A couple years ago I would have never thought about the top 10 home based business ideas; but like everything and everyone, things change. In today’s economy so many people are scared of starting a home business, but it really isn’t that bad. While you hear and see on TV that people are tightening their pocketbooks, there is one thing for sure; there is no recession on the internet.There are millions of families that have been affected by the current global financial crisis. Some have lost their homes, their jobs and everything they have owned. Others are looking to build the backup plan or additional income to get them through the tough times. Many are turning to different home business ideas because they offer the flexibility, low cost and lower risks models compared to the traditional brick and mortar business.Here is my list of what I consider the Top 10 Business Ideas and what they potentially involve:Blogging – A very low cost of generating income from home; is on the internet and is individual that do this are known as “bloggers”. Blogging is very easy to set up, maintain and gives you the ability to write about topics that you like. There are millions and millions of people online reading a wide range of content on a daily basis. With blogs you could become very successful by attracting certain readers and offer them products and or services that help them. You could also “rent” out space on your blog to different marketers, which in turn provides you with additional income.Home Based Franchise – The possibilities are near endless of starting a home based internet franchise; and many are recession proof. I have known people to start the own internet franchise but this is much more risky than joining a proven, time tested internet franchise. While an internet franchise can be a huge learning curve for many, I have found this as the most rewarding in more time for what I like to do but also the compensation is normally higher.Home Based Tutor – Although you may not have thought about this as an option, it has become a very viable one. No matter how bad the economy gets, people are always looking for additional education to enhance the situation that they are in. Many parents are doing everything in their power to obtain the finest education for their children, sometimes even taking out a second mortgage on their home. With the standard education; many people are obtaining tutors to give themselves and their children an educated edge over others. As unemployment rises, many are going back to school and they require some additional tutoring to help with the learning curve.A Food Home Business – No matter how grim it gets, people still have to eat and many are starting to cut down the amount of times that they go out to restaurants. With a food home business, you want to focus on a niche that is still needed year after year. Many people start a bakery offering wedding cakes, birthday cakes and other different treats involving chocolate. The chocolate industry is booming due to the satisfaction it gives to people and the lower cost compared to other treats.A Staging Home Business – With the real estate industry plummeting at an uncontrollable rate, home owners need help staging their property to sale. Home owners trying to sell their homes are turning to home staging experts to prep the home to its highest potential. Not only do home owners request home stagers but also banks and real estate agents; to prep and sell the property quickly.Virtual Assistant- Many companies are trying to reduce their operating costs while improving their profits. Companies have been and will continue to outsource, which gives you the ability to become a virtual assistant. A virtual assistant provides assistance and support to businesses, entrepreneurs, executives and really anyone that needs help but does not want to hire a full time employee. This is a very low cost in high demand home based business idea.Caregiver – no matter what happens, we are all getting older and caring for the elderly is now and always going to be in high demand. Many of the individuals now that need adult day care are also tightening their wallets but there will come a time that they need additional care and support that you could provide.Trading Assistants – During a recession more and more people start selling their personal belongings to get by for another month or two. Many people have heard of eBay and Craigslist, the problem lies with many not feeling competent enough to use them. Many people believe it or not, still do not have an email address or never used a computer. For this reason trading assistants exist, they help sell other peoples products in which they obtain a percentage of the sale price.Cosmetics Consultant – the demand for cosmetics will always be there, mo matter what. Many times during the toughest times is when products like cosmetics are at their peak. There are two primary reasons for this:People want to continue to enhance their visual appeal to maintain their employment or to gain new employment.It makes people feel good about themselves, improving self confidence in turn improving productivity.Affiliate Marketing – This is the home based business idea that many people use online and offline the same. This has become very popular and has exploded as unemployment rises and the recession continues. Becoming an affiliate marketer allows you to make a great deal of money while working from home; selling products like cosmetics, vitamins, soap, educational products and many more.While I cannot say that I have tried all of the Top 10 Home Based Business Ideas, I can say that I have been involved with a few of them. All of these ideas have pro’s and con’s, each has its own level of risks and rewards. I have had my home based business for quite awhile now and love the freedom and the financial benefits that come along with it.

During my daily activities driving around town looking at properties, I see many For Rent By Owner signs on lawns of vacant rental property. As I see these signs, I find it interesting that the owners have not asked themselves, is it really worth it?

I wonder to myself if the property owners have actually asked themselves some key questions:

Am I actually saving money doing it myself?
Am I prepared for the responsibility?
Do I have all the tools I need such as Applications, credit and background checks, leases, eviction forms, notices, repair and cleaning resources?
Will the cost of doing it myself actually save me money or will it cost more?
As a full time professional property manager, I know from experience how difficult and costly it is to manage rental property.

How do I know this?

