from start to finish, you can end up never doing it at all.

Instead, you'll make yourself feel better by ticking off smaller tasks that seem easier – but are often less important.

The solution is to break every task down into as many sub-tasks as possible. So instead of “find a mortgage broker”, the tasks become :

• Email 3 contacts to ask for recommendations
• Post on The Property Hub forum to ask for recommendations
• Email everyone who is recommended to set up a quick call
• Draw up a shortlist of 2-3 people to have a longer conversation with
• Pick a winner

Doesn't that seem much easier already? You can imagine sitting down and bashing out the first task in five minutes right now, then you're underway!

Who will do each job?

Here's a potential lightbulb moment: you don't have to do everything in your business yourself.

Any business has different “functions”, or departments – like sales, manufacturing, and admin. A property business is no exception.

The basic functions of all property businesses are the same:

• Acquisition
• Refurbishment
• Refinancing/selling

The types of task that fall within each function will depend on your business plan. For example, if your aim is to find properties you can buy “below market value”, acquisition could be a major part of the business – involving direct-to-vendor marketing, networking with estate agents, and attending auctions.

On the other hand, if your model involves buying properties that you think will experience strong capital growth, there could be a lot more tasks in the “research” part of the business – and acquisition could be very straightforward once you’ve identified the opportunity itself.

Could you do every task within every function yourself? Maybe.

Could the business achieve better results if you bring in specialists to do what they do best? Definitely .

You could go big and employ an assistant to view properties and make offers for you, or just make sure you outsource functions like management and accountancy to the relevant professionals.

Whatever you do, once you start thinking about your property venture as a business with various departments, you'll start to break away from the idea that this is something you have to do all on your own – and that's a very powerful insight.

OK, this has been a long one – but we've covered a lot of ground.

To recap, those critical steps are:

• Assess where you are now
• Work out where you want to be, and by when
• Outline a strategy to get you there
• Fill in the detail, to get you from “big picture” to individual steps

It's a process that's worked for me, and I've seen it work for many investors I've encouraged to put it into action too.

Its power is in its simplicity: you take the time to intelligently decide exactly what you need to do, then you figure out a way to (to borrow a registered trademark) just do it . As long as you show up and work through your to-do list each day, the big, scary, long-term goal takes care of itself!

Of course, you'll need to assess your progress and adjust course along the way: nothing will pan out exactly as expected, and there's a lot that can change over a timespan of several years.

But by having your plan, what you won't do is get distracted by every new idea that comes your way – researching HMOs one day, and holiday lets the next – and end up getting nowhere.

(You'd be amazed by how many plan-less people that description fits to a tee.)

So now you know how to put a property business plan together. It's not a plan that will necessarily get you funding from the bank, but it's something more important than that: a plan you can use every day to make sure you stay on track to hit your goals.

The one thing that every successful investor does

Rental Properties Business Plan Template

Written by Dave Lavinsky

Rental Property Business Plan

Over the past 20+ years, we have helped over 10,000 entrepreneurs and business owners create business plans to start and grow their rental property business. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a rental property business plan template step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What is a Rental Properties Business Plan?

A business plan provides a snapshot of your rental property business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for a Rental Properties Business

If you’re looking to purchase a rental property, multiple rental properties, or add to your existing rental properties business, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your rental property business in order to improve your chances of success. Your rental property business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Rental Property Companies

With regards to funding, the main sources of funding for rental properties are personal savings, credit cards, mortgages, and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.

The second most common form of funding for a rental property is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan. Venture capitalists will not fund a rental property company. They might consider funding a rental property company with a national presence, but never an individual location. This is because most venture capitalists are looking for millions of dollars in return when they make an investment, and an individual location could never achieve such results.

Finish Your Business Plan Today!

How to write a business plan for a rental property company.

Your business plan should include 10 sections as follows:

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of rental property you are operating and the status; for example, are you a startup, or do you have a portfolio of existing rental properties that you would like to add to?

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the rental properties industry. Discuss the type of rental property you are offering. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.  

Company Analysis

In your company analysis, you will detail the type of rental properties you are offering.

For example, you might offer the following options:

• Single family homes – This type of rental property is often owned by a single individual, rather than a company, who acts as both landlord and property manager.
• Multi-family properties – These types of properties can be subcategorized by the number of units per site. Buildings with 2 – 4 units are the most common (17.5%), while multistory apartment complexes with more than 50 units represent the next-largest, at 12.6% of the industry.
• Short-Term Rental properties – These are fully furnished properties that are rented for a short period of time – usually on a weekly basis for vacation purposes.

