Starting a property management company can be a great business opportunity, especially in today’s booming real estate market. Property managers provide invaluable services to property owners by handling the day-to-day operations and maintenance of their rental properties. If you’re considering starting your own property management company, this comprehensive guide will walk you through the key steps you need to take.
Why Start a Property Management Company?
A property management company essentially acts as a liaison between rental property owners and tenants. Property managers handle all aspects of overseeing a rental property – from collecting rent payments to responding to maintenance requests to enforcing lease terms.
As a property manager, you can provide a convenient, hassle-free service to real estate investors who want to own rental properties but don’t have the time or expertise to manage them. Your services enable real estate investors to own rental property portfolios while passive income.
The property management industry is thriving, as more people opt to rent rather than buy homes. There is a growing demand for professionals who can competently manage rental properties. Starting your own property management firm allows you to capitalize on this demand and build a scalable, lucrative business.
Steps to Start a Property Management Company
Step 1: Choose a Business Structure
The first step is deciding on a legal entity for your business. There are several options to consider:
- Sole proprietorship – The simplest option, but you are personally liable for the business.
- Partnership – Allows you to go into business with one or more partners.
- Limited Liability Company (LLC) – Provides personal liability protection for business debts and obligations.
- S Corporation – Another option that provides liability protection.
Many property management companies operate as LLCs to limit personal liability. Consulting with business attorneys and accountants can help you determine the best legal structure.
Step 2: Obtain Necessary Licensing
Most states require property managers to hold a real estate broker’s license. This involves taking real estate courses, passing an exam, and meeting other licensing requirements.
Ensure you are properly licensed as a real estate broker before providing property management services. Failing to do so could result in hefty fines.
Step 3: Create a Business Plan
A detailed business plan is crucial for guiding your new company. The plan should cover:
- Company description and objectives
- Market analysis of your local rental property industry
- Pricing structure and fee schedule for your services
- Equipment, office space, and other startup costs
- Hiring needs and payroll expenses
- Projected cash flow, profit/loss, and other financial forecasts
Having a strong business plan will help you secure funding, establish operations, and reach financial goals. Revisit the plan regularly to track growth.
Step 4: Choose a Business Name and Structure
Once you have a business plan, it’s time to make your company official!
- Choose a unique, memorable business name that reflects your brand.
- Register your name with the state by filing a “doing business as” (DBA) certificate.
- Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).
- Set up a business banking account to keep your company finances separate.
Step 5: Obtain Property Management Software
Property management software is essential for organizing your rental properties, tenants, accounts, maintenance requests, and more. Popular programs like AppFolio, Buildium, and TenantCloud offer a centralized dashboard to run your entire business.
Invest in comprehensive software early on. Taking the time to learn the software will make your operations more efficient.
Step 6: Build Your Website
A professional website helps you present your services, list your available properties, and connect with new clients. Make sure your site contains:
- Information about your company and team
- Your service offerings and fees
- Property listings and descriptions
- Tenant portal for making payments and requests
- Client testimonials
- Contact information and online inquiry forms
A well-designed site establishes your business credibility and expands your reach.
Step 7: Market Your Services
Once your company is established, it’s time to attract clients! Promote your services through the following channels:
- Local real estate investing groups and events
- Social media pages showcasing your expertise
- Search engine optimization to boost web presence
- Networking with real estate brokers who can refer clients
- Printed flyers and postcards mailed to property owners
- Cold calling and emailing potential clients
- Attending property trade shows and conferences
Step 8: Build Your Portfolio
As you begin working with your first few clients, focus on providing exceptional service. Go above and beyond to impress property owners and tenants. Ask clients for referrals and online reviews to help your business grow.
Slowly build up your property management portfolio by taking on new clients. Be strategic by choosing properties that fit your niche. For example, you may start by managing single-family rentals, then expand into commercial properties.
Handling Day-to-Day Operations
Once your property management company is up and running, you will be responsible for a wide range of standard duties:
- Advertising rental vacancies and screening tenant applications
- Performing credit checks and background checks on applicants
- Preparing rental agreements and leases for new tenants
- Overseeing security deposit collection and management
- Conducting property inspections and responding to maintenance requests
- Enforcing lease terms and resolving tenant issues
- Coordinating with vendors for repairs
- Pursuing rent collection and managing accounts receivable
- Processing and delivering monthly financial statements
- Follow all licensing laws and safety rules
Robust property management software makes completing these tasks simple and streamlined. But exceptional customer service is what really sets great property managers apart.
