Whether you are a landlord with real estate management experience or simply enjoy the real estate industry and are looking for a way to get involved, owning a property management company can prove to be a potentially lucrative opportunity. But like any financial venture, it requires a little business acumen.
Property management can be lucrative and rewarding, but it can also be stressful and draining if you don’t know what you’re doing. While everyone has their own way of doing things, here are a few helpful tips for building a profitable and stable property management business that will deliver results over a long period of time.
What is property management?
Before starting your own property management company, make sure it is right for you. Property management companies are hired to manage rental properties and perform a variety of day-to-day tasks.
As a property manager you are not only focused on real estate. You also deal with people and handle things like marketing, tenant acquisition, contracts and leases, repairs and maintenance, rent collection and possibly even evictions. If you are unfamiliar with the practical nature of property management, there may be something else for you.
You should also be familiar with the local market. What are the current rents for a one-room house? A commercial property? For example, property managers need to know what monthly rental income a duplex owner can expect. This is essential to accurately price your properties and ensure that your customers are satisfied.
Property managers typically charge the property owner a monthly fee for property management services, ranging from 8% to 12% of the monthly rental amount of the property. So if you manage a property that rents for $1,000 a month, you can charge a management fee of $80 to $120 a month. This can add up quickly if you manage multiple properties.
How to start your own property management companybedrijf
You must have the proper paperwork in order and secure licenses before you get started as a property manager. Most states require a real estate manager’s license, including a real estate agent license and/or a real estate manager’s license. Both licenses require coursework and an exam on property management and real estate topics. Check the licensing requirements for your state and make sure to keep these licenses up to date so you can continue to practice property management.
For tax reasons, you must also set up your property management company as a legal entity. Consider a limited liability company (LLC), S corp or C corp. While most real estate management companies are incorporated as LLCs, any of these legal entities will operate.
Don’t forget the business plan! This helps potential investors understand your expected earnings and any other hurdles your business may face.
More about real estate management from Bids For
Organizing your business finances and accounting
Unless you happen to have a ton of cash, you’ll need some capital to get your property management business up and running. A small business loan can be a good financing option.
These types of loans are preferred because of their smoothness and flexibility. For example, smaller lenders may offer lower interest rates and longer repayment terms, which works to the borrower’s advantage.
Consider using software to keep the process as simple and streamlined as possible to keep track of finances once you get started. There are several great programs for real estate managers, including Avail and Innago.
Create your business teams
Unfortunately, this is one of the trickiest parts of building a property management company. No real estate investor will trust you with their property if you don’t have a good reputation in the area. You need customers to build a reputation, but customers want you to have a reputation before they agree to do business with you.
One of the best ways to build a personal reputation is to partner with another property management company for a while. During this time, you can network with other people in the industry and start building connections. If you are then on your own, you have a personal reputation on which you can bet the reputation of your brand.
As you grow, you may need to hire additional workers to take some of the workload off your shoulders. After all, you can’t run a big business on your own. You’ll eventually need some employees to help you scale. The key here is to Turn right people. Warm bodies are not enough. Consider hiring:
- Maintenance managers
- Lease Agents
- Additional property managers
- Marketing specialists
When interviewing candidates, look for motivated and ambitious people. “Employers should be looking for employees who want the job, and candidates who follow show their enthusiasm for the opportunity,” said Mike Steinitz, executive director of Accountemps.
You should also develop a network of trusted service providers, including plumbers, electricians, real estate agents and contractors. Before hiring them, make sure they are properly licensed and have relevant experience. Once you’ve built a positive relationship with them, you’ll know exactly who to call in case of an emergency.
Being a landlord can be fun – if you do it right
No matter how good you are at finding good leases, you can lose everything if you don’t manage your properties properly. Being a landlord doesn’t have to mean midnight calls, expensive evictions, or daily frustrations with ungrateful tenants.
Marketing your property management company
To win clients (and make more money), you need to market your property management company. Effective advertising is key to scaling your property management business.
Create a website that serves as a digital showcase for your business. If you are handy with computers, you can build it yourself. If not, don’t worry, there are plenty of professionals who can get the job done for you. Hiring one can be cost effective for your business in the long run. A freelance SEO strategist can make sure your website appears at the top of Google search results.
Make sure your website includes the properties you manage and is usable by both owners and residents. Your website is essentially the face of your business to newcomers, so use it to make a great first impression.
You should also create social media pages for major social media sites such as Facebook and LinkedIn so that people can learn more about your business. Add branding similar to your website to make everything look seamless and give your page a professional look. Post about your efforts as often as possible and be sure to reach out to commentators and other property management pages to gain and retain followers.
Networking also helps you tremendously in marketing your business. Attend local corporate events, especially real estate events, and bring a stack of business cards with your company’s name and contact information on them. Word of mouth is a great way to do business.
Using property management software can also help you generate leads. Programs like Zillow let you advertise an ad and find potential renters with one click.
Manage your properties
After setting up your property management business and bringing in a few clients, it’s time to manage your properties. It can be a tough job with multiple responsibilities, so staying organized is crucial. Property managers are responsible for a number of services, including:
- Manage tenant requests
- Complete background checks
- Maintain rental contracts and collect rental renewal fees
- Charge eviction fees
- Obtain security deposits
- Collect rent
- Carry out maintenance and repairs
- Complete inspections
Far too many real estate investors and high net worth individuals think that real estate management is as simple as putting some money aside and watching everything fall into place. In most cases, these are the people who fail quite quickly. If you want to be successful in real estate management, you need to have a business approach from start to finish. There is no other way around it.