Because I do it for a living, I have unique insight into the activities and costs associated with managing income properties. My time is valuable! Why would you as an income property owner want to invest the aggravation, effort and time it takes to make a few extra dollars a year renting a property yourself, when you can hire a reputable company to do it!

It’s a no brainer to me. Isn’t your time worth more then $10.00 per hour or $33.58 per month or $403.00 a year for one property! What am I talking about? Let’s take a look at how I arrive at these figures… Before we begin to look at the costs associated with property management, let’s set a few ground rules and identify and define some terms.

Fees

Property management companies charge anywhere from 5-35% for their services based on:

The rental term – Short, mid or long term
Services offered – Concierge, housekeeping etc
Repair services – On staff or hired as needed
Local market – Some areas receive higher management fees then others. Example: Los Angeles California may charge 20-30% fees for long term rentals where my market area charges much less.
Other factors
Property Management services in my area for mid and long term rentals run approximately 10% of each month’s rent. Sometimes, an additional first month’s rent fee is charged to cover initial setup costs.

Lease Terms

I classify lease terms as:

Short term rentals – Less then 1 month
Mid term rentals – 1 to 6 months
Long term rentals – 7 months to 1 year
Variables for renting in my market area depend on several factors:

The season – Being a primarily tourist oriented area; we go through several tourist oriented seasons where our residency swells.
Transfer in and out of Military personnel and families
Construction increases
The Seasons
Let’s break down the type of renters by season so we can estimate and gauge the types of renters we will typically have in a given season:

Winter – During this season we get several types of renters which include “snowbirds”. “Snowbirds” tend towards mid term rentals. They come to our area during the winter months and their primary residences are often the northern United States and Canada.
Spring – The spring season brings short term renters in the form of “spring breakers” as well as families taking advantage of breaks during the school year. An interesting aspect to spring is the semi annual transfer of military families to one or more of our local military bases.
Summer – This season consists primarily of short term renters and midterm renters. Visitors from all over the world travel to our area during summer and stay anywhere from 2-3 days to 1-2 months. While visitors from the United States tend towards short term, European visitors lean more towards 2 weeks or more.
Fall – This is an interesting season and often the time of year local residents change residences. It is also part of the semi annual transfer of military families to one or more of our local military bases.
Vacancy ratio
An important factor to consider in estimating the costs to run an income property is the Vacancy Ratio. Vacancy ratio is defined as the amount of time a rental property is vacant compared to the amount of time it is not.

Vacancy ratio is governed by not only the seasons as mentioned above, but also:

The price of the unit
Amenities – Pool, spa, allow pets, etc.
The local economy
Marketing
Availability of the unit
Other factors defined by the area
In my area we typically see on average a vacancy ratio of 2-4% for small multi-family long term rentals (duplexes and triplexes). However, during difficult economic times we could expect to see ratios as high as 6-7%! I’ve recently seen vacancy ratios as high 10-12% for several areas.

For ease of calculation, we will use a 5% vacancy ratio since it is in the middle of the vacancy ratios we expect to see in my market area. These may or may not reflect the ratios other areas experience. It is advisable to seek the assistance of a qualified property management company in the local area for accurate data.

Let’s get to it…

Now that we have a few guidelines to work with, we can make some educated estimates:

Vacancy ratio
Expected rental terms
Property Management Costs
Using these guidelines, let’s look at the average costs to use a Property Management company. In our example we will use a 2 bedroom 1 ½ bath apartment which typically rents for $700.00 per month utilities not included and no pets allowed.

The property management fee of 10% will provide the following services:

Marketing and advertising – general (lawn sign, website, print, etc.)
Tenant screening/Application services – Background and credit checking
Unlimited unit showing – Using an average of 5 pre-qualified tenant showings per Unit before is rented.
Online transaction processing for tenant and owner
Monthly accounting report
Monthly Unit inspections for the first 3 months
Tenant notifications – Failure to conform to Lease, 3 day rental notices and late payment notices, etc.
Tenant evictions – NOTE: Only the beginning of this process is included. Expenses for full tenant evictions are typically paid by the owner.
Our formula for calculating rental income will be:

Rent * term = Gross Rent minus Vacancy Ratio = Net Income:
$700.00 * 12 = $8400.00 – $420.00 = $7980.00 annually

We expand on this formula and include a property management fee of 10%

Rent * term = Gross Rent minus Vacancy Ratio = Income – Property Management Fee = Net Income:
$700.00 * 12 = $8400.00 – $420.00 = $7980.00 – $798.00 = $7182.00 annually

Note: This article is not intended to be an investment strategy article. The intention of the article is to identify whether it is worth the cost to use a property management company for a rental unit. Therefore, our example uses a simple calculation of net income and not Net Operating Income which is much more complex and used for investment strategies.

