Are you an aspiring property manager who is looking to start their own company in Illinois? If so, you have come to the right place!
Starting your own business of any kind can be a daunting task, and this is especially true in property management.
Property managers have a lot on their plate on a day to day basis, so it is important to make sure that everything in your new business is set up correctly from the very beginning to ensure that your operations remain efficient and organized in the long run.
While being a property manager has many pros, including a flexible schedule, low start up costs, and passive income, there can be many hurdles that come along with the job as well.
In this blog post, we here at Upkeep Media will talk about everything you need to know before starting your property management company in Illinois. From creating a solid business plan and doing thorough market research to finding new clients and scaling your business.
What Exactly Does an Illinois Property Management Company Do?
Being a property manager requires a long list of skill sets in order to succeed.
One aspect of property management that is simply unavoidable is dealing with lots of different kinds of people. This doesn’t just mean tenants and clients!
On a regular basis, property managers will have to deal with maintenance contractors, real estate agents, lawyers, and more. This means that if you are looking into property management as a career for yourself, you will need to have excellent interpersonal and communication skills in order to thrive.
In addition to being an excellent communicator, it also helps any property manager to be highly focused and self motivated.
This is true of most business owners, but it is especially relevant when you become a property manager.
Property management requires a lot of hard work and determination, whether it involves gaining new clients, advertising vacant properties, or putting out fires on a daily basis. It is extremely valuable for a property manager to have a strong work ethic and the ability to handle a crisis at any time.
Lastly, it is helpful to have experience in training employees. You will need this skill as your property management company grows.
As you begin to gain more clients and properties to take care of, you will most likely be unable to handle everything yourself, and you will need to hire a team of professionals to help you cover all of your bases.
Being able to properly and patiently train your new employees is a valuable skill that you will need to gain if you want to effectively grow your business.
Step 1: Understand the Different Ways to Structure Your Business
Before you begin diving into property management, there are some essential steps that you must take in order to establish your business legally and professionally.
Firstly, it is absolutely crucial to meet the necessary state requirements to set up a legal entity for your property management company.
While many property management companies opt for limited liability companies (LLCs), consulting with a local attorney can help you determine the most ideal business structure for your specific situation.
Fortunately, if you don’t want to consult an attorney, setting up an LLC in Illinois doesn’t have to be costly or complex.
You can easily navigate the legal filing process by accessing online resources provided by the state of Illinois and downloading their free Articles of Organization template. With total costs typically ranging from $50 to $150, including fees, establishing your legal entity is fairly accessible for new business owners.
Don’t forget to decide on your property management company name beforehand, as it will be an integral part of establishing your business.
Once your company has been legally established, consider setting up a dedicated office space, even if it’s just a room in your home, to manage your properties efficiently.
For privacy and professionalism, if you are working out of your home, it’s advisable to obtain a separate post office box for business correspondence.
Additionally, make sure that you have all of your professional communication channels in place, including a business email address, fax number, and phone number.
Utilize online services that offer automatic call forwarding if you require a separate phone number while still using your mobile phone. There are also plenty of handy property management automations that can streamline your business and save you time.
After all, having a professional business email and phone number is essential for effective communication with tenants and clients while establishing your credibility as a new company.
Step 2: Create a Strong Legal Contract & Have Knowledge of Illinois Property Management Laws
Once you’ve officially registered your company as a legal entity and begun structuring its operations, the next crucial step is to draft a thorough, legally binding contract tailored for your clientele in Illinois.
Starting this process early on is advisable, considering the time and financial investment it entails, especially with potential attorney fees.
Crafting a solid contract in collaboration with a specialized attorney in property management can safeguard both you and your company against liabilities, fraud, and the any potential risks associated with clients.
A comprehensive property management contract must adhere to all relevant Illinois laws and should clearly outline the following:
- Contract duration.
- Parties involved (your company and the property owner).
- Scope of responsibilities delegated to the property management company, including property maintenance, tenant acquisition, rent collection, repairs, emergency maintenance, and other monthly obligations.
- Exclusions from the property management company’s responsibilities.
- Detailed breakdown of fees payable by the property owner to the management company.
- Obligations of the property owner.
- Inclusion of a hold harmless clause, which legally absolves one or both parties from liabilities in case of injuries or damages incurred during the contract period.
- Termination clause, outlining conditions under which either party can terminate the contract with or without penalties.
