The property management industry is experiencing significant growth, with a projected value of over $26 billion by 2026. This promising market presents a range of opportunities for property managers, whether they are starting a new property management company, expanding their existing operations, or even real estate brokers exploring this field.
However, before embarking on a property management venture, it is crucial to consider various factors and undertake thorough preparations. To assist you in this process, we have compiled a comprehensive guide that outlines the necessary steps and tasks you need to address before opening your business to property owners and residents.
By reading this guide, you will gain valuable insights into the essential elements and hard work involved in starting and running a successful property management business.
How to Start a Property Management Company – 9 Easy Steps
- Create a property management business plan
- Obtain licenses and certifications
- Find your property management niche
- Decide what services to offer
- Choose your property management software
- Plan Payment Structures And Contacts
- Get your paperwork in order
- Hire your first employees
- Marketing Your Property Management Company
What Is Property Management?
Property management involves the supervision and administration of residential or commercial rental properties, which may also include student housing or community associations.
Property managers can either be the owners themselves or separate individuals. In cases where owners lack the time or expertise to handle property rentals, they often hire a property management company to assume the necessary responsibilities and effectively manage the properties on their behalf.
How much does it cost to start a Property Management Company?
When moving into property management, assessing the financial requirements involved in establishing and sustaining a company is important. Even if you begin as an independent property manager, you should anticipate startup expenses of at least $2,000, which encompass insurance, licensing, equipment, and other essential costs associated with running the business.
As your company expands, the initial startup costs to establish and maintain a property management company can range from $10,000 to $20,000, depending on the scale of your initial operations.
Starting a Property Management Company Explained
Starting a property management company involves several key steps and considerations. Here is an overview of the process:
1. Create a property management business plan
To alleviate potential headaches, it is crucial to create a well-thought-out blueprint for your business to pave the way for success. When preparing to write your plan, consider addressing the following key aspects:
Executive Summary: Articulate a compelling description of your business and outline your potential for success.
Business Overview: Provide essential details about your business, including its background, legal structure, and other significant attributes.
Industry Analysis: Conduct thorough market research on the real estate industry in your area, encompassing its size, opportunities, and current trends.
Competitive Analysis: Identify your competitors and analyse their strengths and weaknesses to develop strategies that set you apart.
Marketing Plan: Define a comprehensive marketing strategy that effectively reaches your target customers and distinguishes your business.
Management: Highlight your unique business and property management skills, emphasizing what sets you apart from competitors.
Operations Plan: Outline your approach for managing the day-to-day tasks of your business, ensuring efficient operations.
Financials: Develop estimated revenue, expense, and profit projections for the first five years of your business, demonstrating financial viability and growth potential.
2. Obtain licenses and certifications
Depending on where you live, you may be required to complete further education before working as a property manager. In Florida, for example, both a real estate broker’s license and a Community Association Manager designation are required.
Each state has its own set of requirements for providing property management services, so it’s a good idea to first examine your state’s licencing regulations. If you follow the link, you’ll discover that most states require one or both of the following:
Real estate broker’s licence: Your licence allows you to assist people in the purchase and sale of real estate. Your coursework and exam, however, will focus on real estate in general, with a brief overview of property management.
License/certification for real estate property management: This licence or certificate provides specific instruction in property management.
While it is not necessarily essential, you can further obtain one of the following expert certifications:
- Certified Apartment Manager
- Certified Community Association Manager
- Certified Property Manager
- Residential Management Professional
3. Find your property management niche
Choosing a niche within the property management industry is crucial for standing out from competitors and attracting potential clients. By focusing on a specific sector, you create a spotlight that allows clients to easily find and connect with you.
Inexperienced property managers often face burnout as they accept any landlord and any type of property without limitations. The allure of high fees can be captivating, but it’s important to avoid spreading yourself too thin. Instead of trying to cover all bases, specializing in a particular area is key. Here are four types of property management that you can choose from:
Residential Property Management: Specializing in managing residential properties such as single-family homes, apartments, condos, or townhouses. This niche allows you to focus on the unique needs of residential landlords and tenants, providing services tailored to their requirements.
Commercial Property Management: Concentrating on managing commercial properties such as office buildings, retail spaces, industrial complexes, or mixed-use developments. This niche requires a deep understanding of commercial leases, tenant relations, and property maintenance for businesses.
Vacation Rental Management: Catering to the needs of vacation property owners, this niche involves managing short-term rentals like vacation homes, cabins, or beachfront properties. It requires expertise in marketing, guest bookings, and ensuring exceptional guest experiences.
