business plan for building a house

Construction Business Plan Template

Written by Dave Lavinsky

Construction Business Plan

You’ve come to the right place to create your construction business plan.

We have helped over 100,000 entrepreneurs and business owners create business plans and many have used them to start or grow their construction companies.

Sample Construction Business Plan Outline

Below is a construction business plan example to help you create each section of your own construction business plan:

Executive Summary

Business overview.

VB Residential Construction Company is a startup construction company located in Milwaukee, Wisconsin. The company is founded by two cousins, Victor Martinez and Ben Schmidt. Together they have over 20 years of experience in constructing homes from design concept, remodeling and renovating homes. They are highly skilled in all aspects of construction and have garnered a positive reputation in the local construction community for their ethical practices and competitive skill set. Now that Victor and Ben have an extensive network of clients and contacts, they have decided to begin their own residential construction company.

Product Offering

The following are the services that VB Residential Construction Company will provide:

• Custom home building/design build
• Home remodeling and renovation
• Project Management
• Kitchen and bath construction

Customer Focus

VB Residential Construction Company will target those individuals and industry professionals requiring home construction services in Milwaukee, Wisconsin. Those individuals are landowners looking to develop homes on their lots, architects who have clients needing homes built, developers who have the vision but need a company to make it a reality, and households needing home remodeling services.

Management Team

VB Residential Construction Company will be led by Victor Martinez and Ben Schmidt. Together they have over twenty years of construction experience, primarily in residential builds, remodeling, and renovation. They both started at a young age working and learning from their fathers. When they graduated from high school, their fathers got them jobs at the construction company they were employed at. The four family members worked together for ten years at the construction company. The fathers recently decided they were going to retire from the industry which prompted Victor and Ben to branch out on their own and start their own residential construction company.

Success Factors

VB Residential Construction Company will be able to achieve success by offering the following competitive advantages:

• Friendly and knowledgeable contractors who are able to take any project from concept to reality.
• Unbeatable pricing – Clients will receive the best pricing in town for services on any project while maintaining the best quality and customer satisfaction.

Financial Highlights

VB Residential Construction Company is seeking $200,000 in debt financing to launch its construction business. The funding will be dedicated towards securing a small office space, purchasing two trucks, and purchasing all the construction equipment and supplies. Funding will also be dedicated towards the advertising agency and three months of overhead costs to include payroll of the staff, rent, working capital, and monthly fees to the accounting and human resources firm. The breakout of the funding is below:

• Trucks: $40,000
• Construction equipment, supplies, and materials: $100,000
• Advertising agency in charge of promotions: $10,000
• Three months of overhead expenses (rent, payroll, HR and accounting firms): $40,000
• Working capital: $10,000

Company Overview

Who is vb residential construction company.

VB Residential Construction Company is a newly established contracting company located in Milwaukee, Wisconsin. Founded by cousins, Victor Martinez and Ben Schmidt, they have over 20 years experience in the construction industry. VB specializes in residential remodeling, kitchen and bath construction, as well as custom home building. VB Residential Construction Company also offers residential design, construction, and project management services. VB prides itself in delivering a level of expert craftsmanship to fulfill the vision for the client while exceeding expectations at exceptional value.

Company History

VB comes from the initials of the owners, Victor Martinez and Ben Schmidt, two cousins who have been working in the construction industry most of their lives. Both of their fathers spent decades as contractors and raised their sons working and learning the construction trade. The four have been working for another residential contractor in Milwaukee and have built and remodeled numerous homes for multiple builders and clients. Now that both of their fathers are retiring from the construction industry, Victor and Ben have decided to start their own residential construction company and use their years of experience, expertise, and contacts to be an independent residential contractor.

Since incorporation, VB Residential Construction Company has achieved the following milestones:

• Registered VB Residential Construction Company, LLC to transact business in the state of Wisconsin.
• Located a small office space to have a physical address for the company as well as a receptionist.
• Reached out to their numerous contacts to include real estate agents, developers, architects, and landowners to advise them on their upcoming construction company in order to start getting construction contracts.
• Began pricing out costs for trucks and necessary construction equipment.
• Began recruiting a team of contractors that cover different areas of construction to include mechanical, plumbing, electricians, and roofing.

The following will be the services VB Residential Construction Company will provide:

Industry Analysis

Revenue for the Construction industry is expected to continue growing over the five years as demand for new housing expands. Revenues are expected to reach $107 billion.

Relatively low interest rates, coupled with rising per capita disposable income, is expected to support individual investment in new homes, providing an opportunity for industry revenue growth over the next five years.

Per capita disposable income is expected to rise steadily over the next five years, while concurrently, unemployment will drop, proving favorable conditions for industry growth.

Housing starts are expected to rise an annualized 2.9% and this growth is projected to stem partly from forward-looking consumers that choose to purchase homes while interest rates are low. Relatively low housing stock and relatively low interest rates are expected to lead demand for industry services to increase over the next five years.

Customer Analysis

Demographic profile of target market.

The precise demographics for Milwaukee, Wisconsin are:

Customer Segmentation

VB Residential Construction Company will primarily target the following customer profiles:

• Households in search of home remodeling services
• Landowners who would like to build homes on their lots
• Architects who have clients that need home building or remodeling services
• Developers who have already partnered with landowners and/or architects and are in search of a residential contractor

Competitive Analysis

Direct and indirect competitors.

VB Residential Construction Company will face competition from other companies with similar business profiles. A description of each competitor company is below.

JM Remodeling

JM Remodeling has been in business in Milwaukee, Wisconsin since 1990. They are a full-service design and build company. JM Remodeling specializes in residential and commercial restoration and renovation including custom carpentry, kitchens, bathrooms, roofing, siding, dormers, additions, home gyms, home offices, porches and decks, and mechanical services. JM Remodeling carries a staff of plumbers, electricians, journeymen carpenters, restoration specialists, roofers, siders, sheet metal workers, and expert estimators. JM Remodeling also has an apprenticeship program to train employees within the company. They are licensed, bonded and insured and also part of the National Association of Remodeling Industry (NARI). JM Remodeling also provides warranties on all their services. The work is guaranteed by labor warranties, factory warranties, and extended warranties.

Cream City Construction

Cream City Construction has more than 50 years experience in home design, remodeling and renovation in the Greater Milwaukee area and Southeastern Wisconsin. The home remodeling services they provide are additions, whole house remodeling, kitchens, bathrooms, lower levels, master suites and historic renovations. Cream City Construction is a design build company that works with the client to create the design plans, generate project costs, and build the project.

Cream City Construction is owned and managed by Todd Badovski and Jim Grote. Together they have decades of experience and have spent years refining the skills required to run a high end, quality driven remodeling company. The majority of their projects come from repeat business or referrals from clients delighted with their previous service. Cream City Construction is also a member of the National Association of Remodeling Industry (NARI) as well as the Historic Milwaukee Incorporated.

Sazama Design Build Remodel, LLC

Former restaurant owner Don Sazama established Sazama Design Build Remodel, LLC in 1987 after becoming a Master Carpenter. He wanted to merge his passions of business and design and expand his skills in carpentry and architecture. Don’s firm has completed over 700 homes and won 11 awards from the Milwaukee Home and Living magazine. Sazama Design Build Remodel builds homes that are modern and luxurious and have completed many large remodels of bathroom and kitchen renovations. Sazama likes to collaborate with firms such as Ivy Interiors and an award-winning landscape designer, Gingko Leaf Studio. Sazama Design Build Remodel can build and design all aspects of a home – from a home office, outdoor entertaining area, serene spas, and inviting kitchens. The team at Sazama is able to do a historic renovation, build or renovate into something modern and posh, or keep it traditional.

Competitive Advantage

VB Residential Construction Company will be able to offer the following advantages over their competition:

Marketing Plan

Brand & value proposition.

VB Residential Construction Company will offer the unique value proposition to its clientele:

• Highly trusted and professional contractors with over 20 years of experience remodeling, renovating, and building homes.
• Unbeatable pricing to its clients – VB Residential Construction Company does not mark up its services at a large percentage. They will offer the lowest prices in town.

Promotions Strategy

The promotions strategy for VB Residential Construction Company is as follows:

Word of Mouth/Referrals

Victor and Ben have built up an extensive list of contacts over the years providing home construction services for numerous highly satisfied clients. Most of the clients are repeat customers and have also referred them to other associates for home projects. These referrals and repeat customers are very likely to use VB Residential Construction Company instead of the previous construction company Victor and Ben were employed at.

Professional Associations and Networking

VB Residential Construction Company will become a member of construction and professional associations such as the National Association of Remodeling Industry (NARI) and the Milwaukee Chamber of Commerce. VB will also become a member in associations where other builders, developers, and architects are a part of. They will focus their networking efforts on expanding their client network.

Print Advertising/Billboard

VB Residential Construction Company will invest in professionally designed print ads to display in programs or flyers at industry networking events. They will also invest in two billboards to display in highly trafficked areas of town.

Website/SEO Marketing

VB Residential Construction Company will utilize the same advertising company that designed their print ads and billboards to also design their website. The website will be well organized, informative, and list all their services that VB is able to provide. The website will also list their contact information and a gallery of pictures that show their previous projects. The advertising company will also manage VB’s website presence with SEO marketing tactics so that anytime someone types in the Google or Bing search engine “Milwaukee residential contractor”, “contractor near me”, or “residential contractor near me”, VB Residential Construction Company will be listed at the top of the search results.

The pricing of VB Residential Construction Company will be moderate and on par with competitors so customers feel they receive value when purchasing their services.

Operations Plan

The following will be the operations plan for VB Residential Construction Company.

Operation Functions:

• Victor Martinez and Ben Schmidt will be the owners and managers of the company. They will oversee all staff, contractors, and subcontractors. They will also act as project managers for every job they receive and handle all pricing and bids to the client.
• Victor and Ben will employ a team of contractors under them that will have an array of skill sets. The contractors will be trained and experienced either in plumbing, mechanical, electrical, roofing, or siding. Not all contractors need to be certified in all trades, but they need to be certified in at least one of the trades.
• Office manager/assistant to be located at the small office. This person will handle all incoming calls, assist with visiting clients, bookkeeping and maintain files.
• Victor and Ben will utilize a third-party human resources company to handle all hiring, onboarding, payroll, and benefits for the staff. The HR company will also handle all employee issues.
• Victor and Ben will also pay a third-party accounting firm to manage all the high level accounting and tax payments.

Milestones:

VB Residential Construction Company will have the following milestones complete in the next six months.

3/1/202X – Finalize contract to lease small office space

3/15/202X – Execute advertising agency contract 4/1/202X – Begin networking and placing bids for construction jobs

5/1/202X – Begin recruiting and hiring team of contractors

5/15/202X – Purchase all necessary construction equipment, supplies, and trucks

6/1/202X – Start on first official job as VB Residential Construction Company

Victor and Ben are highly skilled at project management and residential construction. They are also both certified in plumbing, electrical, and mechanical. In the next few years, they will be certified as Master Carpenters.

Financial Plan

Key revenue & costs.

The revenue drivers for VB Residential Construction Company are the upcharge they will charge to the clients for their services. VB will purchase or subcontract a service at cost and will charge a 15% markup in order to obtain the markup fee. 15% is below the normal 25%-30% that other competing residential contractors charge.

The cost drivers will be the overhead costs required in order to maintain a construction company. The expenses will be the costs to purchase and maintain construction equipment and trucks, payroll and overhead costs for the staff, and rent and utilities. Other expenses will be the cost for the advertising agency, accounting firm, human resources firm, and membership association fees.

Funding Requirements and Use of Funds

VB Residential Construction Company is seeking $200,000 in debt financing to launch its construction business. The funding will be dedicated towards securing a small office space, purchasing two trucks, and purchasing all the construction equipment and supplies. Funding will also be dedicated towards the advertising agency and three months of overhead costs to include payroll of the staff, rent, and monthly fees to the accounting and human resources firm. The breakout of the funding is below:

Key Assumptions

The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and in order to pay off the startup business loan.

• Initial Monthly Average Contract Amount: $20,000
• Growth in Average Monthly Contracts: 10%

Financial Projections

Income statement, balance sheet, cash flow statement, construction business plan faqs, what is a construction business plan.

A construction business plan is a plan to start and/or grow your construction 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 construction business plan using our Construction Business Plan Template here .

What Are the Main Types of Construction Companies?

Construction companies can be classified according to the type of constructions that they perform. Some are small renovation contractors, others are new home builders and others are commercial construction companies.

What Are the Main Sources of Revenues and Expenses for a Construction Company?

Construction companies get their primary source of revenue from individual contracts for new homes, remodeling projects or commercial projects.

The key expenses for construction companies are office space rent, salaries and wages, and equipment costs. 

How Do You Get Funding for Your Construction Business Plan?

There are many options for financing a construction company like SBA loans, commercial loans, personal loans, or line of credit. There are also equipment funding opportunities that cover expenses associated with necessary tools, machinery and other equipment. Personal savings, credit card financing and angel investors are also popular forms of funding.

What are the Steps To Start a Construction Business?

Starting a construction 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 Construction Business Plan - The first step in starting a business is to create a detailed construction business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast.  

2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your construction 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 construction business is in compliance with local laws.

3. Register Your Construction Business - Once you have chosen a legal structure, the next step is to register your construction 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 construction 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 Construction Equipment & Supplies - In order to start your construction 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 construction 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 construction business:

• How to Start a Construction Business

Where Can I Get a Construction Business Plan PDF?

You can download our free construction business plan template PDF here . This is a sample construction business plan template you can use in PDF format.

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How to Start a Homebuilder Company: All Your Questions Answered

Get your building business off the ground with this comprehensive guide

If you’re considering how to start your own homebuilding company, look no further. Here we share 14 steps to do just that, explaining each in detail. Whether you want to learn how to start a custom homebuilding business or you want to work with more typical designs, this guide will give you a solid foundation for success.

Click one of the links below to jump to the section you’re most interested in:

• Identify your niche
• Conduct market research
• Write a builder business plan
• Name your building company
• Decide on a business entity type
• Register your business
• Get building licenses and permits
• Get builder insurance

Set up your business to receive and send funds

• Get funding
• Set up your office
• Build your team
• Choose homebuilder business software
• Find your first client

How to identify your home building niche

The first step in figuring out how to start a housebuilding business is to decide which niche to pursue. This way you can select the types of projects that best suit your skillset and your new business’ goals. There are four main niches:

• Tract/production: This involves building clusters of homes (dozens to hundreds) in a single neighborhood, typically with a set number of floor plans and design features for buyers to choose from. A model home is often shown to potential buyers, and price is often the deciding factor for buyers.
• Speculation (aka spec): This involves buying a parcel of land and building a house or houses before finding a buyer. The builder determines the floor plan before breaking ground, but if clients buy in before the work is finished, they might be able to choose finishes and appliances.
• Custom: This involves working with the client to build a unique home based on his or her wishes and local regulations, with complete flexibility regarding the architecture and features. Custom builders also can do renovations and add-ons. 
• Luxury: In this sector, the homes are generally custom, given the higher budget. But whether the home is custom or not, the architecture is generally more distinctive than for the typical home, and the finishes, appliances and other elements are high end. Artisans might even be brought in to create show stopping components, such as artful gates, stairway railings and tilework.

Consider also the possible specialties within any of the above categories. “Green” or sustainable construction is popular, as is the kitchen-and-bath niche.

How to conduct builder market research 

When you’re learning how to start a homebuilding company, it’s imperative to conduct research in certain areas so you’re not just guessing at what clients want and what the local economy and region will support. To make it easier, focus on each area individually. For example:

• Your intended market (both geographical and in terms of specialty)
• Competitors
• The local client base
• Local building trends

It’s not hard to do this research on your own, thanks to all the resources out there. All you need is a computer and the knowledge of where to look. For instance:

• The U.S. Small Business Administration (SBA) offers lots of information on conducting market research and doing competitive analyses and much more in its Business Guide for general businesses. 
• The National Association of Home Builders (NAHB) offers many resources including info on industry news , economic analyses , and more.
• The U.S. Bureau of Labor Statistics (BLS) lets you search typical salary ranges and other economic info
• Put out questionnaires and surveys on social media or mailing lists. This is a great way to find out what people really want. You can also join relevant social media groups and get plenty of info without even posting.
• Do an internet search for “residential construction companies + [your area]” to find competitors. Once you’ve identified them, you can check out their websites and social media to see what types of homes and projects are locally popular and what the typical price ranges are.

Attend industry events and/or search their websites as well as other industry websites for published findings. For instance, Houzz offers a number of regularly updated research reports and IBISWorld offers data on industry trends .