Tips for Running a Successful Property Management Company
Managing a portfolio of rental properties takes dedication, organization, attention to detail, and exemplary customer service skills. Here are some top tips for running a thriving property management business:
- Specialize – Gain expertise with a certain property type like residential, commercial, vacation rentals, etc.
- Set competitive fees – Research industry averages. Don’t under-price yourself or overcharge.
- Systematize everything – Use systems and checklists to operate efficiently.
- Respond quickly – Be highly responsive to owners and tenants to build trust.
- Vet vendors thoroughly – Only use fully licensed, insured vendors you can count on.
- Make finances a priority – Use property management software to stay on top of accounts.
- Keep detailed records – Maintain meticulous records for each property you manage.
- Provide 24/7 support – Be available to handle tenant emergencies.
- Learn legal requirements – Stay current on federal, state, and local laws.
- Continue learning – Read industry blogs and attend conferences. Successful property managers never stop improving their skills.
Current Trends in the Property Management Industry
The property management industry is constantly evolving. Being aware of current trends can help position your business for success. Here are some notable trends to pay attention to:
- Increased demand for single-family rentals – Many investors are snapping up single-family homes to rent out. Managing these scattered rental properties is fueling growth for property managers.
- Remote capabilities – Property managers are utilizing more remote access tools like smart home technology to monitor properties and respond quickly. Virtual showings and digital lease signings are also on the rise.
- Premium amenities – To attract tenants in a competitive market, landlords are upgrading rental units with high-end finishes and luxury amenities like gyms and rooftop decks. Property managers must be able to market and handle such amenities.
- Modular construction – Prefabricated housing units that are cost-effective and quick to assemble are becoming a popular rental housing option. Property managers need to become familiar with managing modern modular community builds.
- Green housing – Environmentally friendly and energy-efficient housing is a draw for today’s renters. Property managers can charge premium rents for upgraded green housing.
- Innovative tenant screening – Property managers are using sophisticated screening tools that tap into employment records, criminal databases, eviction records, and credit reports to evaluate applicants.
Ready to Launch Your Property Management Company?
Starting a property management company allows you to tap into the thriving rental market while providing a much-needed service to real estate investors. Although launching a property management firm requires research, dedication, and upfront investment, the potential rewards are well worth the effort. With proper planning and a commitment to excellence, you can build a rewarding, highly profitable business.
FAQs
How much does it cost to start a property management company?
Starting costs vary depending on your location and scope, but expect to invest around $2,000-$5,000 to cover licensing, branding, website development, office equipment, software, insurance, etc.
How do I attract clients as a new property management company?
Use marketing strategies like social media, SEO, networking events, promotions for new clients, referrals, and listings on rental property websites. Focus on providing excellent service to gradually build a client base.
Do I need a real estate license?
Yes, in most states property managers are legally required to hold an active real estate broker’s license to provide property management services.
How can I provide exceptional customer service to my clients?
Providing exceptional customer service as a property manager requires being highly responsive to issues, conducting regular property inspections, gathering client feedback through surveys, promptly resolving maintenance requests, proactively communicating property updates, suggesting improvements to boost value, clearly explaining policies to avoid confusion, maintaining professionalism even with difficult clients, and going above and beyond to provide white-glove service. Clients want to feel their properties are being properly cared for and their needs are being met, so excellent communication and responsiveness are key.
What are the most common challenges faced by property management companies?
Some of the most common challenges property management companies face:
- Dealing with tenant problems like late rent, damages, and tenant conflicts.
- Finding reliable, reasonably priced vendors for maintenance and repairs.
- Keeping up with legal compliance issues like safety codes.
- Marketing available units and finding quality tenants.
- Handling emergencies or significant maintenance outside of business hours.
- Dealing with client expectations around income and occupancy rates.
- Maintaining high levels of customer service across the entire portfolio.