Homeowners Association (HOA) Management: Specializing in managing community associations, including condominiums, townhome complexes, or gated communities. This niche involves overseeing common areas, enforcing community rules, handling financials, and maintaining positive relationships with homeowners.
4. Decide what services to offer
Assess your competition and discover what packages they provide to entice landlords and real estate investors. In general, as a property manager, you will be required to:
- Market listings for rent
- Conduct showings of rental units
- Screen potential tenants
- Walk tenants through lease agreements
- Inspect investment property upon move-in and move-out
- Collect rents and security deposits
- Provide customer service to tenants
- Schedule repairs and maintenance
- Deal with problems and evictions
5. Choose your property management software
One advantage of property management is how little capital is required to begin started. All you need is an office area with a computer, phone, and printer that includes a copier, scanner, and fax machine. After that, you’re on your way to purchasing the software, so look below.
Customer Relationship Management (CRM) system: A CRM system allows you to manage your customers and remember important information. There are numerous property management CRM systems available, but you should look for one that allows you to save signed papers and track repair requests.
Document signing: With this programme, you can electronically sign leases and other papers.
Financial management: Financial management software is required to track rental income, invoice customers, and generate financial reports.
Rent collection: Allow your tenants to pay online to save time going to the bank.
Tenant screening: You can utilize software to do tenant credit and background checks.
6. Plan Payment Structures And Contacts
Create a payment schedule.
How much money do you need to bring in to meet the costs of running your company? How much should you charge for your services, and how do your estimates compare to those of other property management firms in the area?
As you execute your business payment plan, keep the following fees in mind:
- Management fees: monthly payments charged to clients for management services; can be flat rate or based on a percentage of the total amount.
- Fees for lease renewal: what the cost of renewing tenancies will be.
- Additional expenditures for advertising, special marketing packages, maintenance requests, and other services that should have their own pricing if not included in general management.
7. Get your paperwork in order
If there’s one thing a property manager must learn to love, it’s paperwork.
- Register your property management company with the state: Choose a legal entity, such as sole proprietorship, LLC, or incorporated business, and complete the necessary registration with the state.
- Apply for your EIN: Obtain an Employer Identification Number (EIN) from the IRS, which is required for tax purposes.
- Open a business bank account: Once you have your EIN, open a business checking account to separate personal and business finances, and to facilitate financial transactions for your company.
- Obtain property management company insurance: Protect your business with comprehensive small business insurance that covers general liability, professional liability, property, workers’ compensation (if applicable), and cyber liability. This insurance safeguards your company against potential risks and liabilities.
8. Hire your first employees
When expanding a property management business and hiring staff, it is essential to follow legal requirements and consider various roles and responsibilities. Here are some key points:
Workers’ Compensation Insurance: When hiring employees, it is crucial to have workers’ compensation insurance to comply with legal obligations and provide coverage for any work-related injuries or illnesses.
Hiring Checklist: The Small Business Administration offers a helpful hiring checklist to ensure you cover all necessary steps when bringing on new staff members.
Staffing Considerations: Depending on the growth and needs of your business, consider hiring additional property managers, admins/receptionists, field managers, leasing agents, maintenance managers and staff, marketing specialists, move-out coordinators, office managers, payroll and accounts payable staff, sales representatives, showing coordinators, and service coordinators.
Essential Team Members: Alongside your staff, it is crucial to have competent professionals on your team, such as an accountant, contractors (e.g., chimney sweepers, electricians, groundskeepers, HVAC specialists, locksmiths, painters, plumbers, pool cleaners, and roofers), IT staff, and a real estate lawyer.
Vendor Screening: When working with vendors or contractors, request copies of their licenses, insurance certificates, and bond certificates (if applicable) to protect your business in case of any issues. Negotiating cost savings with vendors can also benefit your property owners, potentially leading to referrals and stronger client relationships.
9. Marketing Your Property Management Company
To effectively promote and grow your new property management company, consider the following strategies:
- Build a Website
- Implement Search Engine Optimization (SEO)
- Launch Social Media Accounts
- Foster Word-of-Mouth Advertising
- Distribute Marketing Materials
- Network in the Community
- Partner with Related Businesses
Building your property management company with the right tools can position you to thrive as you gain expertise. Follow these actions to give yourself the highest chance of success:
Check to see what licencing, fees, insurance, and other papers are required in your area to operate as a property management company.
Use personnel, third-party services, and software to help you with your work.
To expand your business’s network, cultivate strong relationships with tenants, landlords, and contractors in your neighbourhood.
It is possible to succeed in property management, but it will need effort. With the information you’ve obtained today, you may concentrate on overcoming barriers rather than determining what to do next.