How to write a homebuilder business plan

A solid builder business plan is essential for long-term success. Not only will it help you shape your goals and make sure you have enough capital to realize them, but bank lenders and investors will want to see it as part of their research. It doesn’t have to be long and complex to be effective, either. And while charts and graphs can be helpful and in conveying info and giving your plan a professional appearance, they aren’t strictly necessary. But your homebuilder business plan should include the following at a minimum:

• Executive summary: Summarize your business through a bio, goals, and mission statement. Include the niche you chose earlier. This can be just one or two pages. 
• Company overview: Describe the founder(s), share your values statement and what makes your company different, and specify the type of business entity (we’ll explain that later).
• Market analysis: Use the research you did in the previous step to show a clear demand and how your company can satisfy it.
• Business structure: More detail about the type of business entity, including whether there are shareholders, what the organizational layout looks like, and the current or planned number of employees.
• Products and services descriptions. Will you offer eco-friendly solutions, for example? Will you focus on a certain style of home, such as modern or traditional? You can also include how you’ll charge for your services (lump sum, unit price, or cost plus) and if you have any existing relationships with developers, subcontractors or suppliers.
• Marketing and sales plan: Include what types of platforms you’ll have a presence on (Houzz is a great one, of course), advertising you’ll be using, any existing email lists, any other ways you’re planning to reach potential clients, and how you’re planning to turn leads into clients.
• Financial plan: Included projected income and expenses, cash flow forecasts, and any debt obligations (investments, loans, and so on).

Note that the components above are the same whether you’re creating a custom homebuilder business plan or a business plan for a building company that works only with fixed designs.

How to name a homebuilding business

This is actually often the first thing people wonder when they’re figuring out how to start a homebuilding company. And it’s worth some serious thought, given that a name is important in terms of conveying your identity as well as in branding , creating a memorable customer impression and maximizing your firm’s appearance in internet search results. Your market research will help you come up with a name that will draw clients, and you can either get creative or take a more straightforward approach using just your name and/or the types of projects you’ll be focusing on (for example, Custom Traditional Homes by Carl). Ideally the name should indicate what your business is, but your own full name alone might be fine if you’ve already built a reputation.

Important: Do a trademark search and also a general internet search to make sure you’re not infringing on someone else’s name either legally or informally. Even if a business doesn’t hold official rights to a name, it can cause confusion among customers if you have the same or a similar name.

Feeling stuck or uninspired? Do an internet search for “building business name generator” for ideas.

What is the best business entity for a homebuilding company?

It’s helpful to consult a tax professional for this, because each entity type has its own tax implications and reporting requirements. However, a sole proprietorship is not recommended, as it exposes you to personal risk (see below).

• Sole proprietorship: This is the simplest type of business entity, but it offers little protection and no special tax benefits. Your business is under your own name and social security number. If you get sued or owe any debt, your personal assets (home, car, and the like) will be on the line.
• LLC (limited liability company): You get certain asset protections and can choose to be taxed as a partnership or a corporation. Reporting requirements and tax calculations are generally not too onerous. Note, however, that not all states recognize LLCs.
• C Corp: The business is a separate taxable entity, and the owners and shareholders have limited liability because of that. It involves several reporting requirements as well as holding regular meetings. One plus is that you can sell stock in the entity to raise capital.
• S Corp: This is technically a tax status rather than an entity type. So, for instance, your business can be an LLC that’s taxed as an S Corp. It can result in tax savings depending on profit amounts, but also has reporting and other requirements — for example, there must be fewer than 100 shareholders.

As mentioned above, you’ll include the chosen entity type on your builder business plan.

How to register a homebuilding company

If your company is a sole proprietorship in your own name, this might not be technically necessary, but it’s still important as you’re working out how to start a housebuilding business to register it as a legal entity to get certain liability protections, legal benefits and tax deductions. The registration requirements for a homebuilding company are the same as or similar to the requirements for other types of businesses; for most small businesses, you just need to register your business name with the local and state governments. 

First get a federal tax ID number (TIN) or employer tax ID number (EIN) through the IRS . You’ll need it for paying taxes, hiring staff, opening bank accounts, getting loans and applying for business licenses. 

LLCs registration is handled at the state level, but corporations need to file with the federal government, again through the IRS (see Form 2553 ). Then you also need to register with state and possibly local governments; consult the SBA and local government websites to find out your locale’s requirements.

How to get builder licenses and permits

If you’re just beginning your research on how to start a homebuilding business, you might not be aware that you need licenses and permits. But they’re 100% necessary! Without them, your business could be subject to fines or other penalties and even closure. Every state has different requirements, so it's important that you check in with your state’s agency as well as know all the building codes for your state and city.

What are permits? Permits are evidence of permission granted at the state and/or local level for, among other things, hauling certain types or sizes of materials, or if your vehicle is overweight or oversize.

What are licenses? Licenses are granted for operating the business itself. In most states, you’ll need at least a general contractor’s license. If you’ll be doing a specialty service such as carpentry, painting, electrical, roofing or HVAC work, you might need a specific license for that as well.

You can check what licenses and permits are needed and apply for them on the SBA website as well on other government websites.

What insurance does a builder need?

You might be wondering, do builders need insurance? Definitely! Taking out a few kinds of insurance policies not only is often required by the project agreement, but it will help you protect your business in the event of accidents, lawsuits and more. There are four main types to consider:

• General liability. This covers work-related bodily injury (to subcontractors, clients, vendors etc.) and property damage; the specifics of what’s covered are unique to the particular insurance policy. Note that it does not cover the cost of repairing defective work.
• Professional liability. This insurance is often taken out by homebuilders who are also architects or engineers, as it protects businesses from financial liability for design issues.
• Builder’s risk. This is for anyone with a financial interest in the home being built, and it typically covers the property on the jobsite in the event that it is damaged or completely ruined by fire, wind, vandalism, vehicle collisions or other accidents. Some builder’s risk policies also cover construction materials stored at another location.
• Commercial auto. This is coverage for company-owned vehicles used for work-related purposes, and is similar to what many people carry for their personal autos. It can protect light, medium, and heavy-duty vehicles, and you can take out a policy for just one vehicle or several, as well as add on vehicles personally owned by employees that they use for work.

You might also be required to purchase worker’s compensation insurance, which is helpful to have even if it’s not required; it pays workers in the event that they are injured on the job. Consider also inland marine (aka equipment) insurance, which covers any property that might be moved, including tools and equipment.

Think about not just how clients will pay you but how you’ll pay vendors, subcontractors and any employees. First you’ll need a dedicated business bank account, which requires a TIN or EIN (see above). Be sure to check any fees that will be charged; most business bank accounts have a minimum monthly service charge, and some charge for every check deposited or financial transfer as well. If you’ll be taking credit card payments, you’ll also need to get set up with a payment processor (tip: Houzz Pro allows you to take both credit card and ACH payments online ).

In addition, decide which billing method(s) your business will use and study up on how to price your construction jobs so you turn a healthy profit.

How to get funding for a homebuilder business

Funding sources should be included in your builder business plan, and it’s essential to make sure you always have enough working capital to cover the amounts you’ll need to lay out for materials and supplies, office overhead, and payments due until the client pays you. Luckily, there are a number of sources to possibly tap as you figure out how to start a homebuilding company.

SBA and other small business loans. While they can be hard to get and require lots of paperwork, SBA loans are a great option to try for due to their low interest rates and generous terms. Three of the most common are:

• 7(a) loan program: Up to $5 million, and can be used for a variety of business-related purposes.
• Microloans: Up to $50,000 and can be repaid over as many as six years.
• CDC/504 loans: Up to $5.5 million for purchasing fixed assets such as heavy machinery. Can be repaid over 10 or 20 years.

Many lenders both locally and nationwide offer small business loans as well. You can find out about these via internet search; be aware that terms can vary widely.

• Working capital loans: To cover day-to-day expenses such as office rent and payroll. These include lines of credit through a financial institution. 
• Vendor financing: Individual vendors may offer short-term financing/payment plans at varying interest rates, generally between 1% and 6%; be sure to read the fine print on the terms of repayment.
• Equipment loans: For purchasing machinery; the amount loaned must go directly to the cost of the machinery. The equipment’s value serves as collateral, so this is a good option if you have no other collateral or a not-ideal credit score.

Tip: Networking can be a great way to get advice about financing from those who have “been there, done that.” Check out our handy guide to networking in construction for ideas.

How to set up an office for your homebuilding company

While it might be tempting to save money by working from home, a dedicated office confers an air of legitimacy and acts as a place where you can easily meet clients, investors and others involved in your business. You can also set aside a portion of it for holding material samples, project models and other bulk items. 

• Pick the best geographical location. Ideally it will be convenient for both you and anyone who visits. Consider your commute time, local traffic and the parking situation.
• Consider office style. Remember that everything the client sees creates an impression. And if your company focuses on modern housing, for example, setting up in an old Victorian mansion might send mixed messages. Make sure the setting is professional-looking and creates a trustworthy image as well as fits your brand.
• Research costs. You should account for rent or leasing costs in your builder business plan, and make sure that you can afford them. You might have to trade a favorable location for something that works with your budget.
• Ensure security. If you’re not in a building with a guard and/or an alarm system, set up your own security system. Keep in mind that while your files might not be worth dollars to a thief, you’ll be working with clients’ sensitive financial information, and it’s worth protecting.
• Furnish it. At a minimum, you’ll need a desk and chair for you and somewhere else for others to sit, plus a filing cabinet and some general storage. As you might be working on how to start a homebuilding company on a shoestring, check out secondhand stores and local online resale websites such as Craigslist. Add at least a bit of decor too, including any framed certificates of training or printed accolades.
• Equip it. If you work only on a laptop and use your cell phone, you’ll likely still need a printer, some good task lighting for your desk and perhaps a paper shredder for sensitive documents.

How to build your team

1. Decide what roles to fill

Your team might be small to start, but you’ll need at least a project manager to oversee the construction and development of the homes; a home dealer, who will handle pre-project client-related tasks such as selling the homes; and the subcontractors who will do the actual work. Aside from those, you’ll likely need to bring some or all of the following on staff or hire them on a freelance basis:

• Construction foreperson
• Equipment manager
• Superintendent
• Bookkeeper/accountant

2. Interview candidates

Building the right team requires interviewing people thoroughly to make sure they’re:

• Truly interested
• Trustworthy
• A good fit in terms of personality, values and work ethic

See our articles on common construction titles and how to recruit for your team for more info.

3. Keep your employees happy

Job satisfaction is just as important as good pay for many people, so make sure to keep the lines of communication open and listen to what your employees and contractors need. Be flexible when you can and offer opportunities for advancement. See our article on how to retain construction talent for ideas.

How to choose builder business management software

The right software won’t just make your job easier; it’ll help you organize and follow up with leads, increase the accuracy of all of your calculations, let you easily analyze your business’ finances and keep your clients and team members in the loop. So as you’re working out how to start a homebuilding business, consider that investing in software will pay for itself in the long run. Look for something that can help you with everything from organizing to taking payments. It’s especially important that the software is easy to adopt (that is, it has a low learning curve) and that it includes:

• Tools for creating takeoffs and estimates
• Features that promote collaboration
• Cloud-based storage and other features

The ability to use the software on a mobile device also is essential, so you can work whether you’re in the field or at a desk. For home builder software , you can’t beat Houzz Pro, which has all of these features and capabilities and more. Try it free today to put your new construction business on the path to success!

How to find your first builder lead

Getting the word out about your new business is mission critical for the long-term success of your business. And even when you start landing clients, you want to keep focusing on bringing in new clients so you always have a steady stream of work. Our guide to getting leads for a residential construction business is a great place to start; it covers digital marketing, networking, getting referrals and more. Also check out our articles dedicated to:

• Social media marketing
• Email marketing
• Advertising
• Increasing sales

Conclusion: ‘Should I start a homebuilding company?’

By now you should have a pretty good idea of the answer to that question. Even if you’re excited to get started right away, take some time to think it all through instead of just rushing in. Research all of the next steps involved in the actual work too so that you’re comfortable with what’s required. For instance, learn all about the construction project workflow . And talk with booth new and veteran builders to get their take — there’s no substitute for personal experience!

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How To Write a Winning Home Builder Business Plan + Template

Creating a business plan is essential for any business, but it can be especially helpful for home builder businesses who want to improve their strategy and/or raise funding.

A well-crafted business plan not only outlines the vision for your company, but also documents a step-by-step roadmap of how you are going to accomplish it. In order to create an effective business plan, you must first understand the components that are essential to its success.

This article provides an overview of the key elements that every home builder business owner should include in their business plan.

Download the Ultimate Business Plan Template

What is a home builder business plan.

A home builder business plan is a formal written document that describes your company’s business strategy and its feasibility. It documents the reasons you will be successful, your areas of competitive advantage, and it includes information about your team members. Your business plan is a key document that will convince investors and lenders (if needed) that you are positioned to become a successful venture.

Why Write a Home Builder Business Plan?

A home builder business plan is required for banks and investors. The document is a clear and concise guide of your business idea and the steps you will take to make it profitable.

Entrepreneurs can also use this as a roadmap when starting their new company or venture, especially if they are inexperienced in starting a business.

Writing an Effective Home Builder Business Plan

The following are the key components of a successful home builder business plan:

Executive Summary

The executive summary of a home builder business plan is a one to two page overview of your entire business plan. It should summarize the main points, which will be presented in full in the rest of your business plan.

• Start with a one-line description of your home builder company
• Provide a short summary of the key points in each section of your business plan, which includes information about your company’s management team, industry analysis, competitive analysis, and financial forecast among others.

Company Description

This section should include a brief history of your company. Include a short description of how your company started, and provide a timeline of milestones your company has achieved.

If you are just starting your home builder business, you may not have a long company history. Instead, you can include information about your professional experience in this industry and how and why you conceived your new venture. If you have worked for a similar company before or have been involved in an entrepreneurial venture before starting your home builder firm, mention this.

Industry Analysis

The industry or market analysis is an important component of a home builder’s business plan. Conduct thorough market research to determine industry trends and document the size of your market. 

Questions to answer include:

• What part of the home builder industry are you targeting?
• How big is the market?
• What trends are happening in the industry right now (and if applicable, how do these trends support your company’s success)?

You should also include sources for the information you provide, such as published research reports and expert opinions.

Customer Analysis

This section should include a list of your target audience(s) with demographic and psychographic profiles (e.g., age, gender, income level, profession, job titles, interests). You will need to provide a profile of each customer segment separately, including their needs and wants.

For example, a home builder’s customers may include:

• First-time homebuyers
• Homeowners looking to renovate or expand their homes
• Builders and developers constructing new homes

It is important to understand your target customers’ needs, as this will determine the products or services you offer and how you market your business. 

You can include information about how your customers decide to buy from you as well as what keeps them buying from you.

Develop a strategy for targeting those customers who are most likely to buy from you, as well as those that might be influenced to buy your products or home builder services with the right marketing.

Competitive Analysis

The competitive analysis helps you determine how your product or service will be different from competitors and what your unique selling proposition (USP) might be that will set you apart in this industry.

For each competitor, list their strengths and weaknesses. Next, determine your areas of competitive differentiation or advantage; that is, in what ways are you different from and ideally better than your competitors.

Marketing Plan

This part of the business plan is where you determine and document your marketing plan. . Your plan should be clearly laid out, including the following 4 Ps.

• Product/Service : Detail your product/service offerings here. Document their features and benefits.
• Price : Document your pricing strategy here. In addition to stating the prices for your products/services, mention how your pricing compares to your competition.
• Place : Where will your customers find you? What channels of distribution (e.g., partnerships) will you use to reach them if applicable?
• Promotion : How will you reach your target customers? For example, you may use social media, write blog posts, create an email marketing campaign, use pay-per-click advertising, launch a direct mail campaign. Or you may promote your home builder business via referrals or word-of-mouth marketing.  

Operations Plan

This part of your home builder business plan should include the following information:

• How will you deliver your product/service to customers? For example, will you do it in person or over the phone only?
• What infrastructure, equipment, and resources are needed to operate successfully? How can you meet those requirements within budget constraints?

The operations plan is where you also need to include your company’s business policies. You will want to establish policies related to everything from customer service to pricing, to the overall brand image you are trying to present.

Finally, and most importantly, in your Operations Plan, you will lay out the milestones your company hopes to achieve within the next five years. Create a chart that shows the key milestone(s) you hope to achieve each quarter for the next four quarters, and then each year for the following four years. Examples of milestones for a home builder include reaching $X in sales. Other examples include adding new products or services, launching a new marketing campaign, or expanding to a new location.

Management Team

List your team members here, including their names and titles, as well as their expertise and experience relevant to your specific home builder industry. Include brief biography sketches for each team member.