In addition to explaining the type of rental property you operate, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include occupancy goals you’ve reached, number of property acquisitions, etc.
• Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry analysis, you need to provide an overview of the rental properties industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the rental property industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your strategy, particularly if your research identifies market trends.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your rental property business plan:

• How big is the rental properties industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential market for your rental property. You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population or tourist arrivals.

Customer Analysis

The customer analysis section of your rental property business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: households, tourists, etc.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of rental property you offer. Clearly, vacationers would want different amenities and services, and would respond to different marketing promotions than long-term tenants.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.  

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other rental property companies.

Indirect competitors are other options customers may use that aren’t direct competitors. This includes the housing market, or hotels. You need to mention such competition to show you understand that not everyone who needs housing or accommodation will seek out a rental property.

With regards to direct competition, you want to detail the other rental properties with which you compete. Most likely, your direct competitors will be rental properties in the vicinity.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

• What types of customers do they serve?
• What lease lengths or amenities do they offer?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you provide superior properties?
• Will you provide services that your competitors don’t offer?
• Will you make it easier or faster for customers to book the property or submit a lease application?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a rental property business plan, your marketing plan should include the following:

Product : in the product section you should reiterate the type of rental property business that you documented in your Company Analysis. Then, detail the specific options you will be offering. For example, in addition to long-term tenancy, are you offering month-to-month, or short-term rental?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the properties and term options you offer and their prices.

Place : Place refers to the location of your rental property. Document your location and mention how the location will impact your success. For example, is your rental property located in a tourist destination, or in an urban area, etc. Discuss how your location might draw customer interest.

Promotions : the final part of your rental property marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:

• Advertising in local papers and magazines
• Reaching out to local websites
• Social media marketing
• Local radio advertising

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your rental property business, such as customer service, maintenance, processing applications, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect 100% occupancy, or when you hope to reach $X in sales. It could also be when you expect to acquire a new property.  

Management Team

To demonstrate your rental property business’ ability to succeed as a business, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally you and/or your team members have direct experience in rental property management. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in real estate, and/or successfully running small businesses.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you have 1 rental unit or 10? And will revenue grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $200,000 on purchasing and renovating your rental property, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $200,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a rental property business:

• Location build-out including design fees, construction, etc.
• Cost of equipment like computers, software, etc.
• Payroll or salaries paid to staff
• Business insurance
• Taxes and permits
• Legal expenses

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your property blueprint or map.  

Putting together a business plan for your rental properties company is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the rental property industry, your competition and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful rental properties business.

Rental Properties Business Plan FAQs

What is the easiest way to complete my rental properties business plan.

Growthink's Ultimate Business Plan Template  allows you to quickly and easily complete your Rental Properties Business Plan.

What is the Goal of a Business Plan's Executive Summary?

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of rental property business you are operating and the status; for example, are you a startup, do you have a rental properties business that you would like to grow, or are you operating multiple rental property businesses.

Don’t you wish there was a faster, easier way to finish your Rental Properties business plan?

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Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.  

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Other Helpful Business Plan Articles & Templates

Rental Properties Business Plan Template

Written by Dave Lavinsky

Rental Properties Business Plan

You’ve come to the right place to create your Rental Property business plan.

We have helped over 10,000 entrepreneurs and business owners create business plans and many have used them to start or grow their rental property business.

Rental Property Business Plan Example

Below is a template to help you create each section of your rental property business plan.

Executive Summary

Business overview.

Noble Properties is a rental property agency in Seattle, Washington, that specializes in managing, renting, and leasing properties. Our mission is to provide luxury rentals that tenants can call home for years to come. Noble Properties rents out hundreds of homes across the Seattle area, including apartments, single-family homes, and trailers. To help prospective tenants find the perfect home, the company has created an online platform that allows them to search by their specific criteria (number of bedrooms, amenities, rent, etc.). We aim to be one of the most popular rental agencies in the area that customers can depend on again and again for their housing needs.

Noble Properties is founded and run by Joseph Pierce. He has worked in the industry for decades and has extensive knowledge of all aspects of the business. He will be in charge of most of the operations but will hire other staff to help with marketing, accounting, and managing the rentals.

