Are you looking for a way to earn money from your organization and communication skills? You may have what it takes to start a property management company. Just like any business, though, there is a correct way to go about it.
How to Start a Property Management Company in 9 Steps
Property management is one of the most affordable and interesting fields you can venture into. It requires very little capital and minimal education and experience.
Once you get into the industry, you should expect to make at least $38,000 per year. The amount will hike to around $53,000 per year once you become well-experienced. However, since the field requires interacting with people of different types including landlords, tenants, and contractors, it requires that you possess high interpersonal skills.
How Do I Start My Own Property Management Company?
When starting a property management company, you need to make sure you familiarize yourself with laws affecting the landlord and the tenants. You also have to create effective and efficient protocols that will help you succeed in the field.
These requirements somehow limit the number of people who venture into the business. However, if you still feel that you want to venture into the business, you need to first understand what property management is all about.
Property management involves overseeing one or several residential, commercial, and student housing. You can decide to manage your own property or start a property management company and help property owners manage their buildings. In most cases, real estate investors who have no time to manage their property hand over that responsibility to property management companies.
The following steps will help you start a property management company on the right foot:
1. Establish Your Company and Secure a License
The most important certification you require as a property manager is a license to operate. To get a license, you need to enroll in programs that train real estate agents and brokers on how to establish, build, and find clients for your business.
You don’t need any degrees or other educational certifications whatsoever. However, it is still important to check your state laws on licensing requirements.
Once you are set with the certification, establish a legal entity, an incorporated business, Inc., or Limited Liability Corporation, LLC. You can hire an attorney to do it for you. Alternatively, you can go online and fill it out for yourself.
Part of establishing your company is to have a property management business plan. This plan will serve as a guide for your business, mapping out everything from securing capital to breaking even.
A standard business plan should include an executive summary, a company description, a market analysis, organization and management, and a service or product outline. It will also need to include your marketing and sales plans, funding requests, and financial projections.
You don’t even need an office to get started on the property management front. But, you do need a business email, a website, business cards, a computer, a printer, a fax machine, and a scanner. Since you will require constant communication with contractors and clients, you will also need an office line although your personal phone can also do at first.
2. Get Your Finances in Order
As with any business, accounting plays a key role in the success of your property management company. You must have an organized and detailed system to track your cash flow. That means using a credible accounting platform instead of relying on something like Microsoft Excel or, worse yet, manual recording.
You should also open multiple bank accounts to keep your finances in good order. It is best to have a legally-compliant trust account for all your security deposits, and then a separate account for your business operations. A third account should solely serve your owners’ properties.
Your property management company will naturally incur a lot of expenses. This can come in the form of overhead, membership fees, payroll, vendor fees, and other services.
It is best to anticipate all these expenses and record them religiously. This will allow you to set practical revenue targets. As with most property management companies, your revenue will typically come from management fees.
3. Assemble a Competent Team
Since you are just starting out, you may be able to handle the entire business alone. However, if you think you need help now or in the future, you must put together a team of competent workers.
This includes other property managers, admins, leasing agents, various coordinators, field managers, and maintenance staff. You may also need back-office employees to take care of accounting, marketing, sales, and payroll.
Property management involves working closely with landlords, contractors, and tenants. For this reason, you and your team must possess exceptionally excellent communication skills.
Additionally, since money is involved, you must look for honest workers as well. Remember the property owner is entrusting you with collecting monthly rent and paying for any repairs required within his building. If you are not honest and accountable, you might incur losses and smear your reputation.
Apart from full- and part-time employees, you will need to rely on certain contractors. This includes a Certified Public Accountant, real estate attorneys, and various maintenance contractors such as plumbers, electricians, and the like.
4. Look Into Property Management Software
In the digital age, it is nearly impossible to operate a business without the help of software. With the use of programs and technological tools, property management companies are more efficient than ever.