Particularly if you are seeking funding, the goal of this section is to convince investors and lenders that your team has the expertise and experience to execute on your plan. If you are missing key team members, document the roles and responsibilities you plan to hire for in the future.

Financial Plan

Here you will include a summary of your complete and detailed financial plan (your full financial projections go in the Appendix). 

This includes the following three financial statements:

Income Statement

Your income statement should include:

• Revenue : how much revenue you generate.
• Cost of Goods Sold : These are your direct costs associated with generating revenue. This includes labor costs and the cost of any equipment and supplies used to deliver the product/service offering.
• Net Income (or loss) : Once expenses and revenue are totaled and deducted from each other, this is the net income or loss.

Sample Income Statement for a Startup Home Builder  

Balance sheet.

Include a balance sheet that shows your assets, liabilities, and equity. Your balance sheet should include:

• Assets : All of the things you own (including cash).
• Liabilities : This is what you owe against your company’s assets, such as accounts payable or loans.
• Equity : The worth of your business after all liabilities and assets are totaled and deducted from each other.

Sample Balance Sheet for a Startup Home Builder  

Cash flow statement.

Include a cash flow statement showing how much cash comes in, how much cash goes out and a net cash flow for each year. The cash flow statement should include:

• Cash Flow From Operations
• Cash Flow From Investments
• Cash Flow From Financing

Below is a sample of a projected cash flow statement for a startup home builder .

Sample Cash Flow Statement for a Startup Home Builder

You will also want to include an appendix section which will include:

• Your complete financial projections
• A complete list of your company’s business policies and procedures related to the rest of the business plan (marketing, operations, etc.)
• Any other documentation which supports what you included in the body of your business plan.

Writing a good business plan gives you the advantage of being fully prepared to launch and/or grow your home builder company. It not only outlines your business vision but also provides a step-by-step process of how you will accomplish it.

A well-written business plan is an essential tool for any home builder company. The tips we’ve provided in this article should help you write a winning business plan for your home builder business.  

Finish Your Home Builder Business Plan in 1 Day!

Wish there was a faster, easier way to finish your home builder business plan?

With our Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

How To Write a Business Plan for House Building in 9 Steps: Checklist

By alex ryzhkov, resources on house building.

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

Are you considering starting a house building business in the US? The custom home building model is a popular choice, allowing you to create customized homes based on your clients' specific preferences and needs. But before diving into this exciting venture, it's essential to have a well-crafted business plan in place. In this blog post, we'll guide you through the nine key steps to writing a comprehensive business plan for house building.

First, let's take a look at the current state of the housing market. According to the latest statistics, the demand for custom homes is on the rise. With an increasing number of individuals and families looking for personalized living spaces, the custom home building industry has experienced steady growth in recent years. As a savvy entrepreneur, tapping into this market can offer promising opportunities for success.

The first step in writing your business plan is to thoroughly research the housing market. Understand the current trends, demographics, and preferences of potential homebuyers. This information will help you define your target market, enabling you to tailor your services to meet their specific needs.

Next, you'll want to assess the competition. Identify other house building companies in your area and analyze their strengths, weaknesses, and unique selling propositions. This analysis will guide you in determining your own unique selling proposition, which will differentiate your business and attract potential clients.

Before proceeding further, it's crucial to conduct a feasibility study. This study will assess the viability of your business idea, considering factors such as market demand, financial projections, and potential risks. Gathering this information will help you make informed decisions and mitigate potential pitfalls along the way.

With a clear understanding of the market and your competition, you can now define the business structure that best suits your venture. Consider whether you'll operate as a sole proprietorship, partnership, limited liability company (LLC), or corporation. Each option has its own advantages and legal implications, so make sure to consult with professionals to make an informed choice.

A successful house building business requires an effective marketing plan. Outline your marketing strategies, including branding, online presence, advertising, and lead generation. By identifying the most effective channels to reach your target market, you can maximize your business's visibility and attract potential clients.

As with any business, determining your financial requirements is essential. Calculate your initial investment, ongoing expenses, and potential revenue streams. This information will help you secure funding, whether through personal savings, loans, or investors. A solid financial plan will instill confidence in lenders and investors, increasing your chances of obtaining necessary capital.

Lastly, create a timeline and action plan. Break down the necessary steps for launching and growing your business and assign realistic time frames to each task. This roadmap will keep you organized and focused, ensuring that you stay on track toward achieving your goals.

By following these nine steps and crafting a well-thought-out business plan, you'll be equipped with the necessary tools to start your custom home building venture with confidence. Remember, success in this industry lies not only in building houses but also in building lasting relationships with satisfied clients. Good luck on your entrepreneurial journey!

Research The Housing Market

Before starting a house building business, it is essential to thoroughly research the housing market to gain a deep understanding of current trends, demands, and opportunities. This research will serve as the foundation for your business plan and help you make informed decisions throughout the process.

Here are some important aspects to consider:

• Demographics: Study the population demographics in your target area. Are there specific age groups or income brackets that have a higher demand for custom-built homes?
• Market Trends: Stay up to date with the latest housing market trends. Are there any emerging architectural styles, eco-friendly features, or innovative technologies that are particularly sought after?
• Supply and Demand: Determine the current supply and demand dynamics in the housing market. Are there many potential clients looking for custom-built homes but limited builders in the area?
• Local Regulations: Familiarize yourself with the local building codes, zoning regulations, and permit requirements. Make sure you understand any restrictions or obligations that may impact your business.
• Economic Factors: Take into account economic factors that influence the housing market, such as interest rates, inflation rates, and consumer spending. These factors can affect your pricing strategy and target market.

Tips for researching the housing market:

• Utilize online databases and resources to gather regional housing market data.
• Visit real estate websites, attend open houses, and participate in local industry events to gain insights.
• Network with real estate professionals, architects, and industry experts to gather valuable information.
• Consider hiring a market research firm to conduct a comprehensive analysis of your target area.

By conducting thorough research on the housing market, you can identify potential opportunities, understand your target market's needs and preferences, and tailor your business plan accordingly. This information will help you craft a solid foundation for your house building business and increase your chances of success in the competitive industry.

Define The Target Market

Defining your target market is a crucial step in developing a successful business plan for house building. To effectively market and sell your custom homes, you need to have a clear understanding of who your ideal customers are.

1. Research your local area: Start by researching the demographics and housing trends in your local area. Look at factors such as population growth, income levels, and the demand for custom homes. This will help you identify if there is a sufficient market for your services.

2. Narrow down your target audience: Once you have a general understanding of the local housing market, narrow down your target audience based on factors such as age, income, lifestyle, and preferences. Consider whether you want to focus on high-end luxury home buyers or cater to a more middle-class segment.

3. Identify customer needs and preferences: Conduct market research or surveys to gain insights into your target market's needs, preferences, and desired features in a custom home. This information will help you tailor your offerings and marketing messages to attract potential customers.

4. Study your competitors: Analyze your competitors' target market and their offerings to identify any gaps or opportunities. Understanding their strengths and weaknesses can help you position your business and highlight the unique value you bring to the market.

• Consider partnering with local real estate agents or brokers to gain insights and referrals from their clients.
• Attend local trade shows, open houses, and community events to network with potential customers and gain a deeper understanding of their preferences.
• Utilize online tools and platforms, such as social media and market research websites, to gather information about your target market.

By clearly defining your target market, you can tailor your marketing efforts to reach the right audience and increase your chances of success in the custom home building industry.

Assess Competition

Assessing the competition is a critical step in writing a business plan for house building. Understanding the competitive landscape will help you identify your unique selling proposition and differentiate yourself from other builders in the market.

Start by conducting thorough research on existing home builders in your target area. Explore their websites, social media platforms, and any available marketing materials to gain a comprehensive understanding of their offerings, pricing strategies, and customer base. Take note of their strengths, weaknesses, and any gaps in their service offerings that you can potentially capitalize on.

Here are some important factors to consider while assessing the competition:

Range of Services:

Quality and reputation:, pricing and value:, market share:.

By thoroughly assessing the competition, you will be able to refine your business strategy, identify gaps in the market, and develop a unique value proposition that sets you apart from your competitors. Use this information to position your business, attract clients, and gain a competitive advantage in the house building industry.

Determine The Unique Selling Proposition

Determining a unique selling proposition (USP) is essential for any business, including house building. Your USP is what sets you apart from your competitors and gives potential clients a reason to choose your services over others. To determine your USP, consider the following:

• Identify your target market's specific needs and preferences: Understanding your target market's needs will help you develop a USP that directly addresses their pain points and desires.
• Evaluate your competition: Analyze your competitors to identify any gaps or opportunities in the market. Assessing what they offer and how you can differentiate yourself can guide the development of your USP.
• Emphasize your expertise and experience: Highlighting your expertise and experience in house building can be a valuable USP. Showcase any certifications or awards that demonstrate your credibility and quality of work.
• Focus on exceptional customer service: Providing exceptional customer service can be a powerful selling point. Encourage reviews and testimonials from satisfied clients to support claims of excellent service.
• Incorporate sustainable practices or unique features: In an increasingly eco-conscious world, incorporating sustainable practices or unique features into your custom homes can attract environmentally conscious clients.
• Research industry trends: Stay up to date with market trends and incorporate them into your USP to ensure it remains relevant and appealing.
• Continuously evaluate and adapt your USP: Regularly reassess your USP to ensure it remains competitive and aligns with the evolving needs of your target market.
• Communicate your USP effectively: Use your website, social media channels, marketing materials, and client interactions to consistently communicate your USP and its benefits.

Conduct A Feasibility Study

Before embarking on any business venture, it is crucial to conduct a feasibility study to assess the viability, profitability, and sustainability of your house building business. This study will help you evaluate the business model's potential by analyzing various factors and making informed decisions based on the results.

During the feasibility study, consider the following:

• Market Demand: Evaluate the current demand for custom home building in your target market. Research trends, demographics, and economic indicators to gauge the potential demand for your services.
• Competitive Analysis: Analyze the existing competition in the area. Identify their strengths, weaknesses, pricing strategies, and customer satisfaction levels. This information will help you identify opportunities and devise strategies to differentiate your business.
• Financial Analysis: Calculate the costs involved in starting and operating your house building business. Include expenses such as land acquisition, construction materials, permits, labor, marketing, and overhead costs. Analyze the projected revenue and determine if the business can generate sufficient returns on investment.
• Risk Assessment: Identify potential risks and challenges associated with the house building industry. Consider factors such as economic fluctuations, legal and regulatory requirements, environmental impact, and potential delays or disruptions in the construction process.

Tips for Conducting a Feasibility Study:

• Utilize Market Research: Gather data from industry reports, market analysis, and customer surveys to ensure you have a comprehensive understanding of the market and its potential.
• Consult Experts: Seek advice from industry professionals, architects, contractors, and financial advisors to gain insights into the feasibility and profitability of your house building venture.
• Consider Location: Evaluate the suitability of the chosen location for your business. Factors such as proximity to suppliers, availability of skilled labor, and target market demographics should be carefully assessed.
• Account for Contingencies: Factor in unexpected events and costs when conducting your financial analysis. Building a contingency plan will help mitigate potential risks and ensure you are prepared for unforeseen circumstances.

By conducting a thorough feasibility study, you can make informed decisions about the viability of your house building business. It provides essential insights into market demand, competition, financial requirements, and potential risks, allowing you to plan and strategize effectively.

Define The Business Structure

Defining the business structure is a crucial step when writing a business plan for house building. It determines how your company will be organized and legally recognized. Consider the following options:

• Sole Proprietorship: This is the simplest and most common structure for small businesses. As a sole proprietor, you have complete control over the business and bear all the profits and liabilities.
• Partnership: If you plan to start the house building business with one or more partners, a partnership structure might be suitable. This structure allows for shared responsibilities, resources, and decision-making.
• Limited Liability Company (LLC): An LLC combines the benefits of a partnership and a corporation. It provides personal liability protection for owners while maintaining the flexibility of a partnership.
• Corporation: Forming a corporation creates a separate legal entity that protects owners' personal assets from business liabilities. However, the process to establish and maintain a corporation can be more complex.

It's essential to carefully consider which business structure aligns with your goals, risk tolerance, and long-term vision. Additionally, consult with legal and financial professionals to ensure compliance with local regulations and tax requirements.

• Research and understand the legal implications and tax considerations associated with each business structure.
• Consider future growth and scalability when deciding on a business structure.
• Consult with an attorney or business advisor to ensure you make the best decision for your house building business.

Develop A Marketing Plan

A solid marketing plan is crucial for the success of a house building business. It not only helps attract potential clients but also positions the business as a reputable and reliable option in the market. Here are some key steps to develop an effective marketing plan:

• Identify target audience: Determine the specific segment of the market that your business will cater to. This could be first-time homebuyers, high-income individuals or families, or any other specific demographic group.
• Research competitors: Study the strategies and offerings of other house builders in your area. Identify their strengths and weaknesses, and find ways to differentiate your business.
• Develop a unique selling proposition: Clearly define what sets your business apart from the competition. This could be offering exceptional customer service, innovative design options, or faster construction timelines.
• Create a branding strategy: Develop a strong brand identity that resonates with your target audience. This includes designing an eye-catching logo, creating a consistent color scheme, and crafting a compelling brand message.
• Utilize digital marketing: Establish an online presence through a professional website and social media accounts. Use search engine optimization (SEO) techniques to increase your visibility in search engine results and run targeted online advertisements to reach your audience.
• Network and build partnerships: Attend industry events, join local business organizations, and collaborate with real estate agents and architects. Networking can help generate referrals and expand your reach.
• Implement a comprehensive advertising strategy: Consider using a mix of traditional advertising methods, such as print ads in local magazines or newspapers, along with digital advertising platforms like Google Ads or Facebook Ads. Measure the effectiveness of each strategy to allocate resources wisely.
• Track and analyze results: Regularly monitor the performance of your marketing efforts through key performance indicators (KPIs) such as website traffic, lead generation, and conversion rates. Make adjustments to your strategies based on the data.
• Offer special promotions or incentives to attract clients, such as discounted upgrades or free consultations.
• Collect and showcase client testimonials and positive reviews to build trust and credibility.
• Engage with your audience through social media by sharing construction updates, design inspiration, and success stories.
• Consider hiring a professional marketing consultant to provide expert guidance and help refine your strategies.

Determine Financial Requirements

Once you have a solid understanding of your target market, competition, and unique selling proposition, it's time to determine the financial requirements for your house building business. This step is crucial as it helps you assess the costs involved in starting and operating your venture, and ensures you have the necessary funds to support your business goals.

To determine your financial requirements, start by estimating the initial investment needed to get your business off the ground. This may include costs for acquiring land, obtaining permits and licenses, purchasing construction equipment, and setting up an office or showroom. It's essential to conduct thorough research and gather accurate cost estimates to avoid any surprises later on.

Here are some key factors to consider when determining your financial requirements:

• Construction Costs: Calculate the average cost per square foot for building homes in your target market. This will give you a benchmark to estimate the expenses associated with different project sizes.
• Materials and Labor: Research and identify reliable suppliers for construction materials and subcontractors for various tasks. Obtain quotes to estimate the costs for these resources.
• Operating Expenses: Consider ongoing expenses such as utilities, insurance, permits, marketing, and salaries for your team.
• Marketing and Advertising: Allocate a portion of your budget for promoting your services and attracting potential clients.
• Contingency Fund: Set aside some funds for unexpected expenses or project delays that may occur during the construction process.
• Consult with financial advisors or experts in the construction industry to gain insights into common expenses and potential hidden costs.
• Consider exploring financing options such as loans, grants, or partnerships to secure the necessary capital for your business.
• Regularly review and update your financial requirements as your business grows and evolves. Keep track of your expenses and adjust your budget accordingly.

By accurately determining your financial requirements, you can create a realistic and effective business plan that demonstrates your financial viability to potential investors or lenders. Remember that financial stability is crucial for the long-term success of your house building business, so be thorough and meticulous in your financial planning.

Create A Timeline And Action Plan

Once you have completed the previous steps and have a clear understanding of your business plan for house building, it is time to create a timeline and action plan. This will help you stay organized, track your progress, and ensure that you are taking the necessary steps to achieve your goals.

1. Define your timeline: Start by setting specific deadlines for each phase of your house building project. This will help you establish a clear timeline and ensure that you stay on track. Break down the construction process into smaller tasks and assign realistic timeframes to each.

2. Determine key milestones: Identify the major milestones you need to achieve throughout the construction process. This could include obtaining permits, completing foundation work, framing the house, and finishing the interior. By defining these milestones, you can better track your progress and make adjustments if necessary.