Product Offering

Noble Properties offers a variety of properties for prospective tenants to choose from. Some of the options we provide include:

• 1-3 bedroom apartments
• Single-family homes
• Multi-unit buildings
• Short-term rentals
• Mobile homes or trailers

Customer Focus

Noble Properties will target renters located throughout the Seattle area. Most renters are under the age of 40 and earn about the median income. This means that we will primarily market to younger demographics and those who earn around the local median income or more.

Management Team

Noble Properties is led by Joseph Pierce, who has been in the rental property industry for 20 years. Throughout that time, he worked in various positions in local rental property agencies but is now eager to start a rental property business of his own. During his extensive experience in the rental property industry, he acquired an in-depth knowledge of the local area, local regulations, facilities, and the characteristics of different neighborhoods. He also has extensive experience in handling business management activities.

Karen Miller has been Joseph Pierce’s loyal administrative assistant for over ten years at his former rental agency. Joseph relies strongly on Karen’s diligence, attention to detail, and focus when organizing his clients, schedule, and files. Karen has worked in the rental agency industry for so long that she has a thorough knowledge of all aspects required to run a successful rental agency. She will help out with administrative tasks and some of the initial marketing efforts.

Success Factors

Noble Properties will be able to achieve success by offering the following competitive advantages:

• The founder, Joseph Pierce, has decades of extensive experience and knowledge of the industry that will prove invaluable for the company.
• The company will purchase rentals in popular areas around the city, putting our rentals in high demand.
• Noble Properties offers reasonable and affordable rates for all our rentals. Our pricing will be far more cost-effective than the competition.

Financial Highlights

Noble Properties is seeking $1,100,000 in debt financing to launch its rental property agency. The funding will be dedicated to securing initial rental spaces, securing an office space, and purchasing office equipment and supplies. Funding will also be dedicated toward six months of overhead costs, including payroll, rent, and marketing costs. The breakdown of the funding is below:

• Purchasing initial rentals: $600,000
• Office space build-out: $20,000
• Office equipment, supplies, and materials: $20,000
• Six months of overhead expenses (payroll, rent, utilities): $350,000
• Marketing costs: $50,000
• Working capital: $60,000

Company Overview

Who is noble properties, noble properties’ history.

After decades of working for other rental agencies, Joseph Pierce decided to launch an agency of his own. He conducted extensive research on the rental market in the Seattle area. This helped him determine the best spots to find in-demand rentals and how much he should rent them out for. He also did extensive marketing research to determine the best customer segments to market to. After conducting this research and finding a potential office location, Joseph Pierce incorporated Noble Properties as an S-Corporation.

Noble Properties’ operations are currently being run out of Joseph Pierce’s home office but will move to the office location once the lease is finalized.

Since incorporation, Noble Properties has achieved the following milestones:

• Developed the company’s name, logo, and website
• Determined rent/leasing and financing requirements
• Found a potential office location and signed a Letter of Intent to lease it
• Began recruiting key employees with experience in the rental homes/apartment industry

Noble Properties’ Products

Industry analysis.

The rental market is expected to continue to grow over the next five years. According to RentCafe, the average rent for a Seattle apartment is around $2,300 per month. This value is only expected to increase as the demand for apartments and other rentals skyrockets. Furthermore, Seattle’s vacancy rate is incredibly low and expected to decrease further, meaning there aren’t enough rentals to keep up with demand.

The growth is primarily driven by increasing housing prices. Now that housing prices have increased substantially, fewer and fewer people can afford to buy a home. Therefore, many people seek out rentals to live in since they are far more affordable.

Another factor that will help the Seattle rental market is the increasing population. More people are moving to the city, meaning the demand for homes and rentals will continue to soar. This will only push rental prices even higher, which will increase the local rental market’s value substantially.

This is a great market to start a rental agency in. By capitalizing on these trends, Noble Properties is expected to have great success.

Customer Analysis

Demographic profile of target market.

Noble Properties’ target market includes people of all demographics. We are open to offering rentals to people of all ages and groups as long as they can afford to pay their rent. From our initial market research, we expect most of our marketing efforts will target young adults, medium and high-income individuals, and families.

The precise demographics for Seattle, Washington, are:

Customer Segmentation

Noble Properties will primarily target the following customer profiles:

• Young adults
• Individuals who earn the region’s median income or more

Competitive Analysis

Direct and indirect competitors.

