The Complete Guide on How to Start A Property Management Company
Are you thinking of starting a property management company? Some people may tell you that this is the industry to invest in and it’s as easy as ABC. It’s actually pretty much the opposite! Before you dive headfirst into property management, you will need to do your homework, and that’s what this blog post is all about. We are going to take you through what you need to know on how to start a property management company.
There are 7 essential steps that you want to make sure you master in order to start a property management business. If you feel you already know enough about certain aspects listed below, feel free to jump right to the point you’re interested in by using the links below.
- Setting Up Your Property Management Company
- Set Up Your Office and Website
- Build Your Online Visibility
- Hiring the Right Team Members
- Property Management Technology
- Property Management Marketing Strategy
- Networking and Growing your Community
1 – Setting Up Your Property Management Company
When starting any business the first thing you have to go through is the process of setting up a legal entity for your company. It means that, as with all businesses, you must determine what type of legal entity you want to do business as. There are four broad groups of entities to consider when starting a property management company namely, sole proprietorships, partnerships, limited liability companies (LLC), or corporations.
Secondly, you must run an estimate on how much capital is needed to start the business and where it will be located. You have to have the capital to meet your company’s objectives like developing your website, insurance, hiring people, and licensing, depending on the state.
Once you’ve completed all the legal aspects of starting a property management company, now you need to choose a name/logo for your business. It’s likely also that you’ll start small, and that you’ll need to find a bank that finances small businesses. The good news is that the start-up costs for property management companies are relatively low compared to many other business ventures! Your initial startup cost will range between $5,000-$10,000.
Thirdly you will have to apply for licensing according to the state you are located in, and make sure to comply with their requirements. The board and regulations may differ from state to state. The differences between states are too varied and don’t fall under the scope of this article, but just to give you an idea, we’ll list the regulations for a few states.
In South Carolina you will be required to complete a 30-hour pre-licensing course and then apply to take the exam. In Florida you can obtain your license only after you attend an approved 63-hour, pre-licensing classroom course and pass a test, which you can do online as well. As for Arizona, you are required to have a real estate license in the state to manage residential or commercial property for property owners and receive compensation for such activities.
2 – Set Up Your Office
Just like any other service business, you need a place to operate your property management company. So, once you have got the capital, find a quiet place to work where you can meet with clients and handle uninterrupted phone conversations. To cut down your expenses as a new owner, you may want to set up your property management business by starting out with a home office and then renting a commercial office space as the business starts to grow and staff is hired. You will need to have equipment and stationary dedicated to organizing your work like a laptop, cell phone, and more.
3 – Build Your Online Visibility
Furthermore, what’s even more important is that you need to build a website for your property management company. In today’s world of digital marketing and online searches, it’s absolutely critical for all property managers to have an online presence. After all, gone are the days when you used to pull out the Yellow Directory to find local businesses. If a real estate investor, for example, is searching for a property management company, they will search the web to find one. In addition, if your website is great and is found with ease, this will give you credibility and more people will want to hire you. But let’s see how you can build a great website first.
We cannot stress enough how important it is that you choose the right professional to build your website. It may be tempting to think that you can avoid spending those couple of thousands dollars if you do it yourself or with a friend, but please spare yourself the trouble and hand in the project to a dedicated professional team. Website development is a complex, time consuming, and highly specialized work, and you don’t want to lose precious time, – and especially a lot of revenue – in the future simply because your self-made website is not as good as your competition’s.
There are web development companies that specialize in property management websites such as DoorGrow or PMW, both of which we, at BetterWho, have worked with. If you are looking for a cheaper alternative you can outsource to a reliable freelancer from sites like Upwork and Fiverr. You must make sure that both property owners and the tenants of their rental properties can utilize the site and that it allows for easy communication between all parties. Later on, you should work on marketing and advertising your company’s website to attract new clients and get them to contact you rather than you chasing after them (although we also encourage you to woo your clients).
4 – Hiring the Right Team Members
To start with, a good property manager is able to manage multiple properties without the need of hiring additional staff. From our experience, if you do your homework well and are able to stay focused and be proactive, you should be fine alone in managing up to about 75 -125 doors all by yourself. So, depending on how you structure your company, you may run the business on your own or have just an employee or two, as your clients would prefer to hire managers who have a professional team.