3. Outline action steps: Break down each milestone into smaller action steps. Write down the specific tasks and actions that need to be completed to reach each milestone. This will help you stay focused and ensure that you are actively working towards your goals.

• Be realistic with your timeline. Consider potential delays or unforeseen circumstances that may impact the construction process.
• Assign responsibilities to team members or subcontractors for each action step to ensure accountability and efficient progress.
• Regularly review and update your timeline and action plan as needed. Construction projects can be dynamic, and adjustments may be required along the way.

4. Monitor and track: Regularly monitor and track your progress against your timeline and action plan. This will help you identify any potential issues or delays early on, allowing you to take necessary corrective actions.

5. Communicate with stakeholders: Keep all stakeholders, including clients, subcontractors, and suppliers, informed about the timeline and action plan. Clear communication will help manage expectations and ensure everyone is on the same page.

By creating a comprehensive timeline and action plan, you can effectively manage your house building project and increase the chances of its success. Remember to regularly review and revise your plan to adapt to any changes or challenges that may arise during the construction process.

In conclusion, writing a comprehensive business plan for house building in the custom home building model requires careful research and strategic planning. By following the nine steps outlined in this checklist, entrepreneurs can set a solid foundation for success in the competitive housing market.

• Research the housing market to understand trends and demand.
• Define the target market to ensure effective marketing and sales strategies.
• Assess competition to identify unique selling propositions.
• Conduct a feasibility study to evaluate the viability of the business idea.
• Define the business structure to determine organizational and operational frameworks.
• Develop a marketing plan to reach and attract potential clients.
• Determine financial requirements to secure funding for the project.
• Create a timeline and action plan to ensure efficient execution of construction projects.

Successfully navigating the custom home building industry requires a combination of innovation, strategic planning, and attention to detail. With a well-developed business plan, entrepreneurs can position themselves for success and meet the demands of discerning clients seeking customized homes.

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How to Start a Custom Home Building Business

A career owning and operating a custom home building business is exciting. It’s also challenging. Most importantly, it’s rewarding. How many lines of work let you help people realize the home of their dreams? 

Like any other company, a custom home building business has to start somewhere.  

Opening your own custom home company is a large undertaking. It takes a lot of courage, too -- not everyone has the dint and determination to run their own business. 

By taking a thorough and measured approach to starting a custom home business, you’ll enjoy a long and engaging career. 

Starting a Custom Panelized Home Building Business: What it Takes 

Just like building a custom home, there’s a lot that goes into launching your custom home building business. The steps you take in the early days forming your company set you up for future success. To lay the foundation for a home building business that thrives, you’ll need to: 

• Write a business plan 
• Obtain licenses and permits
• Secure finances and create a budget
• Get insurance 
• Form an LLC 
• Set up an office or showroom
• Hire a staff
• Establish a list of subcontractors 
• Do your homework

1. Write a Business Plan

Most entrepreneurs know what they want -- to run a business that does more than just pay the bills. Their company not only provides a living and a sense of pride, but also is poised for longevity. 

Creating a business plan lays a solid foundation for any fledgling company. A business plan puts your vision for your company to paper, giving you a tangible roadmap for your goals. 

Business plans don’t have to be lengthy, in-depth documents full of charts, revenue forecasts, or projections. It can be as simple as a one-sheet giving a brief overview of your company and its goals . Be aware -- if you’re planning to get a loan to start your business, most lenders require a detailed overview of your new company and plans for its future. 

2. Secure Financing and Create a Budget 

Starting a home building company isn’t free. There are plenty of start-up costs you’ll need to cover until your business begins generating revenue:

• Renting or purchasing a space
• Buying equipment
• Paying utilities
• Employee salaries 
• Legal fees 
• Insurance 
• Marketing 

Unless you’ve saved up money, you’ll likely be headed to a bank or other financial institution for startup capital. Your lender will want to see a detailed budget of your anticipated costs for your first year of operation and at least the 3 years after that. The lender will also take a deep dive into your personal finances to make sure you’re a good candidate for a loan. 

With a budget in-hand, you’ll know exactly what expenses to anticipate and the revenue you’ll need to generate to meet them. 

3. Obtain Licenses and Permits 

Going into business for yourself is not simply a matter of opening up shop. At the very least, your company will need to be registered with the county it’s established in. If your custom home building company is one that completes actual construction work, you’ll likely need additional licenses and permits to operate.

Required licenses and permits vary by state and municipality . Your local code enforcement office is a great resource to learn about the forms you’ll need to complete to operate.   4. Get Insurance 

Insurance protects you and your company from those “what ifs.” Should the unforeseen happen, you won’t have to worry about losing your company or falling into financial ruin.   5. Form an LLC

An LLC -- limited liability company -- is a business classification. Through this designation, small businesses get the same legal protections as a large corporation. Practically speaking, establishing your custom home building business as an LLC provides a layer of protection between your company and your personal assets . That means any debts, liens, or lawsuits filed against your company stay there.

There are certain instances -- such as fraud -- where LLC protections for your personal assets don’t apply. And different states have different rules about what an LLC designation means for your business. Consult with a lawyer before forming your LLC.   6. Set up an office or showroom

There’s something to be said for walking into an office or showroom. 

For potential clients, going to a brick-and-mortar location gives the impression of legitimacy -- they’re not walking into someone’s house and sitting at their kitchen table to talk about their next home. That’s not to say a custom home building company can’t be run out of the owner’s home. Some do, but have a separate part of their house reserved strictly for business. 

Having a dedicated space for your business gives you plenty of room for:

• Client meetings
• A small library of custom home floor plans
• Building material samples
• Storing information for your custom home builder marketing plans

7. Hire a Staff

Custom home building businesses have two components: sales and project management. Both are equally important and deserve the right attention. As custom home construction projects are large undertakings, it’s best to have a support system of employees at the ready. 

At minimum, your company should have a home dealer and a project manager on staff. They’ll work in tandem with clients through each step of the custom home building process. 

A home dealer meets with prospects and handles most of the up-front work with a client, such as:

• Selling a home package
• Answering client questions
• Understanding clients’ needs and wants
• Orchestrating floor plan development 

Once a client commits to a floor plan, a project manager takes over to organize and oversee the development and construction of a home. This extends to clients who act as their own general contractors. 

With a home dealer and project manager working together, your company is able to service more clients and build more homes. 

8. Establish a List of Subcontractors

Whether your custom home building company is one that manages projects or builds homes, having a diverse list of dependable subcontractors is essential. 

While all home projects have similar construction elements that most general contractors can handle, some elements require specialized labor. It’s not uncommon for custom home builders to hire subcontractors to handle jobs that need a certain level of expertise, such as:

• Installing a foundation
• Electrical wiring
• Creating custom shower enclosures 

With a bullpen of subcontractors, you’re ready to tackle custom home projects no matter what it takes to build them.

9. Do Your Homework 

Those looking to build a custom home want to work with someone well versed in making their project a reality. Nothing drives a client away faster than a custom home builder who can’t answer their questions.  

Doing your homework before opening your doors allows you to truly be a resource to clients. 

A successful -- and reputable -- custom home builder understands their local housing market and the factors that impact home construction, such as material or land prices. They’re also experts on the types of home packages available -- they can speak to all the details of a custom home build and the choices the client needs to make. 

How Barden Helps Your Custom Home Building Business  

Joining the Barden Building Products family as one of our Independent Dealers takes some of the pressure off launching a new business. 

Barden has worked with many new custom home businesses as they started up, giving them the support and tools to succeed. 

As one of our independent dealers, Barden provides you with: 

• Mentorship 
• Marketing materials and funding
• Networking opportunities through our dealer network 
• Reports on market conditions and housing trends 

As a partner to your business, Barden works with you to build a company poised for long-term success.

Start a Custom Home Building Business

Entering the custom home building industry is a big step for anyone. Successful companies don’t just happen -- they start with spending the time to lay the right groundwork .

By taking a thorough approach and getting everything you’ll need to operate lined up ahead of time, you’ll hit the ground running when you open. And you’ll be able to focus on what matters most: running a company to be proud of. 

Learn more about how Barden Building Products helps you start a custom home business.  Download our e-book, Becoming a Barden Independent Dealer: A Blueprint for Success:

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The 35 Steps to Building a House: Your Start-to-Finish Guide

• House Hunting
• New Constructions
• Published on June 9th, 2023
• 15 min read

Evette is just your average HGTV fan who dreams of having a home worthy of being on one of those shows. When she isn't writing for HomeLight, she's working at her local real estate office. In her downtime, you'll find her searching for the next great hiking trail in her area.

Taryn Tacher is the senior editorial operations manager and senior editor for HomeLight's Resource Centers. With eight years of editorial and operations experience, she previously managed editorial operations at Contently and content partnerships at Conde Nast. Taryn holds a bachelor's from the University of Florida College of Journalism, and she's written for GQ, Teen Vogue, Glamour, Allure, and Variety.

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At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict  editorial integrity in each of our posts.

This is it — you’re finally making the move to build your very own house, and you couldn’t be more excited! It’s a huge decision, and it’s not one you’ve taken lightly. But do you know what goes into a new construction home , start to finish?

If not, don’t worry — we’ve got you covered. We’re going to break down all of the steps of building a house .

We have a lot of ground to cover, so grab a snack!

First thing: Talk to an expert!

A top local real estate agent will have connections to builders in the area and can offer a wealth of advice on how to navigate the whole process. Get the ball rolling by connecting to a highly rated agent through HomeLight today. It’s free, and it only takes a few minutes.

Steps 1-7: Finding, acquiring, and preparing the site

Step 1: find and purchase the lot.

The very first step to building a house is buying the ideal plot of land for your new dwelling.

Think about where you’d like to build. Do you want to live in the country with a large yard? Do you want to build a house in a growing development with a developer? Does the land already have access to utilities like water, sewer, and electricity?

Unfortunately, you can’t buy any old vacant lot — it must adhere to zoning ordinances where you want to build. Common zoning designations include:

• Residential: Areas designated for single-family homes
• Commercial: Areas designated for businesses like restaurants, retail shops, and so on
• Industrial: Areas designated for factories
• Rural: Areas designated for farming
• Historical: Areas designated for the preservation of historical landmarks or buildings
• Environmental: Areas designated for the protection of natural habitats
• Aesthetic: Structures must adhere to a certain “look” as outlined by zoning codes

It’s easier to build a custom because you have more choices. You can build the house from the bottom up and in the way you want — you’ll have to pay accordingly. With a spec home, your options are limited. Contractors may only offer shades of white or certain cabinets. They’re basically cookie-cutter homes.

Step 2: Research the type of house you want

There are three types of builds available; spec homes, tract homes, or a fully custom home.

Spec (speculative) homes

Spec homes are single-family homes that are built in a development with no particular buyer in mind.

If you go under contract early enough on a spec home, you may be able to choose some features like flooring, paint, kitchen appliances, and other finishes.

Tract homes

Tract homes are when a developer buys a large plot of land and divides that land into individual lots. They’ll then construct homes from specific architectural options planned for that community.

Tract homes could include single-family homes, condos, or townhomes.

Custom homes

A custom home is where you have your own plot of land and hire a builder to build a house exactly the way you want it.

Russell Wing , a top-selling agent who has sold 83% more single-family homes than the average agent in Union County, North Carolina , shares insight on the benefits of a custom home.

“It’s easier to build a custom because you have more choices. You can build the house from the bottom up and in the way you want — you’ll have to pay accordingly. With a spec home, your options are limited. Contractors may only offer shades of white or certain cabinets. They’re basically cookie-cutter homes.”

Regardless of which type of home you want, you’ll want to look at the different floor plans available. Consider things like:

• Number of bedrooms and bathrooms
• Open floor plan or not?
• The layout of the home
• Number of levels or floors

Step 3: Research and hire the building team

Building a home is a huge project, and the average build will involve 22 subcontractors working on the home.

The first person you’ll need to hire is the general contractor or a custom home builder. They will oversee the construction of your home from start to finish. Their duties include:

• Getting estimates for labor and materials
• Vetting and hiring subcontractors (some will have a team of subcontractors they generally work with and will hire an outside subcontractor for electrical and plumbing work)
• Assigning tasks to subcontractors
• Making sure the team meets deadlines

Note: Custom home builders and general contractors are not the same thing, but they are very similar. A custom home builder draws up blueprints for the home and specializes in custom homes, whereas a general contractor does not.

Step 4: Get the required permits from the township

Before construction can begin, your contractor will contact your municipal office and discuss your plans. They’ll know what permits are necessary and they might already have a relationship with the municipality, which could help speed up the process.

Permits you will need could include:

• Building permit ($1,200 to $2,000)
• Electrical permit ($10 to $500)
• Plumbing permit ($50 to $500)
• HVAC permit ($250 to $400)
• If a grading permit is needed ( $100 to $1,000 )

If you’re on a budget, you could get the permits yourself, but then you’ll be considered the contractor , and you would be liable if there’s a problem during construction or inspections.

Warning: Do not, under any circumstances, begin construction before obtaining permits! If the city learns that you do not have a permit , you could face increased fees to obtain the proper permits, and you could have to shut down construction until the permits are obtained, or even tear down work you’ve already completed.

Step 5: Clear the property

During this step, a professional land-clearing team will remove any debris, vegetation, trees, brush, and rocks within the intended build site.

When trees, shrubs, and bushes are removed, the team will also begin removing stump and root systems to prevent re-growth.

Note: If there are a lot of trees that need to be removed, you may have the option of selling the trees to a commercial logging company so they can be repurposed and turned into lumber.

Step 6: Level the site

Once the land is cleared, the clearing team will fill in any holes and level the ground. Then, the team will put up wooden stakes to market out where the foundation should be poured.

If the land has dips or hills , these will be graded to make sure there’s a flat surface to accommodate the house and driveway.

Step 7: Prepare the land for the foundation or basement

Using the wooden stakes as a guide, the team will dig holes and trenches for the foundation, utilities, and septic system if applicable.

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Steps 8-14: Building the envelope

Step 8: install footings.

Footings can be made from concrete or brick masonry and are most commonly used with shallow foundations because it distributes the weight of vertical loads directly to the soil.  Footings are generally wider than the foundation itself and sit one foot below the frost line (the typical depth at which the soil freezes in your climate).

Footing drains will be constructed so that water drains away from the house and protects the drains from damage.

Step 9: Pour the foundation

With the footings in place, your home will have either a slab foundation, a crawlspace , or a full basement poured or constructed.

The concrete will go through a curing process to reach maximum strength. This can take anywhere from 28 to 60 days , but depending on weather conditions, the building can resume after one week.

Regardless of the type of foundation your home will have, it will have to be waterproofed.

Step 10: Install drains, sewers, taps

Once the foundation has cured, drains, sewer lines, water taps, and other plumbing that is needed on the first floor will be installed. Then, the contractors will fill in the trenches surrounding the foundation with excavated dirt.

Step 11: Have an inspection done on the foundation

After the footings, foundation, plumbing, and electrical basics have been laid, there will be an inspection to make sure the foundation was done correctly and follows local code requirements.

Some things the inspector will look at typically include:

• The footing’s width, depth, and condition
• Waterproofing
• Reinforced bars

Step 12: Build the frame of the house

Once the inspector gives the project the green light, next comes the framing.

This is where you’ll finally see your home take shape. The framing crew will erect lumber for the walls, flooring, ceiling, and roof trusses. This step could take between one and two weeks to complete.

Step 13: The sheathing is applied to exterior walls

The sheathing is the large sheets of wood, oriented strand board, wafer board, or exterior gypsum that’s nailed to the frame. It’s recommended to use half-inch panels to give the structure more strength.

In some cases, insulation sheathing (rigid foam or cellulose-fiber panels) may be used to improve insulation. This type can be attached directly to the studs, below the wood sheathing. It could also be attached on top of the wood sheathing.

Next, the sheathing is covered with house wrap, a protective cover that prevents moisture from seeping into the underlying wood, preventing mold and wood rot.

Step 14: Install windows and exterior doors

With the sheathing attached to the bones of the house, the windows and doors can be installed.

When you’re shopping for windows and doors, look for energy-efficient windows with the Energy Star label . Energy-efficient windows and doors will help lower energy costs by keeping the temperature indoors consistent, no matter the temperature outdoors.

Steps 15-22: Installing critical systems

Step 15: install hvac system.

The HVAC technician will come in to install ductwork throughout the house. The air handler, condenser, and trim work will be installed as well.

Step 16: Rough plumbing

A plumber will come in and run pipes to the bathrooms, kitchen, and laundry room. They will also install sewer lines, vents, and bathtubs.

This step can be done while the doors and windows are being installed.

Step 17: Have an inspector evaluate the new plumbing

Although a licensed plumber may have done the work, an inspector will have to come in and inspect the work to make sure everything is done correctly.

