Owning and renting out a property is difficult work for independent landlords. Many new landlords who have bought an apartment complex and other rental properties have begun collaborating with property managers to help manage their properties and maintain a profitable business.
WHAT WE’LL COVER:
- Chapter 1: What Is Property Management?
- Chapter 2: How to Start a Property Management Company in 12 Steps
- Chapter 3: How Much Does It Cost to Start A Property Management Business?
- Chapter 4: Free Property Management Company Business Plan Template
- Chapter 5: 5 Tips for New Property Managers
- Chapter 6: 5 Examples of Successful Property Management Groups
Starting a property management business is no easy feat. However, when taken step-by-step, the process of opening a property management business is much less intimidating.
If you are looking to start a property management business of your own, follow the 12 steps below to get started collecting clients and getting their units occupied with happy tenants.
1. Start With a Business Plan
When starting a business of any kind, the business needs to be planned out. Before anything else, create a business plan. Your business plan should include every detail of how your business will be run.
This includes setting a budget and securing funding, deciding what type of business entity and types of properties you plan to manage, determining a pricing structure per unit, choosing a property management software, and more. It’s important to map out your entire business structure prior to making any decisions to ensure everything goes according to plan and stays within your budget.
Download our free property management company business plan template
2. File Your Business Entity Status
There are various types of legal business entities businesses can register as. Depending on what business entity you chose, financial and legal obligations change.
Starting a corporation, you have three main types of entity statuses to choose from.
- C-Corp: Your business is a completely separate legal entity from your personal ownership. It is owned by an unlimited amount of stockholders; therefore, your personal assets are protected from any business debts or liabilities and your corporation can have an unlimited lifetime – extending that of initial owners. Additionally corporations can achieve tax free benefits, such as insurance and retirement plan deductions.
- S-Corp: S-Corps offer many of the same benefits as C-Corps, with the bonus of acquiring special tax provisions. In a C-Corp, there is a chance both the business and shareholders’ personal incomes will be taxed – double taxing those individuals. An S-Corp helps avoid this double taxation, as the income is only reported once on a personal income level.
- Limited Liability Company (LLC): Offering many benefits from both corporation and partnership entities, LLCs allow business owners to have complete corporate liability protection for their personal assets in addition to special tax provisions. LLCs are most similar to S-Corps, except, unlike S-Corps, LLCs do not have to abide by IRS restrictions, allowing foreign investors and greater management flexibility.
By further researching each type of business entity, you can decide which entity status is right for your business plan. Once you’ve chosen a business entity, file your documentation through a business filing and licensing provider, such as LegalZoom.
3. Get Certified in Property Management
Certification courses by trade organizations such as NARPM are not required prior to opening a property management business, but are highly recommended.
The property management industry is adapting alongside technological advancements and changing economic and social norms, so it’s important to continue upskilling in property management programs in order to maintain a modern, successful property management business.
4. Apply for Required Licenses and Permits
As you are starting a business, you will need to acquire a general business license and all general licenses and permits general businesses often need. This includes a federal and state tax identification number, building or construction permits, and any other licenses specific to your property management business.
Separate from the business licenses and permits you will need to acquire, you will likely need to obtain a license in property management. All except six states require a property management license, so make sure you obtain one if needed.
Be sure to check all federal, state, and local laws regarding licenses and permits you will need to legally run your property management business.
5. Secure Funding
Whether you’re planning on starting a property management business on your own or with partners, it’s important to make sure you have secured the funding to purchase the property and fulfill any renovations and necessary bills when opening the business.
Make sure your funds are in order and you can set a realistic budget with the funds available. If you find yourself short on finances, consider looking into loans or meeting with potential stakeholders to expand your budget. This is not something to take lightly, so be sure to do further research on the implications of bringing in another party while constructing your business.
6. Determine Your Pricing Structure
Just like a restaurant would need to price its dishes to make a profit, property managers need to price units to ensure the landlords and themselves are making a profit. Create a pricing structure considering application fees; deposits; type, size, condition, and location of property; maintenance fees; late payment fees; property amenities; and utilities.
Make sure you are charging tenants fairly while still allowing yourself to make a profit from the property. To help get you started, rent is often decided by a flat fee plus between 4-and-12 percent of the gross monthly rent. Typically, the smaller the property, the higher property managers charge.
7. Protect Yourself with Insurance and a Lawyer
Just as you would get car insurance or home insurance, it’s important to insure any properties you are working with and make sure your renters are insured to prevent any unexpected costs.
Depending on the type of property you are renting, there are different policies you will need to consider. Requiring renters insurance for your tenants and landlord coverage can help protect your property from any damage due to tenant negligence, which will save money in the long-run.
Find an attorney to help you draft lease agreements and advise you on best practices to ensure you’re abiding by all federal, state, and local laws and prevent you from any lawsuits filed by tenants or landlords.
8. Find an Office
As a property manager, you will need an office as a main contact point where you can take calls, answer emails, receive snail mail, or hold meetings with tenants or potential leads.
Setting up your office near properties you manage allows you to easily show vacant units and sign leases in-person. Look into options that are within your budget, and choose the most convenient location for you and your clients.
