Learn what to do before starting a property management company and how to grow and protect your business.
There's a lot of upside to starting a property management company. Start-up costs are low, you can do it by yourself with the help of contractors, and there’s a need for property management services in cities across the United States.
Until COVID-19 hit, there was a growing demand for property management services from 2015 to 2020. The pandemic has disrupted that trend, but starting a property management business is still an opportunity worth exploring in the fluctuating housing market.
There are several important steps to consider when starting a property management business. In this article, we’ll cover:
- What does a property manager do?
- Starting your property management company
- Finding your clients and growing your business
- How to protect your property management business
What do property managers do?
A property manager takes care of the maintenance of a property and serves as a liaison between the owner of the property, renters and contractors and vendors who work at the property.
Some property managers work and live on-site at residential properties, such as an apartment complex, while others have an office or work from home. We’ll describe the different types of property managers in detail later in this article.
Starting a property management company has relatively low start-up costs and does not require any advanced degrees, although a property management license is required in most states.
If you have ever been a renter in an apartment complex, a single-family home or a commercial property, there’s a good chance that you worked with a property manager or a property management company.
Typically, property owners hire a property manager so they don’t have to be involved in the day-to-day tasks of managing tenants and general property upkeep.
Property manager duties can include:
- Finding tenants for vacant properties, including collecting applications, tenant screening and lease agreements
- Collecting rent
- Conducting inspections
- Property maintenance and upkeep
- Finding and hiring contractors
- Responding to requests
- Managing emergencies involving the property
A property manager salary usually ranges between $47,000 for an entry-level role to $72,00 with more experience.
Setting up your business and getting your property manager license
Like starting any small business, you will want to create a business plan and be sure to establish your company as a legal entity (usually a sole proprietorship, LLC or incorporated business) for tax purposes.
Your business plan should include a company description, market analysis, a marketing plan, revenue goals, and a clear outline of your services.
Learn more about small business plan essentials and what to include in your plan.
Decide what type of property manager you want to be
When it comes to your property management business, you’ll need to decide the type of properties for which you’ll provide services. There are four main categories of property managers, and you can focus your services on more than one:
Residential property manager
A residential property manager will work with single-family unit landlords, apartment complexes and tenants living on those properties.
Commercial property manager
A commercial property manager oversees offices, retail spaces, restaurants, production and warehouse facilities and other commercial properties.
Condominium property manager
A condominium property manager works with the condominium development’s owner or board of directors to execute policies and rental strategies.
Regional property manager
A regional property manager oversees multiple properties in a specific area, usually for one entity, such as a real estate owner with multiple properties or a real estate management company.
If you’re starting your own business, you’re likely to fall under either the residential or commercial property management umbrella.
Getting a property management license
Most states require a property management license or a real estate license before you can work as a property manager.
Both license types typically require completing an educational course, passing a licensing exam and filing the application and fees.
It’s important to secure your license before you officially launch your business.
Determine your fee structure
Determining what services your property management business will provide and what you will charge is the next step for getting your business started.
Typically, the services property managers provide are related to the fee structure. Research the local market rates and what similar companies in your area are charging. The fees property managers charge are for:
Ongoing management fees
A recurring fee somewhere between 3% and 10% of monthly rental income to cover daily operations.
A one-time fee for filing a vacancy in a property, typically 50% to 100% of one month’s rent on the property. It covers staging, showing and screening applications.
Lease renewal fees
An optional fee for renewing a lease with an existing tenant that is usually not more than $200.
An optional fee if you are asked to be a liaison in the eviction process.
How to find your first property management clients
Once you have your license, business plan and fee structure in place, it’s time to start marketing your business and finding your first clients.
Make sure you are set up with a website, and start networking with contractors and maintenance professionals. Being connected to your community is key. Seek out local real estate organizations, as well.
Developing relationships with property owners is going to be your primary source of income, and delivering the best customer service to them is key to building your business’s reputation.
Find the right property management accounting software
While you can operate a property management business from home or a small office, the right technology and software will make it much easier.
You can organize your financial records, properties, tenants, and contracts with off-the-shelf bookkeeping software. Many programs also have the capability to manage your contractors, maintenance requests and employees. It can also help you streamline daily tasks and pay bills.
How NEXT Insurance helps property managers
NEXT Insurance offers painless and seamless property manager business insurance that is designed specifically for property management companies.
Our U.S.-based insurance advisors are standing by to help if you have any questions, and you’ll have access to our do-it-yourself customer portal 24/7 if you need to access your insurance documents.
Get an instant quote online today.