The inspector will look for leaks and will ensure that the drains, sewage, and vent pipes pass a pressure test.

Step 18: Install electrical wires and panels

This stage is when all of the electrical work is done.

The wires are run through the walls and ceilings. The HVAC is hooked up (including the thermostat), and the fans, lights, electrical outlets, external electrical work, and the circuit breaker are also hooked up and ready to go.

Step. 19: Get an HVAC and electrical inspection

Once the HVAC and electrical work are complete, an inspector will come out and make sure these systems work properly and are completed to code.

Step 20: The roof is put on the home

The sheathing for the roof is generally done when the exterior sheathing is attached to the walls.

During this stage, the roof will be completed. Roofers will install the flashings and asphalt shingles — but other materials may be used , such as clay or concrete tile, slate, metal, or wood.

Step 21: Insulation is installed

The type of insulation your home will need is going to depend on your location.

Usually, insulation is applied to interior walls, the attic, basement, crawl space, and exterior walls (if it wasn’t applied before the sheathing).

The most common types of insulation are fiberglass, cellulose, or foam spray insulation.

Fiberglass insulation is used in unfinished walls, floors and ceilings. It comes in rolls and is installed in-between studs, joists, and beams. The average cost for fiberglass insulation is between $0.30 to $1.50 per square foot.

Cellulose insulation is used in existing and enclosed walls, or new open cavities in the wall. This insulation can be used in unfinished attic floors and other hard to reach places. This type of insulation can be poured, but is usually blown into place using special equipment. The average cost of cellulose insulation is about $1.20 per square foot.

Foam spray insulation is much like cellulose insulation, as it can be applied in enclosed, existing walls, new wall cavities, and unfinished attic floors. It is applied using a spray container (for smaller areas) or a pressure spray product (for larger areas). The average cost of foam spray insulation is between $0.44 to $6.00 per square foot.

Step 22: Drywall is hung

Drywall is hung throughout the interior of the house, as well as on the ceiling.

Step 22b: The walls and ceiling are textured

After the drywall is hung, a texture may be sprayed on the drywall. Then the walls are primed so they can be painted.

Steps 23-32: Adding your design touches

Step 23: walls are painted.

We’re nearing the final steps to building a house!

At this stage, the walls will be painted, and it’ll start feeling a little more like your home.

If you’re going with a spec or tract home, you may not have many choices in paint color, but if it’s a custom home, you could have your choice of colors, or even have wallpaper put on the walls.

Step 24: Exterior finishes are installed

There are different types of siding that can be applied to your home.

Vinyl siding is the cheapest siding material ($7.50 to $15 per square foot) and the most common material used for spec and tract homes. However, if you’re going custom, other options include:

• Wood ($10.50 to $17.50 per square foot)
• Fiber cement ($10.50 to $17.50 per square foot)
• Stucco ($10.50 to $18.50 per square foot)
• Brick ($12.50 to $22.50 per square foot)
• Metal ($7.50 to $25.00 per square foot)
• Stone ($17.50 to $45.00 per square foot)

Step 25: Flooring is laid throughout the house

Once the paint has dried, flooring is laid throughout the house.

Sometimes you won’t have a choice what type of flooring you’ll get if you’re going with a spec or tract home; however, with a custom home, the sky’s the limit!

Step 26: Window sills and trim are completed

When the flooring has been laid, next comes the trim.

Trim will be installed around the windows and doors, along the floor, and if you choose, around the ceiling, too (that’s called crown molding and can add a sophisticated look to any room).

Step 27: Cabinets and vanities are installed

Vanities and cabinets are the next things to be installed in your home.

Spec and tract homes typically come with builder-grade cabinetry , which is the most basic (and affordable) type of cabinetry you can get that still looks good.

You can opt for higher quality cabinets and vanities, but that will affect your budget. Custom cabinets can cost between $500 to $1,200 per linear foot !

Step 28: Light fixtures, outlets, and switches are installed

After the electrical work is finished, light fixtures, outlets, and switches are hooked up.

These features can be customized to match your personal style, but you can also opt for plain white ones and upgrade down the road if you choose.

Step 29: Countertops and appliances are installed in the kitchen

Countertops and appliances are the next things to go in. There are a variety of countertops you can choose from, but the most popular include:

• Quartz ($50 to $200 per square foot)
• Granite ($40 to $100 per square foot)
• Marble ($40 to $100 per square foot)
• Laminate ($40 to $80 per square foot)
• Solid surfacing ($52 to $120 per square foot)
• Recycled glass ($60 to $150 per square foot)
• Butcher block ($50 to $100 per square foot)

Step 30: Bathroom fixtures are installed

Bathroom fixtures such as faucets, showerheads, toilets, heat register covers, and other features are added during this phase.

Step 31: Mirrors are hung

Along with bathroom fixtures, mirrors are hung in the bathroom and other spaces, including walk-in closets, bedrooms, and workout rooms (if in a custom home).

Step 32: Landscaping and hardscaping is completed

You took so much care into what goes in the house; you can’t forget about the exterior!

A professional landscaper can come in and lay down sod, plant trees, or flowers. They’ll install walkways, build decks or patios, create garden walls, and so much more.

This is your chance to make your yard an oasis that leaves your neighbors green with envy!

Steps 33-35: The home stretch

Step 33: final home inspection.

The final home inspection is where a home inspector looks over everything.

They’ll double-check the plumbing, electrical, and HVAC systems. They’ll inspect doors, windows, the foundation, the roof, and more. If the structure passes the inspection, they’ll give you a certificate of occupancy , which means it’s inhabitable and safe to live in.

If there are any issues, another inspection may be required after those problems have been fixed.

Step 34: Final walkthrough

The final walkthrough is your opportunity to go through the house and make sure everything is as you requested.

You’ll want to pay close attention to the details and take note of anything that isn’t what you discussed or approved with your contractor. You’ll also want to look for any signs of damage that may have occurred during the final stages of construction, such as gouges in countertops, dented or scratched appliances, deep scratches on the hardwood floors, or damaged walls.

Step 35: Closing

If everything passes inspection and you don’t find any problems that need to be addressed during the final walkthrough , you can begin the closing process on the home. Hurray!

Don’t be overwhelmed by the steps to build a house

The average homebuyer looks at at least 5 homes in 10 weeks before submitting an offer on a house. There are times when they can’t find a house they want to buy and they’ll go with a new build. In April 2023, 1,416,000 permits for new construction homes were issued across the United States.

If you decide that new construction is right for you, but you’re uncertain about what type of new build you’d like to go with, look at your budget and try to decide the level of customization you want and how much house your budget will allow for.

“You can go to a tract home and get a lot more square footage for the money than you could with a custom build. It’s a cookie-cutter home, and the quality may not be as good as a custom build, but building custom is harder today because the price of materials has skyrocketed,” Wing advises.

If customization isn’t high on your list, a tract home or spec home is a great option. However, if you want a house that reflects your personality from the moment you sign the closing papers, then a custom home is the way to go!

Header Image Source: (Jens Behrmann / Unsplash)

• "Building on Vacant Land: Zoning Issues You Might Face," Nolo (March 2014)
• "What types of contractors will you need to build your home?," Nationwide (February 2023)
• "When Homeowners Must Obtain Permits for Home Projects," Nolo (December 2013)
• "5 Construction Laws to Know Before You Build a House," This Old House (December 2019)
• "How Is Land Clearing Done?," Mr. Tree Inc. (November 2019)

Evette Zalvino

Contributing Author

Taryn Tacher

Senior Editor

First steps for buying a home

First-time home buyer tips

How to pick a real estate agent when buying

Dos and don’ts when buying a home

Is it cheaper to build or buy a house?

New construction homebuying process

23 questions when buying a new construction home

Cheapest way to build a house

Do you need an agent to buy a new build?

Talk to an expert

Cost to build a house in 2023

Cost to build a house in Texas

Cost to build a house in Florida

Cost to build a house in California

Cost to build a house in Michigan

Cost to build a house in Georgia

Cost to build a house in Massachusetts

Cost to build a house in North Carolina

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How to Start a House-Flipping Business: Your Essential Toolkit

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If you've tuned into HGTV lately, it won't come as a shock to learn that more people than ever are interested in how to start a house-flipping business. For enterprising investors who aren’t afraid of hard work, flipping a house is an exciting opportunity for short-term investment and for starting a new business. But there’s a lot of research to be done, plus financing and resources you need before you can start a house-flipping business yourself.

So we’re all on the same page here, house flipping is the process of purchasing distressed, foreclosed, or otherwise desirably priced property with the intent to fix it up and sell at a higher price within a short period of time.

»MORE: Read how to fix up that first property you're flipping

If you’re one of those enterprising investors who want in, you’ll need to know more about how to start a house-flipping business. Follow this guide to help you develop a business strategy, plus determine and execute the optimal financing plan.

Starting a house-flipping business in 8 steps

If you’re determined to invest in short-term real estate and flip a house, here’s where to start:

Step 1: Write a business plan

Before taking any action, financial or otherwise, it’s crucial that writing a business plan is the first step in starting your own house-flipping business. A business plan will be key to keeping your business on track, helping you estimate profits, and getting investors.

Your business plan should be fairly in-depth and there is a lot of information you should be sure to include in it. You can either write it on your own or use a business plan template to help you. No matter what you choose, you should be sure to include the key parts of a business plan.

You'll want to start out with an executive summary detailing the purpose of your business, the vision you have for it, some high-level financial projections and identify who will be involved in the business. The rest of the business plan should include a section on the competition and the demand for your business. After all, you need to be sure that there's enough demand to sustain your house-flipping business—a lack of demand for a small business is the reason 42% of small businesses don't make it. That's a group you don't want to be a part of simply because you didn't do your research before starting your business.

You should also use your business plan to lay out what exactly your business will do and how much it will cost, along with how much you expect to make. With house flipping, you'll want to detail how much money you have, how much you expect to need to buy properties and flip them, and then how much you expect to make back.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Step 2: Grow your network

Flipping houses is tough work, and you'll need a plethora or resources to help you finish each job. Identify the resources already available to you to take full advantage of your strengths. Experience in the real estate business, access to a network of excellent craftspeople, or just a promising property are all assets.

Talk to friends or relatives involved in real estate investment, particularly in the area where you plan to invest in property. Anecdotal evidence and word-of-mouth advice can help you find reputable wholesalers, contractors, and realtors to help you find and complete jobs within budget.

Reach out to your existing professional or personal network to find contacts within the industry, and seek out experts for mentoring and advice. Get active in local real estate investment groups or find your chapter of REIClub to connect with industry professionals.

Step 3: Choose a business entity

In order to operate your house-flipping business legally, you'll need to choose a business entity and register your business with the state in which you plan to operate. While there are many business entity types to choose from, you will want to opt for one with limited liability protection, such as an LLC or corporation.

Liability protection is especially important for a house-flipping business because there are many opportunities for things to go wrong. If someone sues your company over an issue with a property you flipped, you'll want to make sure your personal assets are protected. If you're unsure which entity is right for your business, consult a business attorney to help you weigh your options.

Step 4: Obtain an EIN, insurance, permits, and licenses

Registering your business is the first step to legally establish your operation, but there are a few more steps to take to make sure you're officially allowed to start work as a house flipper. First, you should register for an employer identification number, also known as an EIN. Think of this as a socials security number for your business, which you will use for tax purposes, as well as when applying for business loans or a business bank account or credit card. Applying for an EIN can be done online through the IRS website.

Next, you'll want to look into your business insurance options. If you hire employees, you'll need workers compensation, unemployment, and disability insurance. Beyond those policies, you should also look into general liability and commercial property insurance to protect yourself, your business, and your properties.

Finally, you'll need the proper business licenses and permits to operate your business. The licenses and permits you need will depend on your state and the scope of work you're doing; however, you can expect to need several permits when working in the construction business. Check with your local chamber as commerce and consult with your business attorney to make sure you have all the paperwork you need before you start any work.

Step 5: Find suppliers and contractors

Once your business is legally established, it's time to find contractors and suppliers to help you get your business going. Even if you plan to contribute sweat equity to your house-flipping business, you’ll probably need additional contractors to complete a project successfully. Look for contractors with a portfolio of demonstrable work, references, and positive feedback from previous projects.

A trusted general contractor can also look over any remodeling plans and budget projections you make to check for accuracy with regard to cost and timeliness. Finding suppliers who are reliable and can work within your budget is also incredibly important. Tap into your network and do your research to find some reputable options.

Step 6: Assemble a team

Whether you plan on bringing in a partner, hiring outside contractors, or renovating each property yourself, you’ll need to recruit a team of qualified people to complete a successful flip. In particular, consider sourcing for these roles, which could really help you keep things organized and get the most out of your investment:

Business partners or investors

A good potential partner might be an active private investor in your personal network or a real estate investor looking for a project manager. A good business partner brings an asset or skill to the relationship—be it capital resources, skilled labor, industry expertise, or simply a great work ethic and determination to make an honest profit.

According to Jamell Givens, a partner and real estate investor at Leave the Key Homebuyers, the advantage of having a business partner is the ability to evaluate a deal in different ways. Whereas one partner might think only of a home's profit potential, the other might bring local knowledge or connections with contractors.

Realtors or property owners

A background in real estate and property ownership is a huge plus in the house-flipping business. An experienced partner can help you search efficiently for prospective properties, identify the most valuable improvements for a given area, and navigate contracts and sales once the rehabilitation is complete.

Or, if you know a homeowner looking to sell and willing to loan you the money for necessary repairs and renovations, owner or seller financing may work for you.

Legal counsel

Seeking legal advice about any financial agreement or contractual obligation is a good idea, especially when you’re considering making major investments and buying property.

Step 7: Obtain financing

You’ve found a partner, done your research, and maybe even identified the first property you want to flip. In other words, you’re ready to finance your house-flipping business’s first fix-and-flip.

If this is the beginning of your house-flipping career, you’re probably not going to be eligible for a traditional bank loan. Typically, banks only approve businesses with many years of profitability under their belts. And in house-flipping, time is money. That makes the best fix-and-flip loans short-term financing option—usually around 12 months. Repayment terms on bank loans, on the other hand, can run between five and seven years.

That said, you do have a wide variety of fix-and-flip loans available to you. As a brand-new business, you also have a good option to tap into your personal funds or investments. It’s a little risky to throw your own skin in the game—in other words, your nest egg—but it’s likely that your business doesn’t have the revenue and financial stability that most lenders want to see before extending you a business loan .

As always, it’s wise to explore all of your possible options before settling on a loan that best suits your needs. Start your search with these options for new house-flipping businesses:

Friends and family loan

Many rookie real estate investors fund their first projects with personal loans from partners, friends, or family members. If the loan is comfortably within the lender’s means, this alternative to a bank or private loan can alleviate some of the pressure of a traditional loan, as well as ensure a degree of accountability.

If a friend or family member is an investor or partner in your house-flipping project, it’s a good idea to establish terms of the arrangement in writing as soon as you reach an agreement.

Tap into your 401(k)

For first-time flippers with a retirement plan who are not planning to retire in the near future, one financing possibility is taking out a loan from your 401(k). This option incurs the risk of losing your nest egg, which is always a scary prospect. But financing a business with a 401(k) might be the only viable option for entrepreneurs just starting out—and if you’re smart with starting your house-flipping business, you can hopefully make back the cash and then some.

There are two main options for 401(k) loans: The classic 401(k) loan, in which the IRS allows you to borrow up to half the vested balance, or $50,000, whichever is amount is lower; or a ROBS . You’ll determine which type of financing makes the most sense for you based on the size of your investment and your willingness to dip into your retirement savings.

Combination financing

Many experienced short-term real estate investors find success using multiple financing sources to purchase and renovate a property. Depending on your own capital, a partner or investor, and external lenders, it’s likely that you’ll end up using a combined solution to finance your house flipping business.

Step 8: Source your deal

The success of flipping a home depends in large part on supply and demand in the local real estate market, as well as the cost of labor and value appreciation of the renovations.

Identifying your target property market might help you decide if a real estate wholesaler, auction, or a traditional broker is the right choice for your project. If you’re interested in distressed or foreclosed properties, a wholesale broker or auction will have higher volumes of properties available. A traditional broker might be right for you if the real estate market is new to you or if you need help finding a specific type of property or building.

Determine the scope of renovations or rehabilitation you are equipped to complete on a property, keeping in mind the duration and amount of your fix-and-flip loan.

