Starting an Apartment Rental Business

For those looking for a steady source of income with minimal time to spend, an apartment rental business is hard to beat. You may have heard a lot of horror stories about problem tenants, but notice that most landlords will never sell their apartments!

The truth is a lot of retirees depend on the monthly rental payments for their everyday expenses. Despite everything, apartments normally do not go bankrupt like many small businesses. That is why they are a favorite investment for people who want minimal risk.

However, there is a downside to the safety of this business. The lesser risk comes at the price of lower returns. It will take a relatively long time to get back your investment compared to other ventures. The cash flow, while steady, is small in comparison to the size of the investment.

You must also be updated with the current rental laws. The rules on how much you can increase rentals and the ejectment procedures constantly change, so you must be abreast.

Be very selective in screening tenants. Reject those who have a strong chance of not paying their obligations. Do not allow those who will likely cause too much wear and tear on you apartment, as well.

Your lease agreement must be carefully drafted. It would be best to have one drafted by an attorney with experience in making lease contracts. Buying a ready-made document from a store not only may result in an unfavorable agreement, but your tenants will have a lesser view of the agreement.

The registration requirements for an apartment rental business are simple. Assuming that you will be constructing your own, here are the basic steps:

• Check first if the property you have or plan to acquire is zoned for the construction of a residential apartment. Know, too, about restrictions like the maximum number of floors you can build. These restrictions may possibly make your investment not feasible.

• Register with the Department of Trade and Industry (DTI) if you will be the sole owner of the property or with the Securities and Exchange Commission (SEC) if you plan to be a corporation. Have you accountant or lawyer prepare the needed papers.

• Get a Barangay Clearance.

• Obtain a Building Permit and Occupation Permit from the municipal or city hall. You must also secure your Fire Safety Permit there.

• Register with the Bureau of Internal Revenue (BIR). Get your certificate of registration (COR). This will contain the schedule of your tax obligations with the national government. If you still do not have a Tax Identification Number (TIN), obtain it at the BIR along with your authority to print official receipts.

• Have your receipts printed.

Starting an apartment is a sound investment, but you must know what you are doing to avoid mistakes. Since apartments require a substantial capital, and laws and trends change fast, it would be prudent to know more about this venture before proceeding.

BusinessCoach, Inc., a leading business seminar provider, conducts seminars on starting an Apartment or Commercial Stall Rentals Business.

Click here to view details of the training program on: How to Start an Apartment or Commercial Stall Rental Business »

*Originally published by the Manila Bulletin. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.

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