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How To Start A Home Inspection Business

How To Start A Home Inspection Business

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How To Start A Home Inspection Business

How To Start A Home Inspection Business

Starting your own home inspection business can be a rewarding opportunity, allowing you to be your own boss and help homebuyers make informed decisions about major purchases. However, launching a successful home inspection business is more than just knowing how to identify cracks in a foundation or evaluate an HVAC system. Sure, technical skills are important, but understanding the business side of things is equally important.

This guide will provide an overview of the home inspection industry, steps to get your business up and running, and answers to frequently asked questions. With the right preparation, you can start inspecting homes and building your client base.

Home Inspection Business Overview

Contrary to popular belief, a home inspector is not the same as an appraiser. Although both professions provide a service to assess the value of the home or commercial property, they don’t share the same motivation behind the service that they provide.

An appraiser will determine the home’s value by conducting an appraisal that is commonly required before a borrower can close on their mortgage. On the contrary, a home inspector will determine the home’s condition, oftentimes educating the home buyer or owner during the inspection process. While home appraisals consider the condition of the home when doing their valuation, they also compare recent sales on comparable homes in the area and factor in many variables, including the home’s square footage, the number of bedrooms and bathrooms, lot size, area crime rates, and school districts. While having an appraisal completed is a typical requirement to finance a property, it usually benefits the lender the greatest by ensuring as little risk as possible when funding property on the borrower’s behalf. A home inspection, on the other hand, will protect the homeowner by determining if the property is in good condition and inspecting for good plumbing, electrical, mold inspection, termite inspection, etc., so the homeowner can feel safe living in the home and ensure proper construction on newly built homes, etc.

Starting a home inspection business can be very rewarding and can be operated on a part-time or full-time basis. While aiding clients who seek to fulfill the American Dream, home inspectors assist home shoppers by providing them with the confidence they need to sign off on their home purchase. Your detailed inspection report helps buyers understand the home’s condition and negotiate accordingly with the seller. This third-party assessment provides peace of mind for buyers and helps real estate transactions proceed smoothly.

Industry Summary

The home inspection industry has experienced steady growth in recent years, driven by increased real estate transactions and a growing emphasis on property condition disclosure. According to the American Society of Home Inspectors (ASHI), there are currently over 25,000 home inspectors in the United States. According to IBISWorld research, the industry is expected to generate $5 billion in annual revenue in 2023.

As the housing market expands and more buyers seek inspections for buying homes, there are ongoing opportunities for new home inspection businesses. Low startup costs also make the industry accessible for aspiring entrepreneurs. Leveraging technology like mobile apps helps inspectors work efficiently and provides added convenience for clients.

Steps To Start A Home Inspection Business

Step 1: Market Research

You’ve got the skills, the tools, and the enthusiasm to start a home inspection business. But before you take the plunge, an important first step awaits you: market research.

Start by assessing the size of your local home inspection market. Government websites often have valuable housing data that can tell you about property values and sales volumes in your area. These numbers will give you an inkling of the demand for inspection services.

Don’t stop at raw data though; get to know your competitors by evaluating their services, pricing, and online presence. This may help you find your unique angle, be it a particular expertise or an unmet need in the market. This research can help you decide if you should be aiming your services at a particular market, such as first-time homebuyers, real estate agents, or maybe insurance companies. Knowing your target audience will help you tailor your services and marketing approach. For example, if you’re targeting real estate agents, you might focus on building strong relationships within local real estate offices.

Step 2: Write a Business Plan

After you’ve researched the market and determined there’s a demand for your home inspection services, it’s time to get down to writing a business plan. Why is a business plan so crucial? Think of it as your business’s roadmap, detailing everything from your mission to your financial projections. It’s the document that not only translates your entrepreneurial dream into a strategy but also serves as a reality check.

How does a business plan serve as a reality check? Let’s consider its financial component. A key benefit of the business plan is that it has you project income and expenses. This is not just an exercise in number crunching; it’s an opportunity to evaluate whether your business is truly viable. For example, you might discover that to break even, you’ll need to conduct 20 home inspections per month. Now, you can go back to your market research. Are there enough homes being sold or enough real estate activity in your area to support this number? If the math doesn’t add up, you’ll need to make some adjustments by either finding a way to cut costs or identifying additional revenue streams, like specialized inspection services.

