Property management is a surprisingly affordable and easy field to enter, requiring minimal experience or education.
As a property manager, you’re expected to take care of properties (commercial or residential) or vacant land for individuals, investor groups, or families.
The upside to property management is having a very flexible schedule, low start-up costs, and an almost guaranteed passive income.
On the downside, however, it can result in never-ending regulatory controls and licensing requirements due to its nature of being one the biggest sources of complaints to regulatory agencies in various states.
Yet, property management remains a very appealing field to engage in.
Starting a property management company may be a great business venture, especially for those with experience in property management or real estate (or better yet, both).
Among other things, property management companies are required to take care of everything related to the property of the owners, including rent collection, maintenance, control, and acquisition.
What Skills Are Necessary Before Starting a Property Management Company?
Since you are required to deal with a whole manner of different people and expectations – maintenance contractors, vetting companies, tenants, landlords, etc – you should have great interpersonal skills and communication skills. Additionally, you need to be focused and highly motivated.
The aforementioned skills are necessary for property management. The field is often fraught with problems and things can regularly get ugly. If you’re thinking of starting a property management company you’ll need to have a level head and be prepared for such eventualities.
Steps to Starting a Property Management Company
1. Start With The Basics
As is the case with all businesses, you’ll need to go through all the necessary processes required to set up a legal entity. The majority of property management companies in North America fall under limited liability companies but we recommend you consult with an attorney to find out what’s best for your situation.
If you prefer not to consult an attorney, setting up an LLC doesn’t need to be an expensive process. You can do it yourself.
You only need to go to look up the filing process via your state’s official website; then file it after downloading their free Articles of Organization template. With all fees included, the total cost should typically range from $50-150 USD. You’ll need to think of your company’s name beforehand, so don’t forget about this!
Once you’ve established your company as a legal entity, the next step is to set up an office.
The good news is that it can be as simple as setting aside a room in your home.
Nonetheless, for purposes of preserving 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 offering ‘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, or if you have the budget you can set up a Gmail account for a nominal monthly fee.
2. Writing a Property Management Business Plan
If you want to establish a serious property management company (which you do), you need a business plan. You need to pin down not only your business concept but also the strategies you intend to work with to achieve your company’s objectives, goals, and aims.
It is crucial that your business passes a reality check by putting relevant statistics, figures, and facts into consideration. That said, your business plan should clearly outline all the strategies that you intend to implement to operate your property management company.
Make sure property management business plan includes the following:
–Projections on income generation – you need to calculate your future income. Here, it is better to underestimate rather than to overestimate. Try 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 should cover your company’s mission and vision statement. Try to go into detail about what will set your property management business apart from the competition.
-Product offering, pricing, marketing and sales analysis/strategies, SWOT analysis, advertising strategy, expansion strategies, management techniques, costing and financial projection.
3. Market Feasibility and Research
It’s important you conduct careful research on the city you plan to open your company. You’ll want to make sure you 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.
The last thing you would want is to spend all your energy opening up your company only to find out there’s very little demand for property management.
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, reading about the real estate market in your city, and checking out the competition to find out how they market their business.
4. Finding Clients
Local real estate investment clubs should be your target here. To get into contact with as many real estate investors and landlords as possible, you need to join as many of these as you possibly can. Because this base is your bread and butter, you need to be aggressive in networking.
To find real estate investment groups clubs in your area, the internet is your best friend. Start with a Google search. You should also look on Facebook, LinkedIn, and Meetup.com for real estate investment groups specific to your city.
Additionally, you should also network with people that you deem beneficial to your business.
For example, real estate agents can be a great source of referrals for your business. 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 resourceful to your new business. They occasionally find themselves stuck with rental properties. Moreover, you can also check out for network opportunities in these non-traditional paces and events.
While referrals are the best way to grow your business, you’ll definitely need to focus on marketing your property management company as well. You should use a mix of online and offline avenues to do so.
Here are some ideas of places to get started:
- Attend business fairs, seminars, and expos
- Invest in online paid ads to get your company in front of your target market
- Create a high quality property management website and turn it into an asset
- Optimize your property management website for search engines.
- Advertise your business on rental websites, property/real estate magazines
- Make your business known by sending brochures to real estate stakeholders/property owners
- Sponsor relevant TV programs
- Leverage social media platforms like LinkedIn, Twitter, Facebook, Instagram, Google+, Badoo and other platforms to promote your business
- Attend landlord and residence association meetings with the aim of networking
- 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 property management industry has an easy barrier to entry, it is highly competitive. However, the level of competition is highly dependent on the locality you choose to target.
For example, if you decide to start your property management company in a small town, chances are that you’ll have less competition. Similarly, if you locate your business in large cities like Los Angeles, California, Las Vegas, Nevada, Miami, Florida, Houston, Texas you’ll be up against some pretty tough competitors.
But regardless of where you decide to start your business from, developing good marketing and sales strategies is key.
It’s not 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, it’s crucial that you 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
Although finding tenants might be simple, finding qualified tenants is rather daunting. While your first impulse might be to look for tenants on Craigslist, your target market might be looking for housing differently. For instance, they might be looking for homes to rent on zillow.com, trulia.com or in the local daily newspaper.
Begin by first establishing how your potential tenants search for rental units.Then focus on how you can capitalize on that medium to get a good number of prospects.
When screening tenants make sure you follow government regulations. Don’t forget to adhere to the Fair Housing Act. As a property manager, you need to be knowledgeable about the Fair Housing Act. Violating the conditions can result in big trouble for your new business.
Once you find interested applicants, you’ll have to set up meetings to show them your properties. To save on time due to no-shows, be sure to confirm the meeting beforehand, Also, bring a hefty stack of rental application forms with you.
Once you have a narrowed list of applicants, make sure you perform your due diligence. It’s important that you perform detail background checks on each applicant. This includes checking their criminal history, credit score, calling references, etc.
At this juncture, make sure to include all the required disclosures and addendums – state-specific lease agreements. Unfortunately, most beginner landlords and property managers underestimate the significance of having a solid lease agreement.
It is lost on them that 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 always strive to maximize clients’ profits (by reducing vacancy rates and finding tenants in a timely manner) while trying to keep risks such as damages to property and litigation in check.
One way to achieve this is to have an effective incentive program. According to research, results show that offering incentives to tenants can help reduce turn over and help keep residents happy.
As a property manager, you can decide to offer incentives in terms of points for certain tasks, jobs, and other positive deeds done by tenants.
It is crucial that property managers are both reactive and proactive when dealing with tenants. This can help prevent payment defaults, damaged rental properties, and lawsuits.
Since you’ll be dealing with regular repairs and maintenance, you’ll need to have several contractors on call. Although it is difficult finding competent yet affordable contractors, ties established throughout the entire process of starting a property management company can be helpful.
It goes without saying that you should strive to establish close, long-term relationships with some quality contractors.
Starting a property management company can be challenging, but for the right type of individual, it can be an extremely rewarding career. Property management requires both a willingness to move swiftly and firmly and a love of working with people.
If you would like help in 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.