In our example calculation we see that without any negative impacts affecting a rental unit, the property management company made a whopping $798.00 per year on 1 unit. Let’s now put a price tag on just some of the services we’ve identified being offered by the property management company using average pricing:

Application services – Application forms will cost approximately $5.00 for 5 forms

Marketing and advertising – Lawn sign – $15.00, Website – $40.00 per month, Newspaper advertising – $40.00 per week

Tenant screening – Background check – $15.00, Credit check – $15.00

Unit showing – $10.00 per hour, 5 showings (1 showing per hour) = $50.00 (This is an extremely low rate and used simply to provide a guide. I’m sure your time is worth much more then $10.00 per hour).

Tenant notifications – Notification forms will cost approximately $5.00 for 5 forms, Hourly cost for 1 notification – $10.00 (includes travel time)

We will omit the remaining example property management services as typically they would not be provided by an owner anyway. Without including the advertising costs, when we add up these costs we have an expense of $155.00. If we use our vacancy ratio of 5% (or 6 weeks) and calculate our advertising costs we will need to add in $240.00.

The cost for an owner managed unit not using a property management company is then calculated as:

Rent * term = Gross Rent minus Vacancy Ratio = Income minus simple operating costs = Net Income or:
$700.00 * 12 = $8400.00 – $420.00 = $7980.00 – $395.00 = $7585.00 annually

Wow, a property owner who does the renting of a unit by themselves makes $403.00 more a year or $33.58 more a month then if they hired a qualified property management company!

However, I am not aware of too many property owners whose hourly employment rate is $10.00 per hour considering someone who makes $10.00 would find it difficult to obtain financing to purchase income property!

The question then becomes, how much is your time worth?

If your time, aggravation and effort to rent a property yourself are worth the added income of $403.00 per year or $33.58 a month, then by all means you should not hire a property management company! If on the other hand, less aggravation and effort and your time is worth more then $403.00 a year, you should consider using a property management company to take care of your income property.

A qualified property management company not only saves you time, effort and aggravation but also saves you money. What would happen if the unit would have been vacant longer then 6 weeks? The advertising costs would have eliminated all or part of that $403.00 a year you made!

Is it really worth it? I don’t think so.

If you own rental property, do yourself a favor and hire a reputable, qualified property management company.

Services such as:

Tenant screening – Background and credit checking
Application services
Unit showing
Online transaction processing with tenant and owner reporting
Monthly account reporting
Electronic funds transfer
Are all part of most property management companies standard services.

In addition, property management companies have professional full time staff to help you with all your needs: from creating the most efficient advertising campaigns to tenant screening and background checks to advice for repairs and staging to get the most income for your rental units.

You can’t pick – and – choose, when you will proceed, with ethical behavior, and when you might not! Real estate professionals must realize, and adopt, regular, consistent, allegiance, to the utmost degree of ethics, EVERY day! Not only is this a requirement, both of real estate law, but it’s also a central component, of the National Association of Realtors (NAR), as well as local components. However, even more important, being ethical is the right thing to do, when one represents a client and/ or customer. With that in mind, this article will attempt to review, briefly, using the mnemonic approach, why this is essential and important!

1. Empathy; emphasis: Since, for most people, the value of their house, represents their single, largest financial asset, ethical real estate agents, focus on addressing and understanding/ caring about the perceptions, goals, needs, and priorities, of those they represent! Ethics should drive one, to place his emphasis, on doing what’s best for your client/ customer, rather than being motivated, solely, on selling, to enrich oneself!

2. Value; values; visions: How an agent communicates with his client, generally indicates his focus, and visions, and where he directs his emphasis! Agents owe it to those they represent, to provide true value, while conforming to the core values, of ethics, and absolute integrity!

3. Excellence; endurance; evaluate: Consider what goes into, the way someone evaluates, his planning, performance, and strategic and action plans! Great agents maintain their endurance, in an inspiring, motivating, way, and relentlessly, seek the best scenario, for their clients! Never sacrifice the commitment to excellence, for the expediency, and/ or convenience, of a path, which is merely, good – enough!

4. Relevant; reliable; responsive/ responsibility; realistic: There is a need, to move forward, with relevant, reliable actions. Great agents are consistently, both, responsive to the specific, best interests, of their clients, and accept their responsibility, in a welcoming way! Avoid the tendency to deny, and/ or, bury – your – head – in the sand, but proceed, in a realistic, positive, can – do, manner, focused on achieving the best alternatives, for one’s clients!

5. Yes; you: Ethical behavior requires proceeding, in a positive manner, where the agent, says, yes, to doing, whatever, is in the best interests of his clients, with a quality focus, on doing what’s right! Take personal responsibility, and accept, it’s up to you, to do, what’s best!

Real estate ethics must be a behavior, used EVERY day! Will you be up to the responsibilities, and proceed with absolute integrity, and an emphasis, on service?