Related: How to write a business plan

Step 3: Get Registered

So after the market research and writing a solid business plan, the next logical step in starting your home inspection business is getting it registered and making it legal. While every state has its unique requirements, here are some general guidelines to consider:

Business structure: First, decide on the type of business structure that best fits your needs. The four most common types are:

  • Sole proprietorship: This is the simplest form and is easy to start. It’s cost-effective but offers no personal liability protection. You and the business are essentially one and the same.
  • General partnership: This involves two or more people running a business. Like a sole proprietorship, it’s relatively simple but doesn’t offer liability protection.
  • Corporation: This is a more complex structure, usually suitable for larger businesses. It offers liability protection but involves more paperwork and can be expensive to set up.
  • Limited Liability Company (LLC): This structure offers liability protection like a corporation but is easier to set up and manage. It also offers more flexibility in how you can run your business.

For a home inspection business, an LLC is often recommended due to its liability protection advantages and operational flexibility.

Related: Comparison of business structures

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.

Some popular LLC formation services include:

IncFile - $0 plus state fees & free registered agent for 1 year!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Education and certification: The requirement to obtain a home inspector license is completely dependent on what state you reside in. Some states require extensive training and experience, while others don’t require a license whatsoever. For example, Texas and New York require 100 hours of training in the classroom and passing a state test before being eligible to obtain a home inspector license. Many states also require inspectors to complete continuing education to stay on top of changes in the industry.

Familiarize yourself with the real estate inspection laws in your area. For example, in California, home inspectors should be familiar with the Business and Professions Code, sections 7195 et seq., which defines a home inspection and the intent of the legislature in enacting regulations for home inspectors. The American Society of Home Inspectors (ASHI) provides a comprehensive listing of state regulations and training programs to help you meet the requirements.

Although some states lack a licensing requirement, some individuals still choose to obtain a Certified Home Inspector designation to prepare for the profession.

Obtain business licenses and permits: Depending on your location, there will likely be a variety of general business registrations needed before opening. This could include a local business license, seller’s permit, and Employer Identification Number (EIN).

Related: State guides for general business licensing

Step 4: Set Up Operations

With the business registration out of the way, the next step to cover is setting up your operations.

One of the first things to consider is where you will operate your business. Will you work from home or lease an office space? Operating from home will save you money, but optimally the home office should have an area that serves as a quiet workplace. Leasing an office space may be more expensive, but it can improve your image.

Next, you will need to purchase tools and equipment. You may already have most of this equipment already, but if not, it’s time to order what you need.

Establishing checklists and procedures is another aspect to consider. Creating a standardized list of processes, durations, and inspection themes to follow ensures that your clients will receive a professional, thorough inspection every time. A visually oriented checklist, in particular, can be helpful to present to clients as an explainer and reference tool.

Last, reporting software can be helpful in streamlining your business. Apart from providing professional home inspection reports, quality software can also save time, reduce potential errors, and provide easy access to documents. Some of the best software systems also enable inspectors to create customized forms and reports to match their brand and business – which will, in return, build their reputation and credibility.

Step 5: Create a Marketing Strategy

Getting into the home inspection business requires more than just mastering the technical aspects; you also have to get the word out there. Think of your business like a hidden gem; it doesn’t matter how valuable it is if nobody knows it exists.

First off, let’s look at networking, because building solid relationships is essential in this line of work. You should aim to connect with real estate agents, contractors, mortgage lenders, and even legal professionals who can refer clients your way. Establishing a network with these industry experts not only gives you immediate access to a client pool but also adds credibility to your business.

Just as in-person connections are critical, so is your online presence. A professional website serves as a digital business card. It should detail your services, highlight your credentials, and explain your inspection process. Don’t forget to optimize your website for search engines (SEO) to make it easier for clients to find you. On that note, reviews and social proof take your credibility up a notch. Make it a habit to encourage satisfied clients to share their experiences on platforms like Google and Facebook. These reviews act as personal endorsements, giving prospective customers more reasons to choose you.

Also, don’t overlook the importance of a strong brand. A catchy name, memorable logo, and cohesive business cards make your business stand out from the crowd. Your brand encapsulates your business’s core values and promises, helping you remain top of mind with prospective clients.

Step 6: Prepare to Launch!

The needs for starting a home inspection company can differ from person to person, but here are some common final tasks that may still be needed.

Business insurance: When (not if) a new homeowner encounters a problem with a property that was recently inspected, the home inspector is often sued.  Errors & Omissions Insurance (E&O) will help protect the business from any oversights. Additionally, General Liability Insurance is important should the home inspector cause any harm while inspecting a property.

Related: What types of insurance do home inspectors need?

Setting up bookkeeping: Keeping track of your finances is necessary for any business. You might want to use software like Wave Accounting (FREE) or Quickbooks or hire an accountant to help manage your financial records.