Step 3: Create a Business Plan and Scalable Structure for Your Illinois Real Estate Management Business
For property managers in Illinois who are aspiring to create a successful company, taking the time to craft a comprehensive business plan is essential.
A well-developed business plan will serve as a roadmap, allowing you to fully lay out your business concept, strategies, and goals, while distinguishing your company from competitors in the market.
Aside from the big picture ideas of your company, you will also need to understand the analytical aspects of starting a business if you want it to really succeed in the long run.
In this planning stage, it’s crucial to keep an eye on both short-term milestones and long-term aspirations, while crafting a strategic blueprint to align with the evolving needs of your business.
Property management companies typically adopt one of two common structures:
- The first model involves a single property manager who oversees all interactions with clients and tenants. Under this setup, the property manager often delegates tasks to external businesses or contractors.
- Alternatively, some property management firms opt for a structure with in-house employees. This arrangement ensures a more equitable distribution of tasks and enables each team member to specialize in a specific aspect of the business.
However, it’s important to note that you’re not bound to a single structure indefinitely.
Many property managers start their journey as sole proprietors, relying on contractors and external support to manage their workload.
As their operations expand and client base grows, they transition towards employing staff and establishing a more structured organizational hierarchy.
Expanding your business involves considering various roles, including full-time, part-time, and contract-based positions. Delegating these responsibilities allows you to enhance client service while focusing on strategic priorities as the business owner.
Some essential roles to consider include:
- Additional property managers to oversee multiple properties, ensuring quality service delivery.
- Administrative support for managing office operations efficiently.
- Sales representatives to foster client relationships and attract new business.
- Human resources professionals to oversee employee payroll and benefits.
- Finance professionals to handle accounts payable and receivable.
- Leasing agents, showing coordinators, and tenant managers to manage tenant relations and occupancy.
- Maintenance managers and staff for routine and emergency maintenance tasks.
- Service coordinators to streamline operations.
- Marketing specialists to enhance online presence and brand visibility.
Furthermore, certain contract-based roles play a pivotal role in property management businesses:
- Experienced accountants familiar with the nuances of property management finances.
- Legal support from real estate attorneys or law firms for contractual matters.
- Specialized contractors for tasks such as locksmithing or HVAC maintenance.
- Information technology (IT) professionals to manage business systems effectively.
It’s essential to ensure that all vendors, employees, and contractors are properly registered, qualified, and adequately insured. Additionally, clear contracts outlining responsibilities and liabilities are crucial for protecting your company’s interests.
Remember, the caliber of your team reflects the quality of your business. Conduct thorough research and enlist only qualified and professional partners to ensure the success and reputation of your property management enterprise.
Step 4: Market Your Illinois Property Management Business and Attract Leads
When you are establishing your property management company, it is essential to conduct thorough research on the physical location of your business and the surrounding properties and communities.
This will provide you with valuable insights into your target demographic, rental rates in the neighborhoods you are looking to manage within, your competition for properties, market trends, and the type of property management specialization that makes the most sense with the local demand, whether it be residential or commercial.
Here are some ideas that property managers can use to attract a large pool of leads:
- Attend real estate business fairs, seminars, and expos to network with other industry professionals.
- Invest in online paid advertising to increase exposure for your business.
- Develop a high-quality company website and optimize it for search engines to improve online visibility. This will help you gain visibility on search engines and rank your website higher than your competitors in search results.
- Advertise your property management services on rental websites and property/real estate magazines.
- Distribute brochures to real estate agents and property owners.
- Sponsor relevant TV programs to increase brand recognition.
- Make use of popular social media platforms such as LinkedIn, Twitter, Facebook (including Facebook ads), Instagram, Google+, and Badoo to promote your company and expand your audience.
- Attend landlord and residence association meetings to network in person with property owners.
- Distribute business flyers in targeted areas to generate local interest.
- Display flex banners with company contact information and logos on any properties that you have available for lease or sale.
By networking and implementing effective marketing strategies, you will have an easier time expanding your reach and growing your overall audience and brand identity.
Step 5: Find a Software to Fit Your Needs
As a property management firm, you’ll face a constant influx of competing priorities demanding your attention every hour of every day.
Given the nature of relationship-based operations, maintaining prompt and professional responses to these priorities is paramount. Your reputation as a property manager stands as your most valuable asset.
In addressing the diverse needs of property management, there’s a plethora of software solutions available, catering to various functionalities. Selecting the right software can be daunting, but it’s crucial to opt for a product that offers scalability to accommodate your current and future business needs.