Having said that, we still recommend that you hire a few professionals when starting out your business in property management. At BetterWho, we can help you to hire remote team members at a fraction of the cost of US-based labor. If you want to find out more check out our RTM Direct program.
We’ve been hiring for hundreds of property management clients, so we can safely say that some of the most sought for positions, when it comes to creating your team of experts are:
- A Bookkeeper: You will need a bookkeeper who’s familiar with real estate, property management business, once you have set up your property management business. He/she will be in a position to track the company’s income and expenses, keep records to ensure transparency and honesty, manage books correctly, offer business advice, and provide the proper tax forms and using an accounting software such as QuickBooks.
- A Real Estate Attorney: When it comes to legal matters like licensing you will need to get a lawyer involved in the business. An attorney will look over paperwork to verify that the company is protected from various risks, help you understand the company’s fiduciary duties to clients, as well as protect your assets and mitigating liability.
- Maintenance Contractors: Last but definitely not least property managers need several maintenance contractors on call to perform maintenance and repairs. These should range from handymen up to fully licensed contractors to tackle serious issues. A few examples of contractors that you need include electricians, painters, HVAC services, landscapers, home inspectors, locksmiths, pest and termite control, plumbers, pool services, roof inspectors, the list is endless.
Once you have hired a great team of professionals you are guaranteed to have a successful head start from the beginning before moving on to the next step, which is setting up the tech stack for your property management company.
5 – Property Management Technology
When setting up your property management company you cannot skip this key step of establishing your online presence. We live in a technological age, so finding ways to leverage automation solutions and different tools in the real estate industry is incredibly important. This will without a doubt make your day to day procedures more efficient, and also give you a competitive edge while streamlining business for maximum growth potential. Plus, certain types of management software work as marketing tools that will help you optimize your website and attract new clients.
5.1 Property Management Software
So, what kind of technology and property management software do you need? You definitely need one that allows you to easily manage your financial records, market properties, find tenants for the rental properties, track rents, handle maintenance requests, and lease management. If you are not ready to hire employees, leveraging the right tools helps you manage all these responsibilities and run your business on your own. Most large property management companies will run specific business-oriented property management softwares, but for a start, you may also use a software that is less expensive, and is catered to both individual landlords and small property management companies.
In addition to these tools, it’s worth mentioning that RentVine is a property management tool that is unique on the market. Besides allowing you to get in touch with your clients in an efficient and automated manner, it also allows you to grow your client base! Also, if you work with real estate investor clients, they will most likely be on the hunt for investment properties to buy and rent out. If that is the case, you will be required to find off-market listings, identify the right property for your clients, and share property reports that include key information that investors care about like expenses, ROI, and comps without spending hours on research. This is one of the management services that real estate investors need and showing them that you can offer it will encourage them to hire you!
5.2 Process Management Tools
One of the major steps in improving business performance is to document the processes. Process management tools provide a systematic approach to manage and optimize a property business processes. BPM tools usually facilitate designing, implementing, and measuring workflows and business rules, thus helping to refine and optimize processes. There are many tools out there, from general process management tools such as Process Street, to more dedicated, industry specific ones, such as the process management tool in LeadSimple.
5.3 CRM and Phone Tools
In a time where technology is key, you will need to have a tool to keep all your contacts and be able to reach out to them; naturally, your property management tool will do that for you in respect to current and past owners and tenants, yet if you have more employees, a sales person, and you actively engage in sales, then you cannot go without a CRM and a phone tool. The nice aspect is that many CRMs have free versions, so you can start like that and decide to spend more as your business increases. A good option for a dedicated, property management specific tool is LeadSimple. If you’re looking to grow your property management business, LeadSimple is a great tool to organize your sales.
As for phone tools, the possibilities are endless. We have discovered that Justcall is one of the more pricey but worth the effort tools out there, which offers both reporting and call flexibility.
5.4 Email Tools
Email is a necessary part of everyday life that you can combine to track your current work, as you’re sure to improve your productivity. Make sure to set up a business email account for all correspondence and tracking all communications for example Gmail or Microsoft Outlook.