9. Onboard All Property Management Software & Technology
In order to ensure your property management business is running smoothly, you will need property management software. Property management software can help property managers with every step of managing a property, from advertising vacancies, to signing leases, to monitoring maintenance requests.
Find a property management software that can help with all your needs. Keep in mind that while some property management softwares can get fairly expensive, there are tons of low-cost and free property management software that will fit perfectly within your budget.
10. Launch a Website
Creating a website is essential for nearly every type of business in today’s market. Create and launch a website for your property management business that tells site visitors about your properties and your management services.
The more information potential clients and tenants can find about your business online, the more likely you are to get business meetings and viewings.
11. Accounting and Bookkeeping
At its base, your property management company is a business that needs to pay taxes and ensure all its books are in order. You will want to keep your business finances separate from your personal finances, so it’s best to find an accountant who can help with your business taxes.
An accountant can provide you with the correct tax forms for your property management business while helping ensure your financial records are kept in order and up-to-date.
Last, but certainly not least, you will need to market your property management business with a multifamily marketing strategy in order to bring it new business and start making a profit. Using online resources, such as social media and rental listings sites, can bring in tons of landlords looking for help and potential tenants looking for units to view.
While online marketing is a great method, consider using signs and newspapers as well to reach audiences online and in-person. Posting signs around your office can help attract local landlords to start building business relationships with.
Discover the biggest trends impacting multifamily housing and property managers in 2020
One of the biggest attractions of starting your own property management company is that the startup costs can be fairly affordable – ranging from $2,000 to $10,000. As the property manager, you are responsible for maintaining positive relationships with landlords and renters, so your costs will mainly deal with legal fees, software, marketing, and communication services.
1. Offer Excellent Customer Service
As with businesses of all kinds, offering your customers great customer service will better everyone’s rental experience. Make sure you are staying in contact with your landlords and renters to maintain happy customers on all ends. The happier your clientele, the more pleasant business transactions can be during the stressful time of renting.
2. Manage Your Time
Planning your time to ensure you are completing all you need to in a day is vital when running a property management business. Discuss priorities with your clients and what their most urgent needs are.
Consider using time management software to help increase your efficiency and document your time spent on each project and each property.
3. Join Property Management Groups & Organizations
Joining a property management organization can be a great way to network and meet like-minded property managers, estate agents, and vendors. Joining a community can give you insight on how to better your business and build connections to help gain clientele.
4. Generate Your Own Leads
Being a property manager, it can often be beneficial to reach out to landlords who are not yet working with a property manager and explain how you can help their business. Check out classified ads and real estate listings to find potential clients to reach out to. Do your research before reaching out to any landlords, ensuring you know their property (or properties) and how you can improve their business.
5. Continue Your Property Management Education
As mentioned above, continuing to obtain property management education and certifications is not necessary. However, it can greatly help you further build your professional skill set and stay up-to-date with all new property management trends.
Additionally, taking courses in property management can be a great conversational topic when networking with others in your field and can, in turn, help build not only your personal skill set, but your business.
How Do Landlords Like You Ethically Collect Rent During COVID-19?
1. Greystar Real Estate Partners
Location: Charleston, SC
Greystar was founded in 1993 with the hopes of delivering world-class service to landlords, residents, and investors. Over the years, Greystar has built its brand up to one of the most impressive and successful property management businesses in the United States while maintaining its core value of integrity.
2. Equity Residential
Location: Chicago, IL
Equity Residential prides itself on its ability to find great homes for customers by property managers who truly care about their renters. Starting in the 1960s, Equity Residential was built by two men managing student apartment buildings. Since, the company has expanded to renting to people all over the United States on the same core values of finding the right properties at the right times and hiring the best in the business to manage those properties.
3. The John Stewart Company
Location: San Francisco, CA
The John Stewart Company started in 1978 with the core objective of offering top-quality management services in affordable housing in the bay area. By maintaining those objectives and doing everything to offer property owners and renters incredible service, The John Stewart Company has become one of the most successful affordable property management businesses in California and the United States.
4. Lincoln Property Company
Location: Dallas, TX
Lincoln Property Company began in 1965, and quickly decided to take the brand global. By continuing a growth-based mindset and using modern marketing trends, Lincoln Property Company expanded from local residential properties to global properties, hotels, armed forces bases, and more. The company’s ever-expanding philosophy has allowed it to become one of the largest property management companies out there today.
5. The Irvine Company
Location: Newport Beach, CA
The Irvine Company started from one property in the 1860s. Due to its constant respect for planning and its sustainable approaches, The Irvine Company is a wildly successful property management business, managing sustainable properties of all sizes and types.
Following the steps outlined above can help make the process seem that much easier while ensuring you don’t miss a step while building your business. Using the five tips for new property managers can help you manage your business more efficiently, while building a client-base quicker. Use the five examples of successful property management businesses above to inspire you on what your business could look like in the years to come.
It’s no doubt that starting your own property management business is a big task to take on. But start planning your business and building your network today, and you’ll be renting in no time!
Additional Resources for New Property Management Professionals