Rental properties are, and always will be, in high demand. No matter how the economy is doing or what state the world is in, people will always need a place to live. This is why many people who consider investing in real estate look at the idea of starting a property management business. This isn’t a complicated business to set up, provided that you have the right legal assistance to ensure you are following necessary tenant and rental laws and can be a great way to build a profitable business for the future.
Of course, starting a business takes time and effort. In order to get your property management business off the ground sooner and with fewer hassles, this guide will walk you through everything that you need to know.
The Requirements to Get Started
Like any business, the very first step on your list should be to properly license your property management business, name it, and file the business with the state. You can find the requirements for this on your state’s small business website, as well as through resources like the U.S. Small Business Administration.
Next, you’ll want to create a business plan that includes information about the company itself, what you are hoping to accomplish, a market analysis, an outline of your services, organization and management tools, marketing plans, financial plans, and other details of your intended operations. There are a handful of states that won’t require any type of special licensing for property managers, but most states do have laws in place. Typically, a real estate broker’s license and/or a property manager’s license will be required by anyone who intends to run a property management business. Both of these licenses require courses and an exam, along with continuing education.
If you want to set your business up for success, you should also connect with professional associations like:
- National Association of Residential Property Managers (NARPM)
- National Association of Realtors (NAR)
- Institute of Real Estate Management (IREM)
- National Apartment Association (NAA)
How to File Your Business
The next consideration is what legal entity you’ll want to use to set up your business. You can choose to file as an LLC, S-Corp, or C-Corp, depending on the type of legal protections you want and how you want the business structure to run. This is a time when it could benefit you to consult a legal professional who can advise on the best business structure for your property management business.
You’ll also have to figure out what kind of licensing is required in your state to work as a property manager. Every state has its own guidelines to consider, although most consider it a form of real estate brokerage. The good news, of course, is that you can use this license to be a property manager and also conduct real estate business if you want to make additional income or start a side business.
Here’s What You’ll Need
In addition to setting up your business the right way, you’ll need to choose a name and take care of the basic details. This includes getting a website and phone number that are dedicated to your business and choosing a property management platform that helps make your job that much easier. You’ll also want to hire a real estate attorney to keep on retainer for your property management operations. They can assist with all kinds of legal advice and compliance issues.
You will also need to invest in good office equipment and software that can handle your accounting or bookkeeping needs. There are several solutions out there, and you can even choose to hire an independent financial professional to take care of your books instead of relying on software.
Most people starting out in the property management business industry consider a small business loan to get them started.
Set the Fees and Costs
You’ll need to decide what kind of fees and charges you will have involved in your property management business and how they will be charged. In addition to the rent or monthly lease amount, you’ll also want to consider:
- Application or set-up fees
- Leasing fees
- Management fees
- Late fees
- Maintenance fees
- Returned check fees
- Lease renewal fees
- Eviction fees
All of these costs cover important instances and expenses and could come in handy. While you might start out wanting to be the “nice guy” that doesn’t charge a lot of fees, you’ll quickly see why they exist.
Find Your Network
This is an important time for your property management business. You need to start off on the right foot by finding a professional network of people who can assist you with your business along the way. Consider making connections with a property management organization or even just your local community of professionals. You’ll want to get connected to a plumber, HVAC professional, electrician, carpet cleaning provider, and general contractor. It could also be a good idea to find people who handle pest control and security.
List Your Properties and Start Cultivating Clients
Whether you are seeking more tenants, more properties, or both, starting a property management business is a great way to cultivate your network of real estate resources and generate income that allows you to work less and earn more. Property management is more in-demand than ever before and if you are looking for a long-term option to make extra money, this could be the ideal solution.
How do you keep those newly-cultivated clients happy? It starts with providing a reliable place to stay and a professional image for your PM company. Make sure that you focus on customer service and quick responses, and actively listen to concerns or questions that people have. Stay on top of follow-up and make sure that your tenants know that you’re paying attention.
Tenants will appreciate when you are keeping their best interests in mind and you will find it easy to thrive in the right market and when you embrace the right tools. It’s all about changing the game and it starts with changing the conversation. Now that you understand more about starting a business, you will have a better idea of how to become a property management maven from day one.