Are you interested in starting a property management company? If YES, here’s a complete guide to starting a real estate management company from scratch.
Okay, so we have provided you an in-depth sample property management business plan template. We also took it further by analyzing and drafting a sample property management marketing plan backed up by actionable guerrilla marketing ideas for property management companies. In this article, we will be considering all the requirements for starting a property management business. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- Property Management Industry Overview
- Market Research and Feasibility
- Property Management Business Plan
- Property Management Marketing Plan
- Property Management Firm Name ideas
- Property Management Licenses and Permits
- Cost of Starting a Property Management Company
- Real Estate Management Firm Marketing ideas
Property management which is a subset of the real estate industry is perhaps one of the easiest and affordable real estate businesses to start. This is because it is basically about; lease contracting or accepting rent using legal documents approved for the area in which the property is located.
In a nutshell, property management companies are responsible for taking care of and managing buildings and other real estate properties for individuals (landlords) or for groups of owners.
In the United States, states such as Texas, New York, and Colorado, makes it mandatory for property management companies to be licensed real estate brokers, if they are going to be involved in collecting rent, listing properties for rent or helping negotiate leases and doing inspections as required by their business. Although, a property manager may be a licensed real estate salesperson but generally they must be working under a licensed real estate broker.
A few states, such as Idaho, Maine, and Vermont do not require property managers to have real estate licenses. Other states, such as Montana, Oregon, and South Carolina, allow property managers to work under a property management license rather than a broker’s license. Washington State requires property managers to have a State Real Estate License if they do not own the property.
Landlords who manage their own properties are not required by the law to have a real estate license in many states; however, they must at least have a business license to rent out their own home. It’s only landlords who do not live close to the rental properties that may be required, by local government, to hire the services of a property management company.
What Does It Take to Start a Property Management Company?
Interestingly, the minimum educational requirement for any one that wants to start his or her own property management business is a High School Diploma and hands on the job experience. It is one of the many businesses that an individual can start with from his or her home and basically with just a business card.
Since property management business is all about managing property / properties on behalf of your clients, then you may not need a huge financial base to be able to launch the business except you just want to start pretty big.
As a property manager, your core business responsibility is to liaise with landlords, tenants, and in some case various contractors and for you to effectively conduct your business, you are expected to have a full grasp of the law when it comes to landlord and tenants relationships et al. As a property manager, it is your responsibility to create efficient and effective protocols that will make you relate well with your clients (landlords, tenants and contractors).
For example, you are going to be responsible for the full and proper screening or testing of an applicant’s credit, criminal history, rental history and ability to pay his or her rent when due. If you can get that aspect of your job / business right, you will sure enjoy your business.
Property management companies are also involved in mitigation and remediation regarding any maintenance issues, generally within a budget, with prior or conveyed consent via a Limited Power of Attorney legally agreed to by the property owner.
In fact, there are numerous aspect of the profession and some of them include helping their clients in managing the accounts and finances of the real estate properties, and participating in or initiating litigation with tenants, contractors and insurance agencies.
No doubt, if an aspiring entrepreneur who intends starting his or her own property management business has the right connections, networks, managerial skills, and takes delight in managing real estate for clients, then he or she is going to find property management business very rewarding and lucrative.
Starting a Property Management Company – A Complete Guide
- Property Management Industry Overview
In 2009, statistics has it that the total revenue as recorded of the property management industry in the United States of America was about 59 billion U.S. dollars. Regardless of the widespread expectations of slowing rent growth in 2015, the industry still experienced growth. In the 3rd quarter of 2015, apartment growth hit an all – time high in the United States. This is as a result of escalating prices from the West Coast.
- Interesting Statistics About the Property Management Industry
Although the sales generated from other industries of Property Management Services are less than those from Residential Property Managers, but beyond every reasonable doubt, this line of business is still experiencing steady growth.
The property management industry is highly fragmented and statistics has it that the top 50 property management companies generates less than 25 percent of the total revenue generated in the industry; smaller and medium scale property management companies accounts for the rest.