Noble Properties will face competition from other companies with similar business profiles. A description of each competitor company is below.

Leasing Inc.

Leasing Inc. is a marketplace for finding rental homes and apartments in multiple metropolitan areas around the country. It originally started more than a decade ago as a networking tool for real estate agents, but today it is a fully searchable online database of homes for both sale and rent. Leasing Inc. offers ideal rental properties, all with different amenities that can best suit the tenant’s requirements. Leasing Inc.’s properties are well furnished with all modern accessories and priced competitively.

Rental Barn

Rental Barn is the most visited rental agency website in the United States. Rental Barn and its affiliates offer customers an on-demand experience for selling, buying, renting, and financing with transparency and nearly seamless end-to-end service. The company’s rental property portfolio provides multiple rental apartments according to the customer’s needs and requirements.

Seattle Properties

Seattle Properties is a local rental property business that has dominated the market since 1982. The company manages and rents out hundreds of properties all across the city, including apartments, single-family homes, and mobile homes. All prices are competitive, and some rentals qualify for government programs to help low-income individuals. The company also utilizes a well-designed website to help prospective tenants find their perfect home based on rent, location, and accessories.

Competitive Advantage

• The company will purchase rentals in popular areas around the city, making our rentals in high demand.

Marketing Plan

Brand & value proposition.

The Noble Properties brand will focus on the company’s unique value proposition:

• Offering homes/apartments for rent suited for families and working professionals.
• Offering a diverse range of rental homes in a prime location for a competitive rate.
• Providing excellent customer service.

Promotions Strategy

The promotions strategy for Noble Properties is as follows:

Print Advertising

Noble Properties will invest in professionally designed print ads to display in programs or flyers at industry networking events and relevant local establishments.

Website/SEO Marketing

Noble Properties has designed a website that is well-organized and informative, and lists all our available properties. The website also lists the company’s contact information and other services it provides. We will utilize SEO marketing tactics so that anytime someone types in the Google or Bing search engine “Seattle rental properties” or “rentals near me,” Noble Properties will be listed at the top of the search results.

Referrals  

Noble Properties understands that the best promotion comes from satisfied tenants. The company will encourage its tenants to refer other individuals by providing economic or financial incentives for every new tenant produced. This strategy will increase effectiveness after the business has already been established.

Social Media Marketing  

Social media is one of the most cost-effective and practical marketing methods for improving brand visibility. The company will use social media to develop engaging content that will increase audience awareness and loyalty. Engaging with prospective clients and business partners on social media platforms like Facebook, Instagram, Twitter, and LinkedIn will also help understand the changing customer needs.

The real estate industry fluctuates, and therefore, rental prices, for the most part, are usually out of a company’s control. However, Noble Properties will market its properties at a competitive rate to ensure we do not have vacant properties. We will also keep tight control of costs in order to maximize profits.

Operations Plan

The following will be the operations plan for Noble Properties.

Operation Functions:

• Joseph Pierce will be the Owner and President of the company. He will oversee all staff and manage tenant relations. Jay has spent the past year recruiting the following staff:
• Karen Miller will serve as the Office Manager. She will manage the office administration, client files, and accounts payable. She will also handle much of the marketing efforts until the agency becomes large enough to hire a marketing team.
• Tim Johnson will be the Maintenance Director, who will provide all maintenance at the properties.
• Joseph will outsource professionals to handle the accounting and human resources aspects of the business.
• Joseph will also hire Rental Managers for the various properties as the agency continues to grow.

Milestones:

Noble Properties will have the following milestones completed in the next six months.

5/1/202X – Finalize contract to lease office space.

5/15/202X – Finalize personnel and staff employment contracts for the Noble Properties team.

6/1/202X – Begin moving into Noble Properties office.

7/1/202X – Finalize purchases of initial properties that will be rented.

7/15/202X – Begin networking and marketing efforts.

8/1/202X – Noble Properties opens its office and rentals for business.

Financial Plan

Key revenue & costs.

Noble Properties’ revenue will come from rental income, property management fees and deposits received from tenants.

The major costs for the company will be staff salaries and property maintenance. In the initial years, the company’s marketing spending will be high to establish itself in the market.

Funding Requirements and Use of Funds

Key assumptions.

The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and to pay off the startup business loan.