For property managers, numerous Software as a Service (SaaS) platforms cater specifically to their requirements. Some great examples include:
However, especially in the initial stages of business, these sophisticated management software may not be the sole option at your disposal.
With diligent research, you can find SaaS solutions tailored to individual aspects of property management, such as tenant rent collection, maintenance tracking, email management, and document sharing.
While these specialized platforms may lack the seamless integration of comprehensive software suites, they often offer cost-effective alternatives, enabling scalability as your business evolves in its early months or years of operation.
Step 6: Determine Your Fee Structure
Once you’ve solidified the framework of your business and started attracting new clients, it’s essential to establish your fee structure.
This phase marks a pivotal point in your business development. Setting prices too low might compromise your credibility and perpetually leave you struggling to cover expenses. Pricing too high could deter potential high-value clients.
A crucial initial step in crafting a fee structure is understanding your local market and the pricing landscape of your competitors.
For newcomers to the real estate industry, determining the market value of your services often involves researching similar property management businesses in your vicinity to gauge their common rates.
We advise taking this market analysis a step further by delving into not only competitive prices but also the unique fees and payment structures prevalent in the industry. These fees can vary by city, necessitating a targeted approach in your research rather than relying solely on general online guidelines.
When establishing your pricing structure, consider the following fees:
- Setup Fee:
- A one-time fee property owners in Illinois pay to initiate an account with your business, typically ranging from $200 to $300.
- Ongoing Management Fee:
- The primary component of your monthly income, usually falling between 3% to 10% of the property’s monthly rental income. This rate fluctuates based on location and market competitiveness, covering operational expenses like tenant management, rent collection, inspections, and maintenance.
- Leasing Fee:
- Charged when a unit becomes vacant, often equivalent to one month’s rent or a portion thereof. This fee encompasses expenses related to tenant acquisition, including staging, listing, vetting, lease preparation, and documentation.
- Lease Renewal Fee:
- A one-time fee, less common but prevalent in highly competitive rental markets, paid by tenants upon renewing their lease. Typically nominal, ranging from a few hundred dollars.
- Eviction Fee:
- While optional, advisable if you’re facilitating the eviction process as the property owner liaison.
Beyond these primary fees, it’s best to tailor your fee structure to the clientele you aim to attract. Consider factors such as property type, tenant turnover rates, and maintenance requirements.
Whether managing large developments or single-family properties, customize your fees accordingly to accommodate varying needs.
Regardless of your chosen pricing structure, maintain a commitment to delivering consistent, top-tier service to all clients. Upholding service quality regardless of pricing ensures a positive business reputation and enhances overall profitability.
Step 7: Continue Offering Great Property Management Services in Illinois and Continuously Re-Evaluate Your Business’ Success.
Successful property management companies excel in optimizing client profitability by minimizing vacancy rates, securing tenants promptly, and operating their company in a way that mitigates risks such as property damages and legal expenses.
Implementing incentive programs is a great strategy for succeeding in these goals.
Research suggests that offering incentives to tenants can reduce your overall turnover rates and help to ensure tenant satisfaction.
As a property manager, you can introduce incentive programs, such as reward points for tenant contributions and exemplary behavior, to improve your tenant retention and promote positive relationships with renters.
One of the biggest jobs that a property manager has is maintaining the rental property and ensuring that it remains in good condition.
Given the consistent need for repairs and maintenance in property management, building a network of reliable contractors is essential for seamless operations.
We recommend that you establish these relationships early on in your property management career. Cultivate strong partnerships with reputable contractors to ensure timely and high quality services, as this will only improve your ability to effectively manage the properties under your care.
The Bottom Line
If you do it right, starting your own property management company in Illinois can be incredibly lucrative and fulfilling.
Before you take a single property under your care, you must register your business properly and create a solid business plan so you can know what to expect as you continue your property management journey.
Then, you will need to conduct thorough market research in order to identify your target demographic, set up your pricing structure, and familiarize yourself with your competition.
Finally, you will want to make sure that you are able to effectively manage your rental properties by providing top notch services to both your clients and tenants.
Once you have launched your property management company, you will need to know how to properly advertise it.
With all the other daily tasks and responsibilities that come along with managing rental properties, solid marketing strategies can often fall to the backburner, which end up stunting the growth of your business.
If you want a helping hand when it comes to the marketing side of your company, contact our team of professionals at Upkeep Media. We specialize in helping property management companies thrive.
