How to Start a Home Inspection Business

Overview

How to Start a Home Inspection Business

Launching a home inspection business is an attractive idea and can provide an individual with the choice to opt out of the nine-to-five schedule that’s attached to working in the corporate world. Some home-inspector-hopefuls make the mistake of leaping right into their new business venture without first taking a step back and conducting research on what the job entails.

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, 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. By providing this service to clients, they help limit their client’s possible risk with what is most likely their largest investment. Simultaneously, home inspectors allow a buyer to have a potential advantage over a seller during sales price negotiations.

Industry Summary

The average yearly growth for the home inspection industry between 2012 and 2017 was 4.6 percent and is expected to grow 3% by 2029. As of June 2021, Forbes reported a 17.2% increase in home sales compared to the year prior. Additionally, 50% of homes that are for sale are receiving offers well over the asking price, something that has stunned experts in the industry.

According to a press release from PR Newswire, the worldwide building inspection service market is anticipated to grow over $10 billion in 2021 at a compound annual growth rate of 15.1%. By 2025, the market is expected to hold the line at $14.33 billion.

Related Industries

Handyman
Home Appraiser
Locksmith

Industry Trends

One explanation for the housing market frenzy could be the lack of homes for sale on the market in certain territories that fail to meet the overwhelming demand of home buyer prospects. This creates an urgency for new homes to be constructed. Not to mention, the real estate market is notorious for playing teeter-totter and shifting back and forth between a buyer and seller market. Regardless of what territory our economy favors, buyers and their seller counterparts can take advantage of completing a home inspection during the process.

A combination of current, historically low-interest rates, record-shattering growth in home values, and a lack of homes available for purchase in 2021 are all promising factors for those seeking a career as a home inspection entrepreneur.

Target Market

Ideal customers for a home inspection business include home buyers, home sellers, real estate agents, and mortgage companies.

Skills, experience, and education useful in running a home inspection business

Experience. Nearly every state requires some sort of formal training or exam. A home inspector should be knowledgeable in the foundational elements and construction of homes, so taking it upon yourself to receive an education on home inspections would be a savvy business move.

Troubleshooting skills. 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.

Customer service skills. Personal skills and good communication are relevant for a home inspector to explain the inspection findings to clients.

Management experience. Working independently and possessing leadership skills provide an entrepreneur leverage when owning a business. Whether you are flying solo or have employees to manage, being a good leader represents an individual who knows how to motivate themselves and others-even when the going gets tough – and it will. No business is perfect, and mistakes are bound to happen.

Checklist for Starting a Home Inspection Business

If you’re thinking about starting a home inspection business, it’s important to do your research first. Here is a checklist to help you get started.

Step 1: Write your Business Plan

After researching the ins and outs of starting a home inspection business, the next action to take is to draft a formal business plan. This is proof on paper to yourself, potential employees and partners, and financiers that you are serious and driven when it comes to your future business.

A final business plan should provide clarity to its reader on the long-term goals that are vital for the business to succeed. It also allows the author to identify their competition and what sets their business apart from their competitors.

Related: How to write a business plan

Step 2: Name the Business

Branding your business and coming up with a name that sticks can make or break your business’s success. A catchy name is your safest bet. To help you get started, conduct a Google search to find relevant puns, synonyms, acronyms, and rhymes related to your niche.

Step 3: Form a Business Structure

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a home inspection business, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: Guide to forming your LLC
 

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!

IncAuthority - $0 plus state fees & free registered agent the first year!

ZenBusiness - $49 plus state fees & free registered agent for 1 year!

Step 4: Apply for Business Licenses and Certifications

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.

Although some states lack a licensing requirement, some individuals still choose to attend school to prepare for the profession. According to Spectora, home inspection school tuition can range from $400-$1,000 or greater. Many home inspection schools will include the cost of the license exam in their tuition.

Depending on the state, home inspection businesses will also need to register for a number of general business registrations such as a business license and sales tax license.

In addition to business licensing, there are several certifications a home inspector can have as well. While being a certified home inspector is not required in most states, they provide specific industry knowledge and training and add legitimacy to a business.

Related: Common business licenses, permits, and registrations by state

Step 5: Find Financing

Securing a loan for your business can happen from having a solid business plan, proving how much money you have available to pay back your loan, and having good credit. It is difficult to acquire a small business loan with a credit score below 700. If business owners can’t qualify for a small business loan, many opt-in for a personal loan, loans available to borrowers with bad credit, or borrowing from family members or friends.

Related: Finding the money to start a business

Step 6: Open a Business Bank Account

Keeping your business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Step 7: Get Your Marketing Plan in Place

Establishing a marketing plan is crucial for your business to succeed. According to Fundera, 41% of small businesses leverage social media to drive revenue, and 74% of customers utilize social media to finalize a decision to purchase. While 96% of small businesses use social media for marketing their business, 81% of buyers will search the web before making their purchase.

One of the greatest referral sources is Realtors, so be sure to get to know the local real estate agents and join Realtor associations to get your name well known.  Additionally, mortgage lenders are another great source of new customers.

Related: Low-cost ideas to market a new business

One important marketing task is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.

Step 8: Get 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?

Step 9: Hiring Employees

Deciding to hire employees can be daunting when initially starting business operations. According to a survey conducted by Monster, 62% of small businesses claim to have made a bad hiring decision. First, evaluate whether you need and can afford an employee, review the legalities that pair with hiring help, set up payroll, and begin the hiring process.

Related: Steps to hiring your first employee

Step 10: Set up an Accounting System

Although the thought of accounting can be like a foreign language, it is vital to track if your business is making a profit. Not only is it key to tracking revenue, but it is required by the IRS to prove financial records.

Related: Setting up the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

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

Some of the common startup costs for launching a home inspector business include:

Licensing – The price tag to take the National Home Inspector Exam in most states is $225. After applicants pass their exam, they will pay a one-time application fee that typically falls between $200 to $400.
Home Inspection Equipment – $700 to $10,500 – this 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.
Home Inspection Software – $400 to $2,500 – 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 – $0 to $1,000 – 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.
Legal Fees – $100 to $5,000 – varies depending on attorney’s fees and your location.
– Insurance – $1,500 to $2,500 – this 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?

Inspecting real estate is a lucrative business, with most home inspectors charging between $300 to $500 per visit, according to the U.S. Department of Housing and Urban Development. The average time on site can take from between 2 & 3 hours, plus the cost of generating the report.

Payscale reports that the annual salary of a home inspector ranges from $30,000 to $96,000, with the average salary being $49,272. This number will vary greatly depending on your experience, years in business, price points for the services provided, number of employees, overhead costs, among other business expenses.

In addition to standard home inspection services, some companies will increase revenues by upselling customers with services such as radon testing, water testing, air quality testing, and more.

Are there grants to start a home inspection business?

It’s extremely rare to find a grant to start a home inspection business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.

Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.

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

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

Subscribe Now to the 60-day Startup Challenge!

Subscribe Now to the 60-day Startup Challenge!