There are several software programs you can take advantage of. Quickbooks, for instance, makes managing your finances much easier. There are also programs specifically designed for property managers that let you take care of all business aspects using a single software. These are better if you want to access everything in one location instead of opening different programs every time you switch tasks.
5. Market Your Business
Your success as a property manager is determined by your ability to network. Join local clubs and business organizations such as the Chambers of Commerce. You also need to create a good relationship with real estate agents who are in constant contact with the landlords.
You can also get connections with property owners by working closely with financial lenders. Other people who know property owners and can help you are the local contractors.
In addition to networking, you also need to market your services both online and offline. Ensure you have interactive social media accounts and an efficient website. This way, you can build your brand and reach a wider audience.
You can also make use of various online ads, such as paid searches, as well as content marketing. Also, make an effort to have your company listed on various online directories.
6. Determine Your Fee Structure
When learning how to start a property management business, one of the most important steps is to decide on a fee structure. After all, your main goal is to earn money.
However, you can’t just set an arbitrary amount and call it a day. You must do ample research to find out how much your competitors charge.
From there, you can determine your ongoing management fee. This fee will include your baseline services, such as handling maintenance, coordinating with residents, collecting rent, etc.
You can make use of one of three ways to determine your ongoing management fee:
- Flat Fees. Using this structure, you can charge a flat fee to cover basic services and let clients add extra services à la carte. These à la carte services include leasing fees, setup fees, lease renewal fees, eviction fees, and more.
- Percentage-Based Fees. Using this structure, you can charge a percentage of the rent to cover the price of your services. The rate will depend on the condition of your local market, but, on average, rates fall between 8 and 12 percent.
- Per-Project Fees. Using this structure, you can set a price for each service, allowing clients to only select the ones they need.
7. Prepare a Comprehensive Contract
A thorough contract should clearly define your responsibilities as a property manager and protect you from potential liability. As a property manager, you will act as a bridge between the property owner and his tenants.
You will be in charge of taking care and managing buildings and other real estate investments on behalf of the owners. In this capacity, you will handle:
- Seeking tenants to occupy vacant houses
- Collecting rent
- Overseeing property maintenance and repairs
- Showing property
- Receiving applications
- Managing inspection before move-in and after a tenant vacates
Make sure to include as much detail as possible. Apart from your duties, your management contract should outline your fee structure (including non-payment penalties), work hours, budgets for maintenance and repairs, emergency funds, and an invoicing schedule. It is best to consult a lawyer when drafting your contracts to ensure you cover all your bases.
8. Build a Customer-Centric Plan
Customers are the lifeblood of any business. As such, when you start a property management company, it is crucial that you build your business around them.
This includes both property owners and tenants. Think about what your customers need and how you can fulfill those needs effectively. Tailor your customer service and correspondence according to your demographic.
If residents have any complaints, make sure to listen. Keeping an open line of communication is the key to continued cooperation. In the property management game, you will naturally encounter difficult tenants, so you must also know how to deal with them in a professional way.
Apart from that, you will need to create detailed emergency plans to protect your residents as well as your reputation. This includes natural disasters and property issues (burst pipes, gas leaks).
9. Manage Your Properties Well
As a property manager, you will have a lot on your plate. Clients expect all sorts of services from you, including advertising listings, tenant screening, collecting rent, handling maintenance, and drafting lease agreements. Naturally, you will need to familiarize yourself with every aspect of property management.
When advertising listings, make sure to use the right mediums and craft compelling materials. Screen potential tenants thoroughly by performing criminal background checks, checking credit scores, and speaking to their past landlords.
Conduct regular property inspections to immediately address maintenance problems. Exercise a firm hand when collecting rent. When owners hire property management companies, they consider all these services and more.
Successfully Start a Property Management Company Today
There are over 150 property managers in Florida that you will be competing with and liaise with once you start your property management company. Therefore, it is imperative that you start a property management company in the right way. By doing so, you can set yourself up for future success.
Whether you are looking for a real estate agent, an HOA management company, or a property management company, Florida Property Management can help. Start your search by location using our reliable online directory.
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