H.W.
K.,
What you need is hard facts.
"In Virginia, a family day home provider is required to be licensed if at any one time she cares for more than five children from birth through age 12 **in her home**, other than her own children or children who reside in the home. In addition, a family day home provider who cares for more than four children under two years of age in her home at any one time, including her own children or children who reside in the home, must be licensed unless they are exempt from licensure in accordance with the law."
This is taken from: http://www.southernvajobs.com/daycare_info.php#regs
I can tell you from my own experience running a preschool that even if you are unlicensed, you need to create a real business plan and look at your overhead. Are you planning on supplying snacks and meals, or will the families be bringing those? Being unlicensed, you will not qualify for the USDA food program, so food cost needs to be considered. Then, supply costs for wipes, towels, toilet supplies, extra soap used, cleaning supplies, art supplies, toys, etc. Consider the increase in water usage. Don't forget insurance. My cost annually for a policy on my preschool was close to $500, and I didn't operate a full-time program. I also became an LLC to protect my home from any claims against me, should they arise.
You will also need information regarding liability waivers, emergency contact forms, illness exemption policies (each state has them) and have a plan/handbook for parents so that they know what the mutual expectations are. Clear communication with your families is of extreme importance.
Also consider what your plan would be if your child/children were ill at home with something dreadfully contagious. How will you manage this? Do you have backup care available, or is the onus on the families to have backup care? Do you plan on charging an hourly rate, running a drop-in for regular families or a weekly or monthly rate? All of this must be considered, as well as hours of operation and what they day would really look like with youngsters arriving at your house or staying late in through the dinner hour.
All very real considerations before hanging out your shingle.
My guess is that, like Oregon, unlicensed care must be conducted in one's own home. That's what the above said. Unless you get a great deal or are charging a pretty penny, it's very hard to turn a profit on a rented space without a license. And parents will not want to pay out for this if they are not able to claim the child care expense on their taxes, as Molly pointed out. Landlords also do not want to be paid in cash, so that is another factor to consider.
You might find your local child care resource and referral and ask them for help in getting information. While my preschool was unlicensed (in my own home and a small group for high-quality care), I did attend workshops which familiarized me with the regulations for my state. I'd highly recommend that you and your friend do this research; it can help you decide if this is the right route for you to go before spending any money on this venture.