As a property manager, you’re expected to take care of properties (commercial or residential) for individuals, investor groups and families.
Some of the upsides to property management include the flexible schedule, low start-up costs, and an almost guaranteed passive income.
The downsides include keeping track of local state regulatory controls and licensing requirements. Properties are one of the biggest sources of complaints to regulatory agencies in various states.
But you won’t have to worry about complaints. You’re reading this article, so you’re already amongst the professionals who do their research and avoid these pitfalls.
This mindset is what makes the job a rewarding field to engage in.
Being the owner of a property management company can be a great business venture for those with experience in property management and/or real estate.
As the name suggests, property management companies handle almost everything related to managing a rental property owner’s asset, including but not limited to rent collection, maintenance, control and acquisition.
What Skills Do You Need 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.
It also helps if you are focused, highly motivated as well as experienced in hiring and training employees.
If you’re looking for tips to build a solid foundation of knowledge before making the leap in your professional career, you’ve landed in the right place for some advice.
You don’t need to start your journey with an expensive education or get confused by all the available software and tools.
Keep on reading to get the information you need that could hold the key to your future property management company’s success.
Steps to Starting a Property Management Company
1. Start With The Basics
Like with all businesses, you’ll need to meet some necessary state 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 for advice, 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 need an email address, fax 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 information:
- 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. This will help you when you’re marketing to attract customers.
- Miscellaneous. Other things you should include are your product offering, pricing, marketing and sales analysis/strategies, SWOT analysis, advertising strategy, expansion strategies, management techniques, the communities you want to focus on 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 community, your competition, whether it’s a buyer or seller’s market, the type of property management you should specialize in (residential or commercial), etc.
Conducting market research doesn’t have to be difficult. There is a lot of information available to you online. You can start by looking at sites like Google trends to see the historical demand in your city. You can also read about your local real estate market, or check out the competition to find out how they market their business.
4. Finding Clients
The best places to find customers 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 it comes to getting your business off the ground and building your reputation.
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 and see you as an asset. 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 a lot 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 your state’s 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. But after reading and applying all these tips, you are sure to be headed in the right direction.
It can be an extremely rewarding job when the owner is a knowledgeable professional like you. 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.