• Number of Managed Properties Per Month: 10
• Average Rent Per Month: $2,300
• Office Lease per Year: $100,000

Financial Projections

Income statement, balance sheet, cash flow statement, rental properties business plan faqs, what is a rental property business plan.

A rental property  business plan is a plan to start and/or grow your rental properties business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.

You can easily complete your rental properties business plan using our rental properties Business Plan Template here .

What are the Main Types of Rental Property Businesses?

There are a number of different kinds of rental property companies , some focus on Single family homes, Multi-family properties and others on Short-Term Rental properties.

How Do You Get Funding for Your Rental Property Business Plan?

Rental Property Businesses are often funded through small business loans. Personal savings, credit card financing and angel investors are also popular forms of funding. This is true for a real estate rental business plan or a rental property business plan.

A well-crafted rental property business plan is essential to securing funding from any type of potential investor.

What are the Steps To Start a Rental Properties Business?

Starting a rental property business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.

1. Develop A Rental Property Business Plan - The first step in starting a business is to create a detailed business plan for a rental property that outlines all aspects of the venture. This should include a market analysis, information on the services you will offer, marketing strategy, pricing strategies and a detailed financial forecast.  

2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your rental properties business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your rental properties business is in compliance with local laws.

3. Register Your Rental Properties Business - Once you have chosen a legal structure, the next step is to register your rental properties business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws. 

4. Identify Financing Options - It’s likely that you’ll need some capital to start your rental properties business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms. 

5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations. 

6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events. 

7. Acquire Necessary Rental Properties Equipment & Supplies - In order to start your rental properties business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation. 

8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your rental properties business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising. 

Learn more about how to start a successful rental properties business:

• How to Start a Rental Properties Business

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Types of Commercial Property Insurance

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What Types of Commercial Property Insurance Coverage Does Your Small Business Need?

What Are the Different Types of Commercial Property Insurance?

Mixed-use property insurance.

A mixed-use property is a building that is used for two or more purposes, such as residential, commercial and/or industrial reasons. If you own a property that has a business, such as a store or restaurant, that also has residential rental units, you’ll need mixed-use property insurance coverage.

Commercial Fire Insurance

Commercial fire insurance is a type of coverage included in a commercial property insurance policy. This coverage protects your business property and equipment if it’s damaged or destroyed by fire damage. It can also help cover the costs to repair or replace the damaged property and helps replace lost income if your business needs to temporarily shut down. In addition, commercial fire insurance can help pay for liability lawsuits that might come up because of a fire at your business’s owned or rented property.

Ordinance or Law Insurance

Ordinance or law insurance coverage helps bring your commercial building up to code after a covered loss damages or destroys your property. This coverage will help financially protect your business against the costs associated with restoration or repairs to your commercial building. Without this type of coverage, these costs would have to be paid for out of pocket.

Commercial Flood Insurance

Commercial flood insurance is not typically included in a commercial property insurance policy and you may have to get it as a separate policy. If your business operates in an area that is prone to flooding, this coverage is essential to have. We provide commercial flood insurance through the federal government’s National Flood Insurance Program (NFIP), managed by the Federal Emergency Management Agency (FEMA).

Glass Insurance

Glass insurance covers the costs of replacing your store windows and plate glass windows if they are damaged or destroyed by a covered loss. This insurance coverage is typically included in a commercial property insurance policy.

Commercial Casualty Insurance

Commercial casualty insurance is the liability side of commercial insurance. It helps financially protect your business from legal claims resulting from an accident that might have occurred on your business’ property or because of your business operations – even if you’re not at fault.

Related Coverages To Protect Your Commercial Property

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• Replacement cost coverage: The amount it will cost to replace an item with something similar or the same.
• Actual cash value coverage: The amount it will cost to replace an item, minus depreciation (meaning how old it is or its condition).
• Extended replacement cost coverage: This endorsement helps pay for expenses that you can’t plan for and are above your set policy coverage limits, like the cost of reconstruction increasing due to inflation.

What Is the Difference Between General Liability Insurance and Commercial Property Insurance?

General liability insurance helps protect your business from claims that your business caused bodily injury or property damage to a third party. It can also help protect your business financially if someone sues you for advertising injury. With commercial property insurance, your business’ physical location, equipment and physical assets are protected if they’re destroyed or damaged from a covered loss like fire, theft, burglary or lightning.

What Perils Are Covered Under a Standard Commercial Property Insurance Policy?

• Burglary 

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