6 – Property Management Marketing Strategy
As a new business owner you must remember that customers don’t just come from thin air. As discussed above you will need to establish your online presence and start advertising. As such, you need to search for them and attract them. Your next step in how to start a property management company is to establish a marketing strategy to get clients.
6.1 Traditional outreach strategies
When you’re just starting out and have no clients, traditional marketing methods such as word of mouth and a referral program can be great for advertising your business. For example, you can contact a top real estate agent in your area, introduce yourself as a property manager, and ask them about properties for rent and if they know any investors that are looking to buy investment properties for rent. A real estate investment club is also a great place to find landlords and investors that you can turn into clients for your property management business.
Another strategy is to get your hands dirty and call landlords yourself. Many FRBOs are out there on the market trying to do everything solo that a specialist can do for them, and you can reach out to offer your services. It’s certainly not going to be easy to master the knowledge and the scripts you need to have a conversation with FRBOs, but we have a minicourse that can teach you to do that!
6.2 Online Presence
As mentioned earlier, having a website is also a great strategy for marketing and advertising your property management company. This is a great way to establish authority in the market by having a great online presence. There are plenty of online marketing channels that you can leverage in this step. For example, social media platforms like Google My Business, Yelp, Facebook, Youtube and LinkedIn can be the best way to increase awareness of your company. Here are the benefits of some of them:
Google My Business – helps your business stand out, GMB is more than just a local listing. Your free business profile lets you manage how your business appears on google search and maps., respond to queries, receive and respond to reviews, manage your office schedule, and many more!
Facebook – Social media is not just an advertising tool but also a communication tool. Facebook says one of the benefits of having a business page is the ability to “have one on one conversations with your customers.” Back in the day you would advertise using newspapers but nowadays using Facebook you are able to target your audiences by promoting your posts and making it simpler to access listings so it’s important to make sure your website is mobile friendly.
6.3 Paid campaigns
You can also use Google Ads to drive targeted potential clients to your website, this can be a step further from the basics, only when you have figured out your online presence. As experienced Google Ads users, we advise you to start off with Google Ads only if you have the budget and you can afford to spend a few hundred or thousand of dollars until you get it right, and ONLY if you have the time to dedicate to learning it, as it is extremely complex; if you are lucky enough to have a large capital right from the very start, we encourage you to seek the advice and services of a professional marketing agency, which can do things much faster than you and for a fraction of the price that you would incur you if you were doing things alone; luckily, most marketing agencies nowadays offer both website design services and marketing services, so check with your current webmaster, you may have the chance of actually finding the solution with them.
6.4 Email marketing
Another marketing strategy for your property management company is to use content and email marketing to build trust and credibility with those who’ve visited your website. Lastly, learning how to perform SEO (search engine optimization) will increase your discoverability and chances of potential customers finding your content and website
7 – Networking and Growing your Audience
Once you start marketing your property management company and building a client base, it’s important to remember that your work does not end there. In the real estate industry, it’s very important to conduct heavy networking at the start of your business and continue nurturing your client base. This is the only way you will get to grow your business and get new clients and any additional investment properties.
You may want to join networking communities on Facebook groups like the one we have at BetterWho. Attending property management conferences will also help to grow your business by exposing you to your peers, and helping you grow the name of your brand
So, make sure to build your network with property managers, landlords and tenants and always make sure to continue to build professional relationships in the business like agents, lenders, and contractors. But most importantly don’t forget about your current clients as they may know other property owners in need of property management services! It may be and can be time-consuming and it will require continuous effort at the beginning, and it will quickly become second nature for you.
The bottom-line is that setting up your property management company requires dedication to learn the ins and outs of an ever-changing industry as well as commitment to handle the everyday tasks that come with starting your own property management business. Being a property manager can be a challenge – especially if you are on your own and that is why it may not be for everyone.
However, if you have the experience in managing real estate properties and confidence in establishing your own company and that risk is worth it, you must definitely go for it! The saying that “Great rewards comes with great risks” should be encouraging when starting a property management company as it is indeed a very lucrative business.
Get support and engage with like-minded property managers on our dedicated FB group.
Credits: Photo by David McBee from Pexels