Start Your Dream Business

Follow these best practices for a successful house-flipping business

Once you develop a business strategy, assemble a team, identify a property, and secure financing, it’s time to start implementing your renovation plans, thinking about marketing and selling the property , and generally getting your house-flipping business underway. Make sure you:

Commit to your business plan. Planning, logistics, and administrative organization will make or break your project—although you have the potential to make a big, quick profit, starting a house-flipping business is no walk in the park. You’ll need to scout properties, calculate renovation costs, source a trustworthy crew, possibly apply for a small business loan… not to mention the curveballs that may arise with every step.

Approaching the process with a detailed business plan in hand will help keep you on track. And the more confident you are in your business strategy and execution plan, the more adaptable you’ll be to those unpredictable circumstances that’ll inevitably arise.

Grow your network. Use your first fix-and-flip project to foster relationships with industry professionals—from investors to realtors to carpenters—whose collaboration and skills you will need for your next house flip. Experienced contractors and agents can connect you with other vendors, give you leads on properties and service-providers, as well as provide advice on specific projects. Trusted contacts in the industry can also help you cover your blind spots, and make sure estimates for properties and repairs are accurate, saving you time and money.

Make estimates—then double them . Unless you’re already in possession of a property, sufficient cash, and experience with home repairs, the process of flipping a home will require timelines and cost estimates at every turn.

Err on the side of caution when making any projections about the cost and duration of the renovation. That’s especially important if you’re financing your startup with outside investors who need to see that you’ve done your due diligence before putting their own capital on the line.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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11 Components Of A Successful House Flipping Business Plan

Why Start Flipping Houses?

What is a house flipping business plan, why you need a business plan for flipping houses, 11 important steps in your fix-and-flip business plan, assemble a team & execute, 5 house flipping mistakes to avoid.

There is absolutely no reason for a real estate investor to treat a flipping career like anything less than a legitimate business in today’s competitive marketplace. Whether flipping houses as a full-time job or supplementing a nine-to-five, every investor could benefit immensely from implementing sound business practices into their existing strategy. More specifically, however, there’s no reason to think a well-devised house flipping business plan can’t maximize even a new investor’s potential. If for nothing else, treating flips like a business will tip the scales in an investor’s favor while simultaneously eliminating inefficiency and inconsistency–two of the greatest threats to today’s entrepreneurs.

When asked why they start flipping houses, most investors will instantly lean into the fact that they get to work for themselves, that, and the money. In fact, it’s not a hard argument to make. Becoming a real estate entrepreneur can simultaneously be lucrative and fun. Few career paths award hard-working individuals with more freedom and the ability to generate wealth on the same level as a career in real estate.

Even when the pandemic all but brought the U.S. economy to a standstill, a proper house flipping business plan proved lucrative. As recently as last year, the average home flip “generated a gross profit of $66,300 nationwide (the difference between the median sales price and the median amount originally paid by investors). That was up 6.6 percent from $62,188 in 2019 to the highest point since at least 2005,” according to Attom Data Solutions’ year-end 2020 U.S. Home Flipping Report .

However, it is worth noting that the answer to the question will resonate on multiple levels for today’s best investors. You see, on the surface, it’s easy to understand why someone would want to start flipping houses: it’s a good way to work for yourself and make money. However, some see flipping houses as a bridge to get closer to what they really want. With the ability to realize financial freedom and work at their own pace, investors use real estate as a vehicle to bring them true happiness. Whether spending more uninterrupted time with family and friends or traveling the world, real estate can serve as the means to an end investors envision.

A house flipping business plan is nothing short of the most important aspect of a real estate investor’s career. To that end, I remain convinced few things–if any–come with a better return on investment (ROI) than a well-crafted business plan for house flipping. I could easily argue a great business plan is invaluable, which begs the question: What is a house flipping business plan? Better yet, why does anyone looking to flip properties need to implement one?

To be clear, a business plan for flipping houses is exactly what it sounds like: a plan for flipping houses. However, it is worth noting that a truly great house flipping business plan isn’t meant for flipping a single property but rather multiple properties. You see, a truly great flipping strategy isn’t meant to be used on a single property; it’s meant to guide investors through the house flipping process over the course of their entire careers. Therefore, any investor intent on running a successful rehab company needs to have a real estate flipping business plan of their own.

Today’s most prolific house flipping business plans act as a blueprint for success; better yet, they award savvy investors the chance to make success habitual.

It is not enough to simply start flipping houses on a whim; doing so exercises a reckless abandonment nobody will appreciate. Instead, investors need to devise a plan of attack, as to increase their odds of realizing success and giving themselves a blueprint to follow in times of need. It is worth noting, however, that a house flipping business plan does more than simply tell investors where to go. A truly great flipping houses business plan will also:

Help investors maintain an organizational level that is conducive to a successful business.

Show others how serious investors are, perhaps awarding them with a more trusted network.

Clarify whether or not a respective revenue model makes sense.

Share an investor’s vision with others easier than just about anything else.

Help lenders decide if they want to work with a specific borrower.

Help investors turn their thoughts into more actionable processes.

Bring to light an individual’s strengths and weaknesses.

Force some investors to address their own risk tolerance.

No two businesses are exactly alike, and it’s unfair to expect even similar companies to share the exact same business plan. Perhaps even more importantly, there isn’t a single, universal business plan for flipping houses that will work for every investor in a given market. What works for one investor may or may not work for another, and vice versa. Case in point: there are several ways to draft a promising business plan. That said, no house flipping business plan template is complete without the following sections:

Executive Summary (Mission Statement)

Team dynamic, swot analysis, opportunity, market analysis, financing and projections, growth strategy, lead generation and marketing, goals and objectives, competition, exit strategies.

Aptly named, the executive summary section of a house flipping business plan should sum up an investor’s intentions in a clear, concise mission statement. Perhaps even more specifically, the executive summary will serve as the foundation for an entire business; it’s the first impression, and it’s what customers will use to determine whether or not they want to work with a respective company. Every executive summary should, therefore, clearly define the company’s purpose and long-term goals.

No rehab strategy is complete without clearly identifying the team’s dynamic . Identify the most important positions that will be held and who will hold them. There is no need to acknowledge every person in the rank and file, but it’s important to include the most important positions. In addition to each person’s title and name included in the team dynamic section, be sure to include a description of the title and why it’s needed. This section aims to identify each person’s role moving forward and prevent any disputes over whose responsibility a specific task will be. More importantly, the team dynamic section will see that everyone has a clear idea of what they need to do.

A popular acronym is used to acknowledge a company’s strengths, weaknesses, opportunities, and threats. A SWOT analysis will help up-and-coming real estate investors identify the very components working for and against their current business plan. If for nothing else, success favors those that are most prepared. Few things will prepare a real estate investor for what’s to come better than identifying their own strengths and weaknesses. Perhaps even more importantly, an in-depth, unbiased SWOT analysis will help investors carve out their own niche moving forward.

It is in the best interest of today’s investors to identify the problems that plague their industry and the opportunities that are inevitably created as a result. It’s a sad reality, but a truth, nonetheless: distressed homeowners are in a difficult situation. However, their problems create an opportunity for investors to lend a helping hand. That said, investors need to identify their own opportunities and how they can take advantage of them. This part of the rehab strategy should identify the target audience’s needs and offer a solution.

The market analysis section of a flipping houses business plan should identify the main indicators of the area investors intend to work in. As its name suggests, a market analysis should offer an in-depth look at what’s taking place in the same neighborhoods investors intend to work in. Pay special considerations to the past, present, and future. Among other things, be sure to reference changes in the market share, nearby competitors, historical shifts in the market, costs, pricing, and anything else deemed important to an investor’s success. The more comprehensive, the better a market analysis will serve an investor.

Not surprisingly, the best strategies will detail a company’s financial outlook. Financial literacy about one’s own company can’t be underestimated, and one should prioritize almost everything else involved in a house flipping business plan template. Be sure to explain the model you intend to use and any pricing assumptions gleaned from the market analysis. Additionally, investors will also want to include where exactly they intend to get their funding from and how they will secure money for future deals. To be safe, consider forecasting for at least three years; that way, investors are less likely to receive rude or unwelcome awakenings. The financing section should also touch on how the investors intend to finance future deals. Include which sources will be used, and their respective fees and timelines. The more methods of financing a deal investors have at their disposal, the better. This section should include, but isn’t limited to:

Private Money Lenders

Hard Money Lenders

Institutional Lenders

Owner Financing Strategies

Crowdsourcing

Creating a business plan for house flipping will require investors to think proactively. More importantly, house flipping business plans–even those accommodating new investors–should be written with the intentions of future growth. Scaling a business can prove difficult for those companies that aren’t ready for it. Therefore, it is best to include a section in your initial rehab strategy that outlines any growth strategies that may be relevant. The best time to entertain a growth trajectory is from the onset of one’s career, not in the heat of the moment. Those prepared for growth from the beginning will find the transition to be a lot easier.

Every great house flipping business plan will include a section on how to generate leads through a proper marketing strategy. If for nothing else, this section will serve as the foundation for a great deal of the company to function off of. It is with a great marketing strategy that investors will be able to operate and maintain a funnel of hot leads. It is worth noting, however, that a truly great marketing system is the sum of its parts. There isn’t a single marketing strategy investors should be using, but rather several. For a better idea of what today’s investors are using, here’s a list of what has worked for us:

Direct Mail Marketing

Bandit Signs

Door Hangers

Curated Lists Purchased Online

Real Estate Investment Clubs

No real estate investor can hope to realize success if they can’t clearly define what success for their own company would look like. In other words, it’s impossible to succeed if there are no clear goals and objectives to aim for. Likewise, you can’t possibly know if you realized success if you never sought to define what success actually means. Success is, after all, a relative term. What one investor may deem as a successful business, another could completely disagree with. Therefore, today’s new investors need to develop their own definition of success; that way, they can have something to strive for and even reference when times get tough.

For as important as it is to know your own business, it’s equally important to keep tabs on the competition’s business. There is a great deal of information that can be gleaned from the way your competition runs its business. Therefore, I recommend dedicating an entire section of your house flipping business plan to the people you intend to compete against. What are they currently doing that is working? What hasn’t worked out well for them? Do they currently have a competitive advantage? In understanding the competition, investors will have a better idea of how to proceed and what not to do. Be sure to learn from their successful efforts, but don’t ignore their shortcomings; they are just as valuable.

No plan is even remotely close to complete without a section that outlines potential exit strategies. Therefore, it is at this point in the planning process that investors need to weigh their available options. First, evaluate the property based on its merits and determine how it may meet your specific investing goals. If, for nothing else, there’s an ideal exit strategy for each property, but it must line up with your own goals. In other words, you need to know whether you will flip, rehab, wholesale, or rent the asset before you even buy it. Not only that, but you’ll need a backup plan in place in the event things don’t go according to plan.

It is entirely possible to pull off the perfect house flipping business plan by yourself. After all, one of the best reasons for becoming an investor is to become your own boss. That said, this industry can get very involved very fast. In addition, many skills are required to complete a single deal, all of which can be performed by a different professional. As a result, it may be in every investor’s best interest to assemble a well-qualified team. With a competent team at your side, you’ll be free to do more important activities. Not only that, but if you hire the right team, you can remain confident the job is getting done well.

A good real estate team is invaluable and can increase productivity exponentially. To see to it your team can compete on the highest level, you may want to consider enlisting the help of the following individuals:

Real Estate Agent: A truly great real estate agent is worth their weight in gold. Their knowledge of a given area and their contacts — alone — can save investors an incredible amount of time and money. As a result, a good real estate agent should be one of the first additions to your team.

Attorney: As I already alluded to, the real estate industry can get complicated really fast. A good real estate attorney can make sure you have every corner covered. Their help will mitigate risk around every corner.

Contractor: Good contractors may be found in any city, but the key isn’t to hire just any contractor; you need to hire the right one. A trustworthy contractor is invaluable to today’s investors. Their skills will show in the final product and keep investors on schedule.

CPA: Not unlike the industry itself, the numbers behind everything can get confusing. Therefore, it is important to hire someone familiar with real estate deals and their respective “numbers.” That way, there is much less of a risk of running the numbers incorrectly.

Inspector/Appraiser: Aligning your services with an appraiser or inspector can give investors an advantage. Not only will they serve as a valuable contact when it comes to getting a home inspected, but they can also expedite the process. Remember, time isn’t just money to real estate investors; it’s everything.

Successfully flipping homes requires investors to hone specific skills to increase their odds of making a profit. However, many investors don’t realize that it’s just as important to avoid mistakes as it is to be successful. Sometimes knowing what not to do is just as valuable as knowing what to do. With that in mind, here are some of the most serious house flipping mistakes to avoid:

Inadequate Funds: Any failure to calculate the amount of necessary funds could be disastrous. Running out of capital in the middle of a project can potentially lead to deal-ruining delays and perhaps the deal from being completed altogether. Consequently, those without adequate funds may find the urge to cut corners and produce an inadequate product, which can ultimately cut into profit margins. Instead of beginning a deal with inadequate funds, it’s better to give yourself extra cash to serve as a safety net.

Poor Time Management: Time isn’t simply money; it’s everything to an investor. Therefore, today’s investors really need to learn time management. The faster they can get in and out of a deal, the better. Holding costs will be down, and they’ll be able to move onto another deal even sooner if they can efficiently manage their time. Failure to do so can cost investors a lot of money and perhaps even ruin a deal. Instead of heading into a deal without a plan, investors need to have a schedule. Not only that, but they need to do everything they can to stick to it to avoid unnecessary setbacks.

Inexperience: As perhaps the biggest mistake of them all, far too many investors tend to get in over their heads. A lack of experience, for example, can lead o poor decision-making and folding under pressure. Therefore, investors should work within their comfort zone. Instead of attempting an exit strategy you aren’t familiar with, stick with what you know. When the time comes to branch out, educate yourself before moving forward.

Lack Of Education: A lack of education can be disastrous at any stage of an investment. Nothing is more sure to ruin a deal than ignorance. Therefore, investors must know everything about a deal before going into it. Proactively learn about every aspect of a deal. Read, listen to podcasts, take classes and talk to anyone you may learn from. Education is invaluable to an investor and can alter the course of their career in great ways.

Impatience: Patience is a virtue in the investing world. While time is money, it’s also important to maintain a level head. Sometimes patience can prevent investors from making a huge mistake. If for nothing else, acting irrationally can be devastating.

Today’s greatest real estate investors know it, and it’s about time everyone else did, too: no real estate investing company is complete without a thoroughly crafted house flipping business plan . As the blueprint for running a successful company, business plans are instrumental in developing a new investor’s name and even furthering seasoned entrepreneurs’ success. All things considered, the majority of today’s most successful investors can attribute their current position to a sound business plan.

There’s no reason to think a well-devised business plan for flipping houses can’t maximize even a new investor’s potential.

With a flipping houses business plan in place, investors should have a blueprint to follow before they even get started.

Use a house flipping business plan template if you aren’t sure how to draft one yourself.

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Real Estate Investing & Rental Management | How To

How to Start a House-flipping Business in 7 Steps (+ Free Download)

Published October 18, 2023

Published Oct 18, 2023

REVIEWED BY: Gina Baker

WRITTEN BY: Melanie Patterson

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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 Prepare a Real Estate Investment Business Plan
• 2 Set Up Your House-flipping Business Operations
• 3 Find Financing Sources for Your House-flipping Business
• 4 Hire the Right House-flipping Professionals
• 5 Identify the Right Properties to Fix & Flip
• 6 Create a Marketing & Lead Generation Plan
• 7 Buy, Rehab, Market & Sell Properties
• 8 Mistakes to Avoid When Starting Your Own House-flipping Business
• 9 Frequently Asked Questions (FAQs)
• 10 Bottom Line

Before taking any house-flipping steps, it’s crucial to lay a strong foundation. This base involves creating a comprehensive business plan encompassing operational setup, team recruitment, property evaluation, securing funds, and the flipping process. To aid in this endeavor, we offer a free template and seven critical steps on how to start a house-flipping business to help you craft a solid strategy and ensure your venture’s success.

If you landed here looking for information on where to find fix-and-flip houses, see our article, How to Find Houses to Flip for Profit in 7 Ways .

1. Prepare a Real Estate Investment Business Plan

Before taking any steps to buying and flipping houses, you need a business plan with specific strategies that pertain to the fix-and-flip business model. A business plan provides a roadmap for how many projects you’ll need to take on, how much profit you need to generate, and funding details that will keep you on track to meet your goals. A clear plan also demonstrates professionalism to lenders and investors when seeking funding.

