While it is difficult to scientifically predict your market potential, there are some general guidelines which you might find useful. As a rule of thumb, roughly 15,000 existing homes are sold annually per 1,000,000 population size, or 1.5%. Calculating the percentage of the Of these homes, the percentage that are inspected can be as high as 95% in major cities and along the East and West coasts, and as low as 10-25% in more rural areas. Try to obtain from local officials and real estate salespeople the figures for the population in your region and the percentage of homes there that are inspected. Then apply the following formula to estimate your current home inspection business opportunity:
(Population x .015) x % of homes inspected = # of home inspections conducted per year
For example, if (1) one million people live in your area and you determine that roughly (50%) fifty percent of the homes sold are inspected, then you can estimate that about (7,500) seven thousand five hundred inspections are conducted annually. This is a minimum figure, because it does not include inspections of newly built homes and, as the market and consumer awareness grow, the number of home inspections overall will grow as well.
Now check your local Yellow Pages to determine the number of home inspectors working in your area, and divide the number of annual home inspections by that figure. Twenty (20) inspectors in our example above would mean that each inspector would average about three hundred seventy five (375) inspections per year. This is only a general picture, however, since multi-inspector firms account for a larger market share, while part-time inspectors will do fewer. The average home inspection fee nationally is $240*, and so a home inspector in this scenario could project to earn an annual gross income of $90,000. It is quite feasible, however, for well trained inspectors to earn well over $100,000.
To get a more accurate picture of your local market, you would do well to visit real estate offices to learn how they work with home inspectors, and what home inspectors in the area are doing. It is common practice for inspectors to leave brochures or other literature at these offices to generate referrals, and you might find these helpful.
For those of you who are a little more ambitious, try reaching out to local Real Estate Professionals by offering to hold a "focus group" meeting or luncheon. As conversation starters, you might ask them to complete the following sentences:
- I [do][don't] recommend home inspections to my clients because . . .
- The problem with home inspectors are . . .
- Home buyers' biggest concerns seem to be . . .
- When the home inspector arrives at the house, I . . .
- What I look for in a home inspector is . . .
Another suggestion would be to attend local chapter meetings of national or regional professional associations. By speaking directly with home inspectors in the area, and listening to their concerns and interests during the meeting, you can get a feel for what it's like to inspect homes in your market.
Now let's take a look at the size of your capital investment to start this business. One distinct advantage of this profession is that overhead is low compared to many other businesses. You don't need elaborate office space. You don't need to carry inventory. And because most home inspectors are paid on site following the inspection, you don't need to carry high receivables.
A startup budget of $10,000 or so should be ample to cover the cost of computer hardware and software, company stationery and reports, inspection attire and tools. Ongoing expenses include automobile operating costs, telephone, insurance, marketing, and advertising, accounting, and office supplies. Many of these costs can be kept to a minimum until your business grows. Once established, you may want to consider hiring an office assistant to answer your phone, schedule inspections, and administer day to day activities. A cellular telephone with voice mail may help until you can afford to hire someone.
One other start-up option, of course, is to purchase a franchise. These "packages" typically provide training, marketing support and, occasionally, equipment and materials and can in many instances, pay for itself.
One other aspect of market research you should investigate is the state of home inspector regulation in your state or province. A growing number of legislatures have enacted laws that require varying degrees of experience, testing, and other credentials in order to legally practice home inspection. To date, thirteen states in the U.S. regulate the home inspection profession to some degree. Full licensing exists only in Louisiana, Texas, North Carolina, and New Jersey. For a synopsis of the status of licensing, visit our web site listing State Regulations.