As a property manager, you’re expected to take care of properties (commercial or residential) for individuals, investor groups and families.
The upside to property management is the flexible schedule, low start-up costs, and an almost guaranteed passive income.
The downsides include the regulatory controls and licensing requirements. It doesn’t help that properties are one of the biggest sources of complaints to regulatory agencies in various states.
Nonetheless, property management remains a rewarding field to engage in.
Starting a property management company may be a great business venture, especially for those with experience in property management and/or real estate.
As their name suggests, property management companies take care of everything related their customers’ property, including but not limited to rent collection, maintenance, control and acquisition.
What Skills Are Necessary Before Starting a Property Management Company?
Since you’re going to deal with different people – maintenance contractors, vetting companies, tenants, landlords, and the like – you should have great interpersonal and communication skills. Also, you need to be focused and highly motivated. If you’re thinking of starting a property management company, here’s what you need to know.
Steps to Starting a Property Management Company
1. Start With The Basics
Like with all businesses, you’ll need to meet some necessary requirements to set up a legal entity. Most of the property management companies in North America are limited liability companies. However, we recommend you consult with an attorney to find out what’s best for your situation.
If you’d rather not consult an attorney, setting up an LLC doesn’t need to be expensive. In fact, you can do it yourself.
You only need to look up the filing process via your state’s official website, and download their free Articles of Organization template. Including all fees, the total cost should range from $50-150. Don’t forget to think of your company name beforehand.
Once you’ve established your company as a legal entity, the next step is to set up an office. Luckily, it’s as simple as setting aside a room in your home. Nonetheless, for the sake of privacy, you’d want to set up a separate post office box for correspondence.
Finally, you’ll require an email address and a phone number. There are a ton of online services that offer automatic call forwarding if you need a separate phone number but still want to use your own mobile phone.
As for your email address, you can use Zoho as a free option. If you have the budget, you can also set up a Gmail account for a nominal monthly fee.
2. Writing a Property Management Business Plan
If you want to establish a property management company that’ll succeed, you need a business plan. A business plan allows you to pin down your business concept, as well as the strategies you’ll use to achieve your company’s goals.
It’s important that you consider factors like relevant statistics, figures and other data. Your business plan should clearly outline all the strategies that you intend to implement to operate your property management company.
Make sure your property management business plan includes the following.
- Projections on income generation. It’s better to be conservative with your estimates; that is, it’s better to underestimate rather than overestimate your projected income. Make sure to set realistic expectations for the number of properties you’ll be managing, as well the management fees you’ll charge.
- Company description and executive summary. This covers your company’s mission and vision statement. Here, you should emphasize what sets your property management business apart from the competition.
- Miscellaneous. Other things you should include are your product offering, pricing, marketing and sales analysis/strategies, SWOT analysis, advertising strategy, expansion strategies, management techniques, and costing and financial projections.
3. Market Feasibility and Research
Don’t forget to conduct careful research on your company’s physical location. This way, you’ll have a clear understanding of your target demographic, the rental rates in the area, your competition, whether it’s a buyer or seller’s market, whether you should specialize in residential or commercial property management, etc.
Conducting market research doesn’t have to be difficult. You can start by looking at Google trends to see the historical demand in your city. You can also read about the real estate market in your city, or check out the competition to find out how they market their business.
4. Finding Clients
The best places to find clients are local real estate investment clubs. To contact as many real estate investors and landlords as possible, join as many of these clubs as you can. Networking is crucial when getting your business off the ground.
Use the Internet to find real estate investment clubs in your area. Start with a Google search. Look into Facebook, LinkedIn and Meetup.com for real estate investment groups specific to your city.
Also, network with people who can benefit your business. For example, real estate agents can be a great source of client referrals. They’re often the first point of contact for many real estate investors. Consider reaching out to real estate agents in your area and offering them a referral fee.
Besides real estate agents, hard money lenders can also be useful to your new business. Sometimes, they find themselves stuck with rental properties. You can also check out network opportunities in these non-traditional places and events.
While referrals are the best way to grow your business, you’ll also need to focus on marketing your property management company. Use a mix of online and offline avenues to do your marketing.
Here are some places to get started.
- Attend business fairs, seminars and expos.
- Invest in online paid ads to boost exposure for your company.
- Create a high quality property management website.
- Optimize your property management website for search engines.
- Advertise your business on rental websites and property/real estate magazines.
- Send brochures to real estate stakeholders/property owners.
- Sponsor TV programs related to your business.
- Leverage social media platforms like LinkedIn, Twitter, Facebook, Instagram, Google+ and Badoo to promote your business.
- Attend landlord and residence association meetings.
- Distribute flyers in targeted areas from time to time.
- Place your flex banners with your company’s contacts and logos in every property you put up for lease or sale.
5. Dealing With Competition
Since the barrier to the property management industry is relatively low, expect to have tons of competition. The level of competition depends on the locality you choose to target.
For example, if you start your property management company in a small town, you’ll naturally have less competition. Similarly, if you locate your business in large cities like Los Angeles, Las Vegas, Miami and Houston, you’ll be up against some pretty tough industry players.
Regardless of where you decide to start your business, fine-tuning your marketing and sales strategies is key.
It’s never easy to start a new business. But with hard work and dedication, you can start a successful property management company in no time.
As a beginner, you have to focus on providing top-notch customer service. By providing excellent property management services, you’re more likely to receive referrals from existing clients.
6. Finding Qualified Tenants
Finding tenants is one thing, but finding qualified ones is another. Your first impulse might be to look for tenants on Craigslist. However, your target market might be looking for housing in a different avenue. For example, they might be looking for homes to rent on zillow.com, trulia.com or the local daily newspaper.
Establish how your potential tenants search for rental units. Focus on how you can capitalize on that method to get your prospects. Check out this article for a list of websites you can use to find tenants.
When screening tenants, make sure you follow government regulations. Don’t forget to comply with the Fair Housing Act. Otherwise, you’ll run into legal issues from the get-go.
Once you have interested applicants, set up meetings to show them your properties. To avoid no-shows, confirm the meeting beforehand, Also, bring a hefty stack of rental application forms with you.
After narrowing down your list of applicants, make sure you perform your due diligence. It’s important that you perform detailed background checks on each applicant. This includes checking their criminal history, credit score, calling references, and the like.
At this point, be sure to include all the required disclosures and addendums, such as state-specific lease agreements. Unfortunately, most beginner landlords and property managers underestimate the significance of having a solid lease agreement.
The lease agreement is the first document a judge will ask for when disputes between tenants and landlords arise. You can find state-specific lease agreement packages, a variety of screening services, and a free rental application at EZ Landlord Forms.
7. Property Management
Good property management companies maximize clients’ profits by reducing vacancy rates and finding tenants in a timely manner, while minimizing risks such as damages to property and litigation expenses.
One way to achieve this is to have an effective incentive program. According to research, offering incentives to tenants can help reduce turn over and keep residents happy. As a property manager, you can offer incentives in the form of reward points for jobs and other good deeds by tenants.
Since you’ll be dealing with repairs and maintenance on a regular basis, you’ll need to have several contractors. You can find competent yet affordable contractors through the contacts you made while starting your property management company. Strive to establish close, long-term relationships with high-quality contractors.
Starting a property management company can be challenging. For the right kind of person, however, it can be an extremely rewarding career. Property management requires the ability to make decisions on the fly, as well as a love of working with people.
If you need help marketing your property management company, don’t hesitate to contact us. We specialize in helping property management companies grow, and would love to speak with you about how we can help your business.