Use our real estate investment business plan and complete the following information to get started:

• Write mission and vision statements
• Conduct a SWOT analysis (strengths, weaknesses, opportunities, and threats)
• Set specific and measurable goals
• Write a company summary
• Conduct a market analysis

However, in addition to items from a general investment business plan, a strong house-flipping business plan includes detailed information about this unique business model. Make sure your plan also includes the following:

• Types of properties: Such as single-family homes, duplexes, or multifamily properties.
• Geographic area: The specific locations and neighborhoods where you want to invest.
• Who’ll do the work: Decide if a contractor does the work, you hire a team of specialists, or if you’re doing the work yourself.
• Project timeline: The projected timeline to complete the flip and a six-month margin for inevitable delays.
• Number of projects: How many projects you can realistically manage and complete during the course of one year.
• Financial plan and sources: Define your financing sources and include all costs such as materials, labor, carrying costs (taxes, insurance, utilities, mortgage principal and interest), marketing, and real estate agent commission.
• Expected return on investment (ROI): This figure should include actual calculations, not just a goal. It’s common for flippers to aim for an ROI of 20%. However, returns will vary depending on the location, property values, and the current real estate market conditions.

Use our free template below to write your house-flipping plan and start your business on the right foot:

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FREE House Flipping Business Plan Template

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2. set up your house-flipping business operations.

While many think flipping houses is solely about buying, renovating, and selling, it’s crucial to establish the proper business foundation for long-term success. This step involves choosing the correct legal entity, like an LLC, registering your business, and creating separate bank accounts. Consulting professionals, such as attorneys and accountants, ensure you set up your entity correctly. Proper business operations keep your enterprise organized, efficient, and legally compliant.

Choose the Right Business Entity

When launching your house-flipping business, selecting the appropriate legal structure and registering it with your state creates a separation between your personal and business assets—safeguarding you in case of business-related liabilities. For instance, if someone gets injured during a demolition, they can sue your company. Still, it creates a hedge from them suing you personally.

Common entity types for investing in real estate include DBA (doing business as), S Corp (subchapter or small business corporation), LLC (limited liability company), and sole proprietorship (the lowest form of legal protection). You must consult with your accountant and attorney as part of your learning how to start a house-flipping business to determine the best fit for your business since this also ties into your financial situation and varies by person.

Read our guide on How to Start a Real Estate Holding Company in 6 Steps for more details.

Register Your Business With the IRS & Obtain Permits

Apart from your legal business entity, you must register your business with the Internal Revenue Service (IRS) and get an employee identification number (EIN) . An EIN identifies it as a business entity. Make sure to also check with your state and local municipality for what other business licenses and permits you may need, such as building permits, change of use, or special exceptions to zoning ordinances.

Conveniently apply online (Source: U.S. Internal Revenue Service )

Open a Business Bank Account

With your EIN, you can open a business bank account . Keeping your personal and business money separate is essential to protecting your livelihood and staying legally compliant. Having this account up and running is crucial when starting a flipping business.

For example, you’ll be spending money on gas when looking for properties; all business expenses should come from the same account. You also need to pay your newly hired attorney and accountant. Managing your business account and costs will eliminate auditing from the IRS and complications when your accountant does your taxes.

Analytics in the Baselane dashboard (Source: Baselane )

With Baselane’s analytics and reporting capabilities, gain real-time insights into your property’s performance, such as cash flow, profit and loss (P&L), capital expenditures, carrying expenses, and transfers. Streamline the consolidation of your investment property’s financial data from both your business banking and external accounts, all within a single, user-friendly platform.

Visit Baselane

Pro tip: Once your business bank account is up and running, consider applying for a business credit card —a valuable tool for acquiring building materials and office supplies without any upfront costs. Some business credit cards offer perks like cash back, which saves on your upfront costs. Some provide a 30-day to 18-month interest-free period, allowing you to manage expenses more effectively.

3. Find Financing Sources for Your House-flipping Business

A common question in house flipping is how to begin with no money. While you’ll need some funds to buy properties, many flippers don’t use cash for the entire process. They typically secure financing through hard money lenders or specialized loans for house flippers.

The two most common ways to get into the flipping homes business are:

• Hard money loans : These loans offer faster approval and funding times than traditional mortgages. The borrower qualifications are more lenient but with shorter loan terms and higher interest rates.
• Rehab loans: These include home equity lines of credit (HELOCs), HomeStyle renovation mortgages, 203(k) rehab loans, or CHOICERenovation loans. They require a lower down payment but also have more extensive criteria and paperwork.

If you have a construction or real estate background, you can join investment groups and find investors willing to put up some cash. It’s easy to find local events and groups for investors by searching on Google or Meetup.com.

Real estate investor groups (Source: Meetup )

Remember that the costs to flip a house vary depending on the individual property, its condition, prices of repairs, and the real estate market. Learning how much money you need to flip a house and how much money you can make by flipping houses can be complex. Still, getting the right financing and maximizing your profits is necessary.

Creating a budget and calculating each project is an important part of your house-flipping checklist. Use the free house-flipping calculator to generate your potential profits when shopping and evaluating potential properties.

4. Hire the Right House-flipping Professionals

When starting as a house-flipper, remember the significance of your professional network for your business plan. Flipping houses isn’t a solo venture; you’ll collaborate with experts like lawyers, accountants, real estate agents, and contractors. These professionals provide valuable insights and guidance for successful house flips, making the difference between a lucrative investment and a costly mistake.

Some important house-flipping pros to hire include:

• Real estate attorney: Manages legal aspects, ensures compliance with local laws, and drafts contracts.
• Accountant: Helps with business structure, filing house-flipping taxes , expense tracking, and financial advice.
• Real estate agent: Offers industry insights, local connections, and accurate market data.
• General contractor (GC): Oversees rehabs, ensuring quality and reducing errors.
• Administrative assistant: Assists with tasks and project management as your business grows.
• Handyperson: Handles smaller jobs, saving time and costs.
• Landscaper: Enhances curb appeal for higher ROI.
• Architect (for large projects): Ensures structural integrity and avoids costly issues.

The most trusted way to find experts is through referrals. Suppose other real estate investors or agents in your network succeeded with a professional. In that case, it’s more likely that you’ll also have a smooth experience with them. However, you should still check them out and vet them with an interview or meeting to ensure you choose the right professionals. In the long run, spending time and effort to choose an expert saves you time, money, and stress.

Pro tip: Building and utilizing your network is crucial for success in house flipping. A strong network can connect you with the right professionals, making it easier to find deals and resources. Your network provides valuable insights, market knowledge, and support from experienced individuals who can guide you through the process and help avoid common pitfalls. Additionally, networking can lead to partnerships and opportunities for collaboration, enabling you to scale your house-flipping business effectively.

5. Identify the Right Properties to Fix & Flip

Before jumping into a purchase, begin by evaluating potential properties to flip. Run a comparative market analysis (CMA) on properties or have a real estate agent run one to determine the value and calculate the return on investment (ROI). Evaluate each property within its neighborhood, location, and real estate market context.

When learning how to find houses to flip , some essential factors to evaluate include:

• Location: Pick nearby properties for easy site visits.
• Neighborhood: Choose desirable neighborhoods for curb appeal.
• Amenities: Houses near parks, schools, and other establishments attract buyers.
• Structural issues: Avoid costly structural problems.
• Value-add repairs: Research profitable upgrades like kitchens and bathrooms.
• Property size: Focus on square footage over the floor plan.
• Outdoor space: Properties with outdoor areas tend to yield higher returns.

Did you know? The potential return on investment (ROI) in a house-flipping business can be significant. Investors purchase distressed properties at a lower cost, renovate them to increase their market value, and then sell them at a higher price, resulting in a profit. ROI percentages vary widely, but successful flips can yield returns ranging from 10% to 100% or even more of the initial investment , depending on location and other factors. However, house flipping comes with risks, such as unexpected renovation costs or market fluctuations, so thorough research and proper planning are crucial to maximize ROI and minimize potential losses.

6. Create a Marketing & Lead Generation Plan

Setting up a successful house-flipping business involves some marketing and real estate branding . While a complex marketing funnel isn’t necessary initially, a well-crafted marketing strategy ensures a steady influx of new projects for your house-flipping business.

Marketing Your Fix & Flip Business

Having foundational marketing elements is crucial for projecting professionalism, building your reputation as a reliable home flipper, and marketing your newly renovated properties, especially if you seek funding. Lenders see your professionalism and experience as favorable.

Consider starting your business with these marketing elements :

Logo: A quality logo distinguishes your brand and is useful across future marketing materials.

Business cards: Affordable and handy for networking; consider adding QR codes for website access.

Website: A simple, one-page site effectively communicates your identity, services, and contact information.

Gmail business email account. (Source: Google Workspace )

Business email: Use your website domain for a professional email address, boosting your image.

Business card templates (Source: Canva )

As you dive into house flipping, consider expanding your marketing with tools like social media and email campaigns. Canva, a versatile and user-friendly design platform, offers templates for various needs, from social media posts to postcards and letterheads. It’s a go-to tool for business owners, making it easy to create diverse marketing materials, both digital and print.

Visit Canva

Lead Generation Strategies for Your Business

Additionally, you will need to consistently generate potential renovation projects and motivated sellers. Many beginners use listing platforms like Zillow to find houses to flip, which offers versatile search filters to refine property searches based on your chosen criteria.

Homeowners opting to sell without agents often use FSBO.com ( For Sale By Owner ), Craigslist, or Facebook Marketplace. Foreclosed and bank-owned properties typically appear on websites like Foreclosure.com or the government’s HUD Homes site. These properties are appealing to investors for their potential to offer significant discounts and investment opportunities. Generate leads and learn how to find cheap houses to flip, start with the following resources:

7. Buy, Rehab, Market & Sell Properties

Once you have all the right business strategies and structures in place, the bulk of your work as a house flipper comes to buying, renovating, and selling properties. As soon as you close on your property, you’ll have monthly carrying costs that can add to your planned expenses. Therefore, the more efficiently you can complete the flip, the higher your profits.

The process of making money flipping houses goes like this:

• Close on the investment property: Buying an investment property is different than purchasing a primary home, so make sure you know how to determine a budget, evaluate properties, and choose the right lender. Depending on your financing, closing on the property can take 15 to 45 days.
• Make all repairs, renovations, and upgrades: Repairing a fix-and-flip property will take the most time. You or your general contractor should manage the timeline, remembering that delays increase your carrying costs.
• Market the property for sale: There are endless ways to generate excitement about your property and increase the sale price. For some ideas, read 21 Real Estate Marketing Ideas & Strategies . Although these strategies are aimed at agents, they are equally effective for home flippers.
• Sell the property: Working with a real estate agent is often the most efficient way for flippers to sell their properties since they manage communications with the buyer’s agent and lender and often schedule the necessary appointments. However, many flippers choose to get a real estate license to gain access to the MLS and save even more on fees.

Course platform (Source: Colibri Real Estate )

Experienced house flippers often handle their property transactions to reduce expenses. You can conveniently pursue a real estate license through online schools like Colibri Real Estate, which offers comprehensive courses, instructor support, e-books, live Q&A sessions, and exam prep tools with a pass guarantee. Colibri Real Estate, an accredited education provider, has assisted countless agents and brokers nationwide in obtaining their licenses, enhancing profit opportunities.

Visit Colibri Real Estate

Mistakes to Avoid When Starting a House Flipping Business

Every beginner inevitably makes mistakes while building their business. For house flippers, there are some definite learning curves, and every new project presents unique challenges. However, the more mistakes you can avoid in the beginning, the more efficiently you’ll be able to build your flipping business and generate a strong ROI.

Some mistakes to avoid when flipping houses include:

• Overestimating your abilities: Avoid taking on major electrical work or plumbing tasks if you lack the necessary skills. It can lead to costly mistakes.
• Lacking a team: House flipping often requires collaboration with contractors, real estate agents, and other professionals. Trying to do it all alone can lead to delays and errors.
• Overspending on renovations: Going over budget can eat into your profits. Plan carefully and prioritize cost-effective improvements.
• Buying a flip far away: Distance can make managing the project effectively and promptly responding to issues challenging.
• Not understanding the numbers: Accurate financial calculations are crucial. Failing to grasp costs and potential profits can result in financial setbacks.
• Being unprepared for the unexpected: House flips often encounter unexpected issues, such as hidden structural problems. Have a contingency plan and budget for surprises.

Frequently Asked Questions (FAQs)

What is the 70% rule in house flipping.

Real estate investors use the 70% rule in house flipping to determine the maximum purchase price for a property to ensure a profitable flip. According to this rule, investors should not pay more than 70% of the property’s after-repair value (ARV) minus the estimated repair and carrying costs.

How much money do you need to start flipping houses?

The initial capital needed for house flipping varies due to location, property type, and your specific flipping houses business plan. Generally, having access to $20,000 to $50,000 is a good starting point. This budget should encompass property purchase, renovation, carrying costs (like taxes and utilities), and contingencies for surprises. Access to financing options, such as loans or partnerships, can also affect your capital requirements.

How many houses a year can you flip?

The number of houses you can reasonably flip in a year depends on various factors, including your experience, team, resources, and local market conditions. On average, experienced house flippers may aim for two to five flips yearly. Beginners may start with one to two flips annually. Scaling beyond these numbers often requires a well-established operation, access to financing, and efficient project management.

Bottom Line

Learning how to start a house-flipping business begins with a strong business plan. It also starts by setting up the right legal and financial systems to set yourself up for success as the business grows. Successful home flippers also create a network of professionals to get their flips done properly and implement strategic marketing and lead generation systems. After following this step-by-step guide, your house-flipping business will be ready to generate strong profits.

About the Author

Find Melanie On LinkedIn

Melanie Patterson

Melanie is a contributing real estate expert at Fit Small Business and the editor of our sister site, The Close, specializing in real estate business development for new and seasoned agents, property managers, and real estate investors. She has over 30 years combined experience in real estate sales, marketing, property management, and investing and is a licensed real estate agent in NH & MA.

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How to Write a House Flipping Business Plan

The most important part of starting a new rehab project is having a house flipping business plan.

Before making an offer on a property, you need to define what your goals are for the project and how you’re planning to reach them. House flipping needs to be approached from an objective and quantifiable perspective, not an emotional one. As such, a house flipping project plan is essential to create a clear path to success.

To make the process as easy as possible, we have created a free house flipping business plan that you can download.

We also encourage you to read the rest of this article to help you understand each part of the house flipping business plan.

Click Here Get Your Free House Flipping Business Plan Template

Benefits of writing a house flipping business plan, writing a house flipping project plan is important because:.

• It will turn your vague ideas into concrete thoughts.
• It will help you to resolve lingering issues that you keep pushing off.
• It will help you to fully understand what you are getting into and how to get out of it.
• It will force you to consider the time, money and emotional commitment needed.
• It will force you to address your tolerance for risk.
• It will make you think about your own strengths and weaknesses and identify areas where you may need assistance.
• It will show people who are working with you (lenders, lawyers, contractors, etc.) that you are serious about the project.
• It will improve your chances of getting approved for a loan.
• It will help you plan and organize your house flipping business beyond single house flips
• It will let you know if/when you are going off-track

House Flipping Business Plan Outline

Now that you know why you should create a house flipping business plan, let’s jump into what a business plan actually looks like.

Our free house flipping business plan template includes the following topics:

Executive Summary

Mission statement.

• Market Analysis
• Strategy, Timing, and Financial Projections
• Team Description

Exit Strategies and Backup Plans

What are you doing.

The executive summary is the elevator pitch version of your business plan. It should briefly cover all of the topics covered in the business plan, starting with your mission statement and a brief overview of the project goals.

If someone only has time to read one page of your house flipping business plan, this will be it. They should gain a basic understanding of the whole project, your ideas, and what you bring to the table. It’s often easiest to write this piece last after all of your planning from the other sections are established.

Why are you embarking on this business venture?

The mission statement is a one to three sentence synopsis of your project objectives and the underlying philosophies behind them. This statement says a lot about your central ideals and business culture, and it is very important when laying the foundations for your project.

When writing your mission statement, cut the jargon! Make it clear, concise and useful.

Comparative Market Analysis

What is the economic environment surrounding your project.

Read more about how to prepare your own CMA in our Real Estate Strategy section.

Understanding the neighborhood where you are buying is essential to your success. Only when you have done your own due diligence can you be sure that you are getting a good deal. In the end, your thoughtful planning should be rewarded with moving forward on a successful project.

Sites such as Realtor , Zillow , and Trulia are all free sites that can give you information on the property to be purchased and neighborhood value. These sites can show you the selling prices of nearby homes and the characteristics of the home (bedrooms, bathrooms, square footage, lot size, etc.), allowing comparisons to be made between properties. These sites will also show you what is for sale in the neighborhood, so you will have a sense of the competition in the local market. Another great strategy is attending as many open houses in the neighborhood as possible to get a real sense of size, finishes, configurations, and more.

