Property management industry is a competitive, yet growing industry in the US. By 2023 it is estimated to reach $22 billion, making it an appealing industry to begin your career in.
However, just like in any other industry, you need to educate yourself and conduct a thorough industry analysis, before starting your business.
This guide summarizes all the crucial steps you should consider before kickstarting your career as a property manager. So let’s get started!
Once you make up your mind to enter the world of Property Management you need a solid business plan to convert your dreams into reality. A business plan acts as a blueprint for your company’s structure, financials, and long-term goals.
It will act as a document to guide you throughout the journey. If you are starting a property management company then you will need to pitch your idea to investors or secure a loan. An actionable and result-oriented business plan will help you in securing funds to kickstart your business.
Here are some essential points for you to consider while writing a property management business plan:
Most states in the US do require a real estate license to begin working as a property manager, or broker. It is pivotal that you research thoroughly regarding your state regulations and requirements beforehand.
All licenses require criminal background checks and a record of completion of minimum years of education. The two most common licenses required by the state are:
This is the most common type of accreditation required by most of the states. For this license, you need to pass the broker’s exam, show proven experience in the field as a licensed salesperson and must have completed 10-100 hours of broker’s training courses.
This license requires you to complete specific hours of coursework, pass the property manager’s exam and continue with the education classes.
States such as Montana, Oregon, and South Carolina accept property manager’s licenses rather than broker’s licenses. Whereas states such as Idaho, Maine, and Vermont require no license at all.
For the majority of the states, a Real Estate broker’s license is a mandatory requirement for property managers who are carrying out renting and leasing activities.
With tough competition in the property management industry, getting a certification definitely pays off as a strong competitive edge.
It will also help you as a new property manager to attract investors and open more doors by bringing authenticity and credibility to your brand name. Here are the organizations that provide courses and licenses for Property Management:
The courses teach you how to begin and structure a property management business, find owner leads while remaining compliant to existing laws. We have shortlisted the most trending and critical property management courses for your ease:
This is by far the most crucial decision, you as a new property manager need to make. Filing your business means choosing a legal entity – such as a Limited Liability Corporation (LLC) or an incorporated business (Inc.). Following are the three types of legal entity statuses you can get your business registered as:
As a C-Corp your property management business will be a separate legal entity from your ownership. You will be paid as an employee while your business will be owned by stockholders. This will protect your assets from debts or liabilities.
Your business will receive tax-free benefits such as insurance and retirement plan deductions. However, as a C-Corp both shareholder’s and your personal incomes will be taxed resulting in a double taxation problem.
S-Corp has similar benefits as that of a C-Corp, but without the risk of double taxation. The incomes are only taxed once at a personal level instead of at business income.
Most property managers begin their businesses as a Limited Liability Corporation. In an LLC, the business income will pass directly to you. You will also get liability protection for your personal assets along with special tax provisions.
By further researching each type of business entity, you can decide which entity status is right for your business plan. Once you’ve selected a business entity, file your documentation through a business filing and licensing provider.
Pricing your services strategically is another crucial step in your property management business. You will want to make sure that you don’t lose leads to competitors while not charging too high for your services
The best way to decide a fair price is by calling up other property management companies in your area and getting a quote for their charges.
A one-size-fits-all pricing approach will fail to generate profits for your business right from the beginning. Here are the most common fees you should consider:
This fee includes your day-to-day activities, such as communicating with tenants, handling maintenance requests, responding to inquiries, rent collections, and acting as a liaison between renters and owners. You can charge a flat fee or a percentage-based fee which is usually between 8% - 12%.
This onboarding fee is a one-time fee charged to landlords for setting up an account with your property management company. This also includes initial property inspections and typically is around $300 or less.
Every time a unit goes vacant, all costs related to finding the new renters and getting them move-in, is counted in the leasing fee. This fee normally includes listing properties, showing costs, screening costs, writing applications, and preparing the lease. It is mostly equivalent to a month’s rent or cost for about 50-75% of the rent.
This fee covers lease renewals for existing residents and is charged for around $200 or less.
Most property managers use maintenance fees as a revenue generation model if they have a huge portfolio. Owners are usually charged 10-20% more on top of a repair cost.
Eviction costs more than just litigation costs, it also includes your role as a property manager to bear the burden of hearings and changing regulations. It mainly includes all the legal costs for filing an eviction and getting things moving in the court.
Make sure this fee is indicated on your leasing agreement beforehand, it charges for any missed or late rental payments.
Lastly, you must do all of the necessary due diligence before setting up a pricing structure for every individual client.