Contracts It’s important to be as clear as possible when it comes to contractual agreements with your clients. Having clients sign service agreements that outline scope, fees, liability limits, and other terms ensures that both you and the client are on the same page. Keep in mind that the contract should also address cancellation terms, payment terms, and dispute resolution.

RocketLawyer and Law Depot have free and inexpensive templates that may be helpful, but consider having them reviewed by an attorney.

Business bank account: Opening a separate bank account for your business can help streamline your finances and makes tax filing easier.

Accepting credit cards: Offering various payment options can make it easier for clients to pay for your services.

Greg’s Tip: Don’t skimp on reporting: A detailed report can set you apart from competitors and over time will generate referrals from banks and realtors as your reports can be counted on.

Greg's Business Tip

Common Questions When Starting A Home Inspection Business

How much does it cost to start a home inspection business?

The total costs to initially start a home inspection business range from $2,000 to $5,000. Some of the common startup costs for launching a home inspector business include:

Licensing: $500 – $2,000 – Initial business registration, home inspector licensing, training, and exam fees.

Tools & equipment: $500 to $1,500 – Includes items like a vehicle to get you to and from homes you will be inspecting, an electrical tester, flashlight, gas detector, a ladder, screwdriver, thermometer, etc.

Software: $300 to $800 – This will keep you organized and allow your business operations to run smoothly. Completing transactions, writing reports, and scheduling appointments can now be made right at your fingertips using your phone or iPad.

Marketing: $500 to $2,000 – Branded clothing, brochures, business cards, logo, website, a social media manager if you choose to hire help, advertising through websites like Facebook Ads or Google Ads are a few items you may pay for when it comes to marketing.

Insurance: $750 – $2,000 – Includes policies like auto and liability insurance and depends on the coverage selected, experience, and the number of claims the business owner has made.

How profitable is a home inspection business?

The typical home inspector charges around $300 to $500 per inspection, with most inspectors aiming to complete 2 to 4 inspections per day. The average time on site can take from between 2 & 3 hours, plus the time of generating the report.

Based on completing 3 inspections per day at an average price of $400, the potential annual revenue for a home inspector working 5 days per week would be about $312,000 (3 inspections x $400 per inspection x 5 days per week x 52 weeks).

Expenses for a home inspection business can include insurance, marketing, office space, equipment, and software. Most one-person inspection companies aim to keep these expenses below 30% of sales. Using this average, total expenses in the example would be $93,600.

That leaves potential earnings before tax of about $218,400 per year for a busy home inspector working full time. Of course, inspectors just starting out wouldn’t achieve this level immediately, but the potential for six-figure earnings exists in the home inspection field for those who build a solid reputation and client base over time.

What skills are helpful when running a home inspection business?

Running a successful home inspection business requires a blend of technical, interpersonal, and business skills. Here are some key skills that can be beneficial:

Technical knowledge: Most tenured home inspectors have seen it all, from foundational issues to water damage and beyond. Being knowledgeable about mechanical issues and offering suggestions on how the homeowner can fix a problem is a major step in daily operations.

Analytical skills: Home inspectors must be able to identify issues that are not always immediately obvious. This requires a keen eye for detail and the ability to analyze different elements of a property.

Communication skills: Home inspectors need to clearly explain their findings to clients, many of whom may not have a technical background. Good verbal and written communication skills are crucial.

Customer service skills: Being polite, respectful, and responsive to clients’ questions and concerns can help build a positive reputation and foster client relationships.

Physical stamina and dexterity: The job often involves physical activities like climbing ladders, crawling in tight spaces, and walking on roofs. Good physical condition is important.

Business management skills: As a business owner, you’ll need to understand basic business operations like marketing, accounting, and project management.

Problem-solving skills: Every property is unique, so home inspectors need to be adaptable and able to solve problems as they arise.

Ethical judgment: Inspectors must provide unbiased, accurate reports regardless of any external pressures or potential gain.

Time management skills: Inspectors often have multiple inspections in a day, so being able to manage time effectively is important.

Continual learning: The field of home inspection is ever-evolving with new technologies and regulations. Staying updated with these changes is necessary to maintain high standards of service.

What is the NAICS code for a home inspection business?

The NAICS code for a home inspection service is 541350.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code and how to find yours

American Society of Home Inspectors (ASHI)
National Association of Home Inspectors (NAHI)
International Association of Certified Home Inspectors ( InterNACHI )

How To Start A Home Inspection Business

How To Start A Home Inspection Business

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