Want to succeed as an entrepreneur in the real estate industry? Here is what you need to know.
The real estate industry is fiercely competitive. When someone decides to start their own business in this sector, they must commit to long hours of hard work, commitment, and dedication. But more than those, one needs critical knowledge of strategic growth and business management. This is especially important if you want to learn how to start a property management company.
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So, if you are looking for a profitable business idea and contemplating property management, you have reached the right place. In this blog, you will find all the necessary information about starting a property management company in the most comprehensive, step-by-step guide. You will also find some of the best expert tips on how to increase efficiency in your workflow and grow your business. So, read on and find out all you need to know.
What is A Property Management Company?
One of the first things that you should learn before you start your career as a property management entrepreneur is: What does a property management business do?
In simple terms, a property management company helps landlords with various day-to-day tasks involved in real estate management. The sole purpose of a property manager is to relieve a property owner from the worries of maintaining their property by taking care of mundane responsibilities themselves.
Different property management businesses provide different types of services. But they mostly revolve around common tasks such as:
- Tenant screening
- Background verification
- Renting out property units
- Rent collection
- Marketing and promotion
- Accounting
- Maintenance and repair of property
In general, landlords are responsible for taking care of these tasks. But property management companies take care of them on the landlords’ behalf and charge a fee for their services.
Evidently, property management is an arduous task. But with proper planning and strategy, you can successfully grow your business and earn profits.
How Profitable Is the Property Management Business?
Although managing a property and taking care of maintenance tasks may not sound like much, it is a huge market to dabble in if you are looking for a profitable business idea. Currently, it is a $100 billion industry expected to double in size within the next 5 years. The revenue potential is approximately $48,000 to $180,000 p.a., with a profit potential of $43,000 – $72,000 p.a.
As it is clear from the figures, you can make a huge profit with a property management business. But to do so, you have to play your cards right. And most importantly, you need to start your venture very meticulously.
How to Start A Property Management Company
Now that you know what the job entails and how profitable it can be as a business idea, it is time to learn the basics of starting a property management company. Before you proceed to find out the details, let us assure you that it is not rocket science. You just need to know the necessary steps and follow them meticulously.
Here is how you can start your own property management business:
This is perhaps the most important step in starting your own property management company. Every state has some specific legal requirements and codes that landlords and property managers must comply with. Before you open your business and start offering services, make sure you thoroughly learn and understand the necessary laws and regulations. It is crucial to avoid any kind of legal conflict going forward.
While some laws are rather self-explanatory, some of them can be a bit confusing. You might take help from a professional in that regard or conduct thorough research, in any case, ensure that you understand the laws to their full extent, especially landlord-tenant laws and eviction laws.
If you want to start a property management business, or any other business for that matter, you need to make sure that you understand the market trends and demands to keep up with the competition. To this end, conduct thorough market research.
Market research will tell you if your business idea has a chance of being successful. It is a way to find out about possible customers and other competitors in your area. Use that knowledge to find a way to give your business an edge over the competition.
Start writing your business plan once you know your area or market. A business plan is an outline that describes the business’s structure, how it works, and other information about how it operates. The document can be the foundation of your strategic plan, and it can also help investors, financial institutions, and possible business partners understand what you want to do with your business. A well-organized property management business plan could help you get funding or investments to start. You can get help from a legal expert to draw the outlines and go from there.
In general, your business plan must include the following points:
- Executive summary
- Market analysis
- Customer analysis
- Competitive analysis
- Marketing plan
- Financial strategy
Once you have done the background research and drawn up a plan, it is time to actually start the business.
To open your company, start by choosing an appropriate name for your property management business. It is a very important task since the name of your company will serve as your brand and, ideally, will last for its lifetime. So, choose a name that reflects your vision, expresses your brand voice, and helps you stand out from the crowd. In short, choose a name that is memorable and meaningful.
In addition, there are a few things that you should keep in mind while choosing the name:
- Keep it simple
Choose a name that your potential customers can easily pronounce, spell, and remember. It is great to make it sound quirky and unique if you want to, but refrain from using too much of word play or puns. Keep it professional. - Make sure the name is available
This is perhaps the most important aspect to remember while choosing a name for your business. Make sure it is unique, i.e.,it is not already in use by some other organization. Also, make sure a corresponding or suitable domain name is available. - Focus on marketing
Choose a name that clearly describes your business goals, brand voice, and the services you offer. In other words, choose a name that makes your marketing efforts easier.