If you are starting as a one or two-person property management company, you will be needing automation to save loads of your time.
There are many solutions including switching to property management software or using other apps for automating your daily operations.
As a beginner you only have limited funds to invest in expensive property management software, that’s why free tools on the internet will help you to get started. Here are a few of them:
Apart from these tools, you will also need to register for a rental listing site to advertise your properties. Once you figure that out for your business, renter leads will start inquiring about the properties you listed.
While you are self-managing everything, scheduling showings and pre-screening tenants can become a huge hassle for you. You can easily automate your leasing workflow by switching to smarter tools.
A smart leasing assistant can perform these tasks in milliseconds without requiring you to do anything. From responding to inquiries, qualifying them, to booking tours – these smart assistants can help you save 70% of your time spent on monotonous tasks. You can spend this time growing your portfolio and strengthening relations with property owners.
Having a high technology automation platform also helps you with your sales pitch to the owners. They will see how your company values tenant well-being, responsiveness, and better reporting.
Having a detailed, and well-thought agreement beforehand sets the expectations and the tone of relationship you are going to have with the property owners. A well-planned agreement contract spells out every single detail of your responsibilities, and also clearly excludes the ones you won’t be taking care of.
This will not only help you as a new property manager to focus on diversifying your business but will also give property owners a clear idea of your credibility and what to expect from you.
Here are some critical factors your property management contract should touch upon:
Smart property managers keep a keen eye on their finances right from the start. As a beginner entering the property management industry, you should be vigilant of what’s coming in and going out of your company.
The first step to do your finances is to open a separate trust account. Here’s how you can do it:
The best way to keep your finances structured and accurate is by opening a trust account that is completely separate from your personal or business accounts.
Trust accounting varies from state to state, so you should pay close attention to your state’s regulations to stay compliant.
Trust accounts are important for collecting tenant deposits, rent payments, or security deposits on an owner’s rental property. It also includes rent collected on behalf of someone else or any other transaction carried out on behalf of another. These trust funds are called client or property owner funds.
A single trust account for multiple clients might create a mess as well. However, by depositing the receipts within 48 hours you can keep your finances in order.
You should regularly maintain your books and record every transaction. Your expenses will mostly include:
You can easily forecast your revenue from estimated growth in the number of doors (year-on-year), the maintenance cost, and the management fees you will charge.
Now that you have completed all the previous steps, it’s time to get into the field and start attracting property owners to your company. Here are a few ways that will help you with the property management lead generation process:
The first and foremost step is to create a property management website for your company. It is the first touchpoint where your potential clients will connect with your brand. Your website should be optimized with your brand colors and should explain your services in greater detail.
Referral programs are the most common and effective option for beginning property managers. You can offer monetary benefits to brokers and other real estate investors if they refer more clients.
Many property managers still don’t think SEO results into monetary results. However, the key is to be patient and continue optimizing your property management website with keywords. Most owners begin their search for a property management company on Google, so your presence matters.
For better reach on Google, you should list your business on GMB as it helps with local SEO and boosts your chances of appearing on Google's first page.
Along with GMB, you should also get yourself listed on review sites of your area. This will increase the credibility of your company when owners search for your services.
PPC is costly but also an effective medium of getting clients to click through to your website. Bid on certain search keywords that are closest related to your services and attract owner leads to your site.
Once you get owners to reach your website, now you would want them to spend more time navigating your site. Good quality published content can help you with that. It creates an image of you as an expert in the field which further assists owners in choosing you over your competitors.
During COVID the consumption of social media significantly increased. Not just tenants but property owners are also hanging on these Facebook Groups or Reddit threads. That’s why you should be present on all social media channels and engage with your target audience.
Testimonials play a huge role in any consumer’s decision-making journey, and your clients are no exception. You can install widgets on your sites, that will synchronize new reviews directly to your site.
Other than these you can also cultivate relationships with your clients by networking with them in investor meetups or different conferences related to property management. You can also advertise your company by sending brochures to real estate investors and brokers as well.
Once you have got your property management company up and running you need to make sure that your business remains compliant with the ever-changing housing rules and regulations. You will also have to conduct regular maintenance checks and stay on top of day-to-day repairs.
You should also join several Facebook groups centered around property management and interact with other budding property managers as well.
Property management, that too single-handedly, is not everyone’s cup of tea for sure. A major chunk of your job will be building relationships with clients and tenants. It can also get very overwhelming for beginners.
The trick is to delegate tasks, hire the right people at the right time, and deploy automation tools for tasks that are repetitive and take too much of your time, as you keep growing.
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