“How To Start A Property Management Company”
Are you looking to start a property management company?
As a recent college graduate, or someone who has been involved with property management for years, you could be looking for opportunities on how to capitalize on your property management skills and experience.
In the United States there are over 200,000 companies that do property management. Doesn’t sound like much of an opportunity until you realize that there are over 15,000,000 rental property units that need managing.
There are unlimited opportunities to start a property management firm in the following areas: Residential property management, Nonresidential property management, Land management, Real estate brokerage, and Construction.
In reading this blog post will allow you to understand the processes and steps on how you can start your own residential property management company.
Steps On Starting A Property Management Company
When you start your own property management company there are steps that you should consider and follow to be successful.
Before we start with the process of opening your own property management company it is best to first understand and identify what is property management.
What Is Property Management Company?
Property management is the process or business of overseeing single or multiple rental properties. Property management firms can either manage their own rental units or take on multiple landowners units making it a much more lucrative business. They typically manage residential, student housing, or commercial properties.
Management of a property means taking care of the property. This includes monitoring, maintenance, and repair of the property in order to maintain the useful life and condition of the property.
So then… what does a property management company do?
Property management companies take care of the overall operation of the property. A company that manages properties is the one who deals directly with prospective clients and tenants. Additionally a property management company also oversees the marketing and advertising of the property.
It is the property management companies duties to perform any collection of rents, resolve all issues with tenants, arrange and perform repairs for the properties and make sure units are rented and perform any evictions as needed.
Now that you understand what exactly property management means let’s get into the actual steps needed to be performed in starting your own property management company…
Step 1: Setting Up Your Property Management Company
Starting your own management company that primarily focuses on managing properties is just the same as setting up any type of commercial enterprise. Opening and developing a company that focuses on the management of the property is easy and surprisingly affordable to start. The normal start up fee to open a property management firm ranges from $2000- $10,000.
Create A Business Plan
The first step to opening any business is to develop a business plan. This can be done finding forms online or hiring an outside source to help you complete the plan.
Establishing a Legal Entity for Your Business
In addition to developing a business plan, the next thing that you should do when you starting your own property management company is to establish a legal entity in the State and county that you will doing business. Property management companies are normally formed under a Limited Liability Corporation (LLC) or an incorporated business (Inc.).
Establishing your own legal entity can be done online or by filing the required forms with the State your business is located in. We would highly suggest that you hire or have an attorney as well as a tax accountant review your business plan and make sure all legal documents are filled out correctly. There is additional costs involved in hiring an attorney to review documents, but this could help you avoid mis-steps and mistakes in establishing your new business.
Additionally, you need to check local and State requirements to meet the requirements, if needed, for applying for and receiving a license to run a real estate management company.
Most States require a license and qualification of real estate or building type references to start a property management company. Check your local and State regulations to meet any requirements needed.
Once you’re done setting up a legal entity, it’s important that you set up your business’ office.
Setting Up An Office
Setting up your business can start within the walls of your home. You can set up a post office box if you don’t want your home address to be publicized. Until you’re ready to take on clients you can save costs of renting office space by using your home office to complete the processes of starting your rental property business.
However when you begin to talk with prospective landowners and clients, establishing a place to do business in a realtors office or a small business office is more professional and can help in establishing new clients as they are able to meet you in a business location over your home office.
Another way of establishing an office is to set up your new company with an online presence. This entails starting a website or a blog for your company showing that you are in business and ready to service any property management clients. With your online presence you should create a new email account and have a phone number that will be used specifically for your business.
If your office is located out of your home or virtually I recommend getting a post office box for any mail. That will help ensure you don’t have disgruntled tenants knocking on your door in the middle of the night.
Developing Your Business Tools
Like any traditional business, you need to have tools to get your business out into the public both quickly and professionally.
The important thing is to have your contact info already at hand. The best way to do this is to make up business cards, develop a small brochure, and other advertising materials to show that you are a legal business ready to manage properties. Having business cards are important since all the contact details of your company are easily available to new clients and landowners. Additionally you will need business cards when you start looking for clients and tenants.
When developing a brochure you can also use the services you list on your brochure to add to the website for your business. A brochure allows you to easily and efficiently inform prospective clients of your abilities and services offered in performing property management for them.
It is also important to list a mobile phone number for contact outside your office to allow clients to access your services when needed.
Now that you have the place, tools and legal entity to do property management it is time to find and get clients to make your property management business profitable.
Step 2: Attract And Get Clients
So your property management business is all set up and ready to take on new clients…
Now, it’s time to get to work on attracting and finding clients for your property management company.
Where To Start
As a new or established property manager you should be aggressive in looking for new clients. A good place to start in finding property management types of referrals would be having a directory of real estate investing clubs. There are numerous real estate clubs to join online and offline. An additional source of referrals can come from getting the list of realtors in the area where you want to establish your business.