After choosing a suitable name, it is time to choose a business structure for your property management company. You may choose from the following:
- Sole proprietorship
- Partnership
- Limited liability company (LLC)
- S Corporation
- C Corporation
Once you finalize the name and business structure, register your business with the appropriate authorities. In the USA, for example, you will be required to register with the Secretary of State in which your business is located.
Most US states require property managers to obtain proper licensure and accreditation. Since the legal requirements are continuously updated and vary from state to state, find out what licenses and permits you need to start your business and apply for them. In general, housing regulations necessitate the following:
- Real estate broker license
- Property manager license
Although it is not a legal requirement, having some relevant certifications may give you a competitive edge.
Once you’ve registered your business, you can go to the IRS website to ask for an employer identification number (EIN), which is basically a tax ID. With your EIN, you can open a business bank account for your new property management business. Open a checking account with a debit card so that you can use it for all of your business’s costs. This includes cars, tools, gas, insurance, and anything else you need to get your job done.
To protect your personal assets, you must use separate business bank and credit accounts.
When you mix your personal and professional accounts, your house, car, and other items could be at risk if your business is sued. This is known in business law as “piercing your corporate veil.” Having a dedicated business account will also help you to a great extent during the tax season.
In the same way that you need licenses and permits to run your business legally and safely, you also need insurance. Business insurance covers the financial health of your company in the event of a covered loss.
There are different kinds of insurance plans for different kinds of businesses that face different kinds of risks. Start with general liability insurance if you don’t know what kinds of risks your business might face. This is the coverage that most small companies need, so it’s a great place for your business to start. Workers’ compensation insurance is another important type of insurance that many businesses need. If your business will have workers, your state will probably require you to have Workers’ Compensation insurance.
Unlike many other businesses, it is rather difficult to run a property management business out of your living room. It is better to rent or buy an office space and set up an office for your company. It will give your business a professional edge, and will also help you in various aspects like tax and securing funds.
To set up the office, you will also need some basic equipment like desktops/laptops, printers, security gadgets, telecommunications, various office equipment and supplies, etc.
To keep up with current market trends and get a competitive edge, you might also want to invest in digital tools like work order management software, scheduling software, CRM, accounting software, etc. Or else, you can sign up for a property management software system like Field Promax and get all the benefits of these software tools on a single platform.
Once you complete the legal requirements and arrange the necessary equipment, it’s time to build a brand for your property management company and promote it to attract new customers. To this end, you will have to set up a marketing strategy and invest in some marketing materials. Initially, you will need the following items to carry out your marketing endeavor:
- Company logo
- Website
- Social media profile/ page
- Physical promotional items like posters, flyers, pamphlets, etc.
Once you have set up your website and social media pages, start networking with potential clients. You can also collaborate with related businesses to get your brand highlighted. Also, adding your company to business listings like Google My Business and Yelp may be a great start to promoting your business.
How Much Money is Needed to Start a Property management Business
Startup costs for a property management company may vary depending on your location, especially based on education and licensing costs in your state. Other than these, you will also have to arrange funding for some important aspects of your business, such as:-
- Payroll
- Equipment rental
- Membership fees
- Software subscriptions
- Website building and maintenance
- Marketing
- Overhead costs
Overall, the cost of starting a property management business ranges between $3000 and $7000.
If you have read this far, you might already have a clear idea about how to start a property management company. Most of these tasks you can do by yourself. But for some, you might want help from a professional. All in all, it is easily achievable if you follow the steps correctly.
The problem, however, is that most people focus on how to open a property management company, whereas you should actually focus on how to make your business sustainable. Starting a business is easy. The harder part is making it grow. But there is nothing to worry about. We have an expert tip for you in that regard.
The secret to growing a property management business is to provide quality service and ensure customer satisfaction. And to do that, leverage automation from the get go. Sign up for Field Promax, the best property management software, and you are ready to take on the challenge.