For example, in 2014, the federal government of the United States of America spent a total of $189,718,950 on Residential Property Managers basically for coordinating repairs of government facilities. The federal government awarded about 273 contracts to 47 companies, with an average value of $4,036,573 per company – majority of the companies that got the contracts fall within the top 50 property management companies in the United Stated of America.
Going forward, the Operating conditions for the Property Management industry are projected to remain positive over the next five years, and thereafter, it may likely slow down at some point in the future. Which is why in the next few years, the value of residential construction will experience huge growth due to improved consumer confidence and low interest rates, causing an increase in the housing stock.
It is also important to note that, the US home ownership rate will also experience increase. In essence, fewer consumers will require property management services. So, it is important for property management companies to start positioning their companies to diversify now so as to remain in business in the future.
Accommodation is amongst the top needs of humans which is why people do all they can to secure a roof over their heads or a place to run their business from. This is perhaps one of the factors that influence people to start their property management companies. They know that if they are well positioned and they have good relationship with property owners, they are likely going to generate huge properties from the business.
Other factors that influence people to venture into the property management industry is the fact that you can start the business with minimal start – up capital and you can make good returns from the business within a short period of time.
Starting a Property Management Company – Market Feasibility and Research
- Demographics and Psychographics
In most countries of the world, you can only be permitted to rent an apartment when you are 18 years and above. It means that if you are running a property management company, your target market demography should be from 18 years and above.
Aside from renting apartments to people who are 18 years and above, you should also ensure that you rent apartments or properties to those who are qualified. Most countries of the world don’t allow property management companies to rent apartments to migrants who are not well documented.
In essence the demographic compositions of those who need the services of property management companies are people who fall into the following groups; working class / corporate executives, business people, corporate organizations, documented / legal migrants, campus students, and household / families et al.
- List of Niche ideas Within the Property Management Industry
There are several areas in the property management trade that you may consider carving a niche in. Some of these areas include:
- Real Estate Property Managers
- Commercial Leasing
- Residential property management
- Non-residential property management
- Land management
- Real estate brokerage
The Level of Competition in the Property Management Industry
It depends on where you choose to pitch your business tent, but on the average property management industry is open to all and sundry and it is indeed highly competitive.
If you choose to start your property management company in a small town, few miles from busy cities, you are likely going to face fewer competitions as against locating your property management company in cities like New York City, Las Vegas, Los Angeles, Maine, and Boston et al.
The competition in these cities is pretty tough. You must develop good sales and marketing strategies to penetrate the market if you are a newbie property management company.
Over and above, the demand for properties (leasing, renting et al) is driven by commercial real estate occupancy levels and to a larger extent, profit generation by property managers depends on their creativity and their network base couple with the top notch service delivery.
One thing is certain in the property management industry; the larger your company, the higher your competitive advantage. The truth is that, big property management companies have good leverage points when it comes to performing a wide range of management services in multiple markets. On the other hand, small property management companies can compete effectively by specializing in the neighborhood marker or the local market as the case may be.
- List of Well – Known Brands Property Management Companies
There are property management brands that have done pretty well over the years. These people know what it takes to have started humble and build a successful business within record time. Here are some of the leading property management companies in the United States of America and in some parts of the world:
- Greystar Real Estate Partners – they manage over 192,000 properties
- Riverstone Residential Group – They manage over 170,000 properties
- Lincoln Property Company – They manage over 144,000 properties
- Pinnacle – They manage over 138,000 properties
- Equity Residential – They manage over 119,000 properties
- Winn Companies – They manage over 91,000 properties
- Aimco – They manage over 88,000 properties
- Camden Property Trust – They manage over 67,000 properties
- Bell Partners Inc – They manage over 65,000 properties
- Archstone – They manage over 8,000 properties
- Cortland Partners LLC
- RAM Partners LLC
- CBRE Group
- Jones Lang LaSalle
- Mitsubishi Estate (Japan)
- Regus