When starting to look for and find clients, it is important that you are aggressive at this stage so joining real estate investment clubs is a must. Networking and making relationships with realtors, property investors and others in the real estate business is important to finding your clients for your business. You may find your first clients through contacting club members or realtors, but you will need to establish a wide ranging network to gain more clients.
Continuing To Grow
If you are already an established property manager then the first clients you contact would be through referrals from your past clients that you worked with.
A good source of property management leads could come from real estate agents who specialize in investment properties. In developing a relationship with these types of agents they can refer your business to their clients who are new to the business and might ask for recommendations for property management services.
Another possible source of clients could come from contacting local lending institutions who have property investors looking for property management services. Additionally hard money lenders could be stuck with the responsibilities of having properties that need management services. They could want to find a reliable property management company to outsource their property management needs to take care of their rental properties.
Step 3: Find Potential Tenants
After establishing clients and contracting to do property management for landowners and other investors, it is time to make your business and the investors business profitable.
Finding Tenants To Lease or Rent Units
Property management is the overseeing of rental property units. So with that said, you have to make sure that you are ready to fill and manage rental properties for landowners and investors that you are servicing.
In a residential rental property business, finding tenants is very easy. The real challenge is finding the most qualified ones that will pay rents on time and not damage the properties they are renting. You should also consider how tenants look for rental properties.
The easiest way to find potential tenants is to advertise. And since technology is running vigorously in today’s world, make use of the internet. Posting vacancies on craigs list, apartment finders and other free sites is one method. Posting signs in the area where the rentals are located is another free method of advertising. If you have large supply of units to rent or are having difficulty renting units then paid advertising through google and bing of your rentals could help. Some potential tenants could be found through newspapers advertising.
If you choose to use a “For Rent” sign… be mindful of the area especially if you have a vacant single family home for rent. This is literally telling would be thieves and vandals… “Pick Me!”
Don’t just be content with one medium of finding tenants. Remember that your goal for your client is to fill up the rental units and make them earn profits for your rental property management business and landowner investors.
Now here’s the catch…
Looking for the right market to find your tenants is important. However, your advertising campaigns should not single out any particular demographic group. It should adhere to the Fair Housing Act. So your campaigns should not specify a certain type of tenant or be considered discriminatory.
Filling the rentals you have and managing them is key to becoming profitable in your new business. However the more you can increase the number of rental units you can fill and manage directly affects your bottom line and profitability.
So how do you use new technology to find more landowners and investors to increase size and responsibilities of managing properties for your new business?
The Ongoing Search For More Rentals To Manage
As your property management business expands, you could begin to add office staff to help assist in the management of rental unit. To cover these expanding costs you should continually be looking for new landowners and investors needing rental property management services.
Using technology like the internet and online advertising can help you in expanding your property management business. You can run a paid search campaigns with Bing, Google and other online advertisers that will help capture property owners searching for property management in your area.
When looking for new clients that need property management services you should always remember that your business is all about networking with professionals and other real estate business in your area. So constantly calling or visiting realtors that service landowner investors is an excellent way to expand your property management business.
Additionally, remember that doing a great job with the existing clients you have will allow you to ask for referrals from those clients that will help expand your business as well.
Step 4: Property Management
The last tip or the last step that I’ll give to you when it comes to starting your own property management company is of course… managing the property.
Maintaining the property, minimizing the risk of litigation and damage to rental units, and maximizing your client’s profits are a priority for property management companies.
Maintaining the property can be done by securing a list of contractors who will take care of all the maintenance and repair of the property. Inexpensive handymen with the license to handle any small repairs should be on your list as well. The professionals you hire or have on call for maintenance of the properties should be competent, reliable, and affordable.
You can maximize your client’s profits by making sure that tenants feel at ease to contact you when problems arise at the property. This will lower maintenance costs by addressing issues as the come up instead of when the tenant vacates or leaves the unit. Another way to maximize profits is to keep your rental units in the best conditions, upgrades, new appliances, etc. so you can charge the maximum rents available in the area you’re renting for. Having the flexibility to offer your most qualified tenants a discount on long term leases and contracts is also a way to make sure tenants feel satisfied with renting the unit and staying in the rental for long terms of time.
Incentives or housewarming gifts are a good way to ensure that relationship with your tenants begins and stays healthy.
Being a proactive and reactive property manager is important to maximizing profits and minimizing risks. If issues arise, property managers must deal with tenants and address to their needs immediately. Making sure that they will feel that you take good care of them. This helps in avoiding any lawsuits, damage to properties, and late or default payments.
Final Thoughts On Steps On Starting A Property Management Company
Starting your own property management company has its own rewards, but also comes with its own challenges. I took the time to walk you through the process of starting a property management company… from creating the legal entity to finding tenants and managing the rentals. Although we only touched on some of the subjects I tried to give you the framework and overview so you know what it takes to start a property management company.
Please comment below if you have any questions or thoughts about starting a property management company.
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