Below is a list of ways to better understand the market you want to buy in:

• Work with a realtor to help you identify properties
• Join real estate investment groups to get education
• Align with a wholesaler
• Find lists on the Internet
• Review foreclosure sale lists

All of these tools may help you identify your best opportunities, but you must do the work yourself, and not rely on what others tell you.

Once you do your due diligence, be sure you describe your research and rationale within your business plan. Write this section as an organized series of data points that explain the decisions that you are making with the choice of house and rehabbing decisions.

The goal of this section is to show a third party reader where the property and project fit in the current economic and regional real estate markets.

A house flipping business plan will force you to consider any difficulties that may arise, and prepare for them. This is just one of the ways that a house flipping project plan can help you plan, prepare, and get ahead of future roadblocks.

Project timeframe, how long will your project take.

Now that you’ve outlined your executive summary, mission and market analysis, you’ll want to develop a timeframe for your rehab project.

Keep in mind that rehabbing and flipping always takes longer and costs more than you think it will. Make a timeline that is realistic, and then add additional time to it to cover inevitable delays that you can’t initially account for.

Next, “cost out” each month on your timeline being as detailed as possible.

Consider the following questions when costing out your timeline:

• How much will you need to pay on the loan you have for the property?
• How much are insurance and taxes monthly?
• How much will you need to pay your contractor?
• How much are the monthly utility bills going to be?

To read more about developing a project timeline, read Chapter 4 of our Flipping Houses 101 Guide, “ Develop a Property Investment Plan and Timeline .”

Financial Projections

How much will it cost where will the time & money go.

After you determine how long your flipping project will take, you will need to show a budget and financial projection. The financial projection takes into account both time spent flipping the property and money spent across the whole project. This is one of the most important sections of the business plan.

Here are a few costs to include in your budget:

• Cost of the property
• Expected rehab costs
• Other expenses like marketing costs to sell the property
• Additional contingency expenses

Add all of these costs to get a total investment number.

Then, provide a realistic, supportable value for the sale of the property and deduct liquidation costs (such as realtor fees, transfer taxes, etc.) to project your expected profit on the property.

Use our House Flipping Calculator to help calculate a cost breakdown for your project, and then include these details in your business plan. This will not only help you identify potential budget challenges, but also show people you are working with that you’ve strategically thought through your budget!

Pro tip: Make sure that your numbers are realistic, and do not rely on everything going right.

After identifying all of the costs to buy a home, and how long it will take to actually complete the rehab, you should be able to fully estimate your cash flow through the duration of the project. This financial projection will help you understand how much cash is necessary to keep your project moving forward.

Financing Strategy

How do you plan to fund your project.

This section of the business plan should identify all of the sources of your start-up capital for your rehab project. To put it simply: Where will you get the money to flip a house?

There are numerous house flipping funding options, including:

• Conventional Mortgage
• Government Insured Loans
• Owner Financing
• Private Money

Keep in mind that your source of funding will have an impact on your timeline, costs and overall budget.

In the world of real estate investing, an all-cash offer is always preferred over an offer from someone with financing contingencies. Financing your project with your own cash is a good option if you don’t want to be in debt to an institution. However, most house flippers cannot afford to flip a house without financial help. It’s important to do your research about each type of funding listed above to compare the short and long term costs of each option.

To learn more about these six types of funding, check out Chapter 3 of our Flipping Houses 101 Guide, “ Getting Rehab Funding Right .”

If you want to get funding from a lender, watch the video below, where Rehab Financial’s President, Susan Naftulin, offers key tips to help you get approved by a lender.

Once you choose a source of funding, clearly explain which financial assistance you intend to use in your house flipping business plan, if you are going to get pre-approved, and how far in advance you plan to get pre-approved.

About Your Team

How is your organization structured are you building a team or taking on responsibilities yourself.

Now, you need to decide how you want your house flipping business to be organized.

Do you want to borrow in your own name as a sole proprietor? Or, do you want to form a partnership, corporation, limited liability company?

Read more about the best business structures for real estate investors in our Real Estate Strategy section.

You may need to seek the advice of an attorney or accountant to fully understand the implications of each organization type. Be careful about this choice, because your selection can affect your ability to borrow money, mitigate your risk, attract investors, etc.

This section of the business plan is also where you should talk about yourself. Include a brief bio, relevant experience and unique skills that will be advantageous to your company.

If you are working with a house flipping team , include who these people are, and why you chose to work with them. Make sure that the reader understands what you are doing and how the team you are working with will contribute to a successful rehab project.

How are you getting out of the investment? Do you have contingencies in place in case of unforeseen circumstances?

Finally, your house flipping business plan needs to address your exit strategy. Essentially, an exit strategy is what a house flipper plans to do with their property once the rehab is complete.

You also need to address contingencies in case the project doesn’t go as planned.

Below are a few examples of common scenarios where you’ll need to explain your contingency plans.

Scenario 1: Your property doesn’t sell

• What will you do if your property does not sell? Will you use it as a rental?
• If so, you should show that the rental will pay the carrying expenses of the building.

Scenario 2: You’re going to use your property as a rental

• Do you plan to refinance the property and hold it as a rental?
• If so, show your plans for refinancing it, but also show what you will do if you cannot obtain the needed credit.

Scenario 3: You’re going to sell the property

• Will you sell the property?
• If so, state how much you plan to sell it for. In addition, you will also need to know the rules related to your exit strategy.

Scenario 4: You’re going to sell the property to an FHA buyer

• Do you plan to sell to an FHA buyer?
• If so, make sure you understand the anti-flipping regulations to make sure you aren’t trying to sell too soon. Generally, you will need to hold the property for more than 90 days in an FHA situation.

Why a House Flipping Business Plan is Crucial

A thorough, well-written business plan can be an invaluable tool in helping you meet your house flipping goals. Time spent on planning at the beginning of the process will save you immeasurable time, money and worry during the process.

Get Your Free House Flipping Business Plan Template

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I built a 296-square-foot backyard tiny home in Atlanta: What to know if you want to convert a $5,000 shed from Costco

In 2021, I converted a 12-by-24-foot shed into a tiny home in my backyard in Atlanta, Georgia. Since then, I've used this structure — formally known as an accessory dwelling unit (ADU) — as a short- and long-term rental, my own personal living space, and most recently a home for my sister, brother-in-law, and new baby nephew.

Now, as a 28-year-old real estate entrepreneur, I run marketing for Gather ADU , the startup I co-founded to help other homeowners create more housing on their existing property.

With rising home prices , a national housing shortage , and demand for creative and affordable living arrangements, it's no wonder that companies like Amazon, Home Depot, and Costco are selling DIY shed kits and backyard guest houses.

I'm not surprised that people are attracted to the low prices. There's a lot of buzz , for example, about the easy-to-assemble Costco shed that's on sale in March for $5,000 and the possibility of converting it into a living space.

If you're tempted to click "add to cart" and turn one into a tiny home, though, here's what you should consider first:

1. You might need approvals or permits

Not all municipalities let you place or construct additional dwellings on your property. 

Your local zoning codes and classification will determine whether you can put a structure like this in your backyard in the first place, and dictate any rules that apply. For instance, some areas may have minimum lot size requirements, limits on the size or height of structures, setback regulations that tell you how close the ADU can be to property lines or other structures, and guidelines regarding utility connections.

You can find this information by searching your address online or calling your local zoning or permitting office. Try hitting Ctrl + F to look for the terms "accessory dwelling unit" or "guest house" in your zoning code.

By familiarizing yourself with these regulations up front, you can avoid potential legal hurdles such as fines and stop-work orders.

2. The structure might not be built for residential purposes

While sheds sold by companies like Amazon, Home Depot, and Costco may offer affordability and convenience, not all of these structures are suitable for long-term habitation.

Many sheds on the market are designed primarily for storage purposes. They lack the proper insulation, ventilation, and structural integrity to withstand the rigors of residential occupancy.

Before purchasing a shed for conversion into a living space, review the product specifications. Look for options explicitly marketed or certified for residential use. Reach out to the manufacturer if needed.

3. Plumbing and electricity aren't a given

Shed options typically aren't equipped with essential utilities like plumbing and electrical systems. 

Installing toilets, sinks, and showers requires careful planning and professional expertise. In addition to the cost of fixtures and materials, there might be expenses associated with trenching and connecting to existing sewer or septic systems.

Similarly, ensuring access to electricity involves more than simply plugging into an existing outlet. To convert a shed into a tiny home you can actually live in might require installing dedicated electrical wiring and outlets that comply with building codes and safety standards. 

Given the complexity of plumbing and electrical work, you'll need competent contractors. I'd urge you to prioritize expertise and reliability over price here.

4. Sheds aren't always the cheaper route

While the initial price tag may make a $5,000 Costco shed, for example, seem like a steal, the reality is that transforming such a structure into a livable space can get expensive fast. If you want a floor with that Costco shed, you're already up to $6,000, even with the sale.

You'll have to factor in additional expenses such as concrete foundation work, permit fees, and professional services from architects or engineers. And the interior build-out adds up with insulation, drywall, plumbing, electrical wiring, and furnishings.

In my experience, even a modest conversion will likely end up running $50,000 to $75,000 these days with all the labor and material costs. Mine cost $35,000, but I've seen costs rise significantly in just the past few years as I've helped others navigate the process.

Before committing to a shed conversion, browse various prefabricated models online and get three to five quotes from contractors for a shed buildout versus a newly constructed — or "stick-built" — dwelling. A stick-built home's durability and long-term value may end up outweighing the initial savings.

5. Making a shed functional can take longer than you think

Many shed kits claim the structures can be assembled in one day . The reality is that achieving a functional and comfortable living space requires careful planning, coordination, and execution.

Sure, the structure can be delivered and assembled in one day. But that doesn't account for preparing the foundation the structure will sit on or hooking it up to utilities.

In my experience, a typical tiny home build or conversion can take anywhere from three to 12 months to complete, depending on factors including permit processing times, contractor availability, and the complexity of the particular project. Mine took eight months altogether from building, electrical and plumbing permit submissions to finished home.

Plan accordingly — considering feasibility , costs , and financing options — and be prepared for unexpected delays.

Precious Price  is a TEDx speaker, marketing strategist, tiny homes expert, and social entrepreneur. She is the CMO at GatherADU, the startup she co-founded to help homeowners create housing using the underutilized space of their existing property. She holds a master's degree in management information systems from Indiana University. Follow her on  Instagram ,  Twitter  and  YouTube .

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Plus,  sign up for CNBC Make It's newsletter  to get tips and tricks for success at work, with money and in life.

Business Insider

A software engineer built a tiny home for his mom and now he has a full-blown business selling DIY plans

Posted: December 21, 2023 | Last updated: March 6, 2024

• Dan Louche set up Tiny Home Builders in 2009 after he built a tiny house for his mom. 
• It offers a range of plans, with prices starting at about $200 for a 20-foot "Simple Living" plan.
• Customers can build their own tiny homes for as little as $10,000 in materials.

In 2009, Dan Louche's mom told him her health was deteriorating due to mold growing in her home following damage caused by a storm. 

He knew something had to be done, but couldn't afford to buy her a new home in Florida. While searching for an answer, the 47-year-old saw a PBS show about a woman who had built her own tiny home.

"I saw that and thought it would be an awesome solution," Louche told Insider. His mom wrote a blog about the construction and fit-out of her home.

He said that despite growing up in a family of contractors and having a background in engineering, he didn't have the expertise to build one himself.

"So I started researching and just really diving into it," Louche said. "Then I went out, bought a trailer and I started building that first house. It was never intended to be a business – it was really just trying to solve my mom's problem."

Through his experience he started to pick up skills, and he eventually decided he wanted to help others build their own tiny houses, so in 2010 he founded Tiny Home Builders .

Interest in building tiny homes appears to have steadily increase since 2020, according to Google Trends data for the search term "tiny home plans." So former engineer Louche may have made a smart business decision in selling plans to prospective builders. 

"I thought maybe there's someone else who might have the same experience or a need to build their own," Dan Louche said.

When Louche and his wife went to visit his mom at her tiny home, she was surprised by how livable it was and how it met all her needs. 

That was when he knew he could help others build their own, he said.

He has a blog where he documented his mistakes and tips for people who also didn't have much construction experience.

"We started to provide resources for people to help them build their own house," he said. "Initially we started selling some of those to try and make up some of the money we spent on my mom's house, but it ended up growing bigger and now it's a company." 

Tiny Home Builders offers a range of plans in different sizes.

There are five plans on offer: Tiny Living, The Element, Tiny Studio, Tiny Retirement, and Simple Living. Each comes in a range of sizes.For people just starting out, the company also offers a design and construction guide that summarizes the process of building a tiny house."That gives you an introduction to the process," Louche said. "It doesn't give you the floor plan of a house, but it gives you some of the knowledge that you would need to go off and do it."

The plans offer instructions on how to build the homes and a cost estimate.

There's also a comprehensive material list with approximate prices for materials. They can range from $10,000 to $25,000, according to the company's website .Tiny Home Builders also offers two-day intensive workshop sessions to show people how to build the homes if they are ready to build their own house but don't have the knowledge.

One of the most popular plans is for the "Tiny Living" design.

One of the most popular designs is the "Tiny Living" plan that costs $347. It has a big family living area, bathroom, kitchen, and a sleeping area and is offered in six sizes from 12 feet to 32 feet.

"I recommend the smallest house be 16 feet long because it can have a full bathroom, a full bedroom, kitchen, and couch. That's all a single person really needs," Louche said. "The smaller the house, the cheaper it's going to be to build."

Customers can email the company for support during the construction process.

The company says it gets about 60 emails a day from people asking questions about the construction process.

"If we get a question two or three times we're putting together resources to help everybody else," Louche said. "We try to help everybody that we can because we want everybody to be successful and have a good experience." 

If two people are building a tiny home full-time, it can take as little as two months to finish.

The longest it's ever taken Louche to build a tiny home is a year, which was when he first started and while he was also juggling full-time job, he said.

It's mostly young people who buy the plans, Louche said.

The main customer base is people who don't have kids, or people just starting a family, Louche said. There aren't many families living in tiny houses due their size, he added. 

With a tiny house, you can have a home for the price of a car.

The cost is a big plus, but the challenge for people building tiny homes has been finding places to park them. Louche said some places such as California are passing laws to encourage ADUs, or Accessory Dwelling Units. "It means they can be parked in anybody's backyard. When we first started there was a lot of resistance to adoption, but we're seeing that as time goes on, that resistance is dying down," he said.

Tiny Home Builders also has an online marketplace to buy and sell tiny houses.

People can sell their used tiny homes or ones they have built using the plans on their site via the marketplace.  

" It's an extremely rewarding experience to help people build their own house. We want to make sure that we help people go through that process," Louche said. 

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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 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

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.

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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

Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.

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.

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OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.  

Click here to see how Growthink’s professional business plan consulting services can create your business plan for you.

Other Helpful Business Plan Articles & Templates

Cleanup begins at ‘trash house’ where entire property is filled with garbage and junk

LOS ANGELES (AP) — Los Angeles Mayor Karen Bass vowed that cleanup would happen at a home where mounds of garbage and debris had piled up several feet high across the entire property’s fenced-in yard and driveway.

The mayor said Wednesday she only learned this week about the Spanish-style bungalow in the Fairfax district that residents have dubbed the “trash house.” Neighbors say they have repeatedly complained about the stench coming from hundreds of white garbage bags that have accumulated along with broken down vehicles, piles of newspapers, cigarette cartons and other junk.

Standing in front of the house, Bass said she would instruct officials to bypass red tape to make sure the place gets cleaned up immediately.

“I don’t want to hear about any process or whatever, this to me is a public health emergency,” Bass said Wednesday. “This is a fire hazard and I worry about the individual there, this place catching fire, him losing his life.”

Hours later, sanitation workers wearing coveralls and masks arrived and began loading the trash into trucks.

Since last July, the Department of Building and Safety has fielded more than a dozen complaints related to trash and improper storage at the property, according to city records obtained by the Los Angeles Times . The complaints remain under investigation, but the city issued an order to comply in November.

With no compliance happening and piles of trash growing, the complaints ratcheted up this week, triggered in part by a post on the social media app Nextdoor and a report Monday from KTLA-TV .

“It’s filthy,” said Miriam Kosberg, whose family has owned the property directly behind the house for decades. “There’s garbage all the way up to the back fence.”

Kosberg told the Times she and her family hear the sounds of animals in the backyard and believe the swarm of mosquitoes in their yard is due to standing water and other detritus next door.

Another neighbor, Jonathan Fromen, said the problem has persisted for at least a decade. The yard was cleaned up a bit in 2018 and 2019, but since then the garbage began piling up again, Fromen told the Times.

Copyright 2024 The Associated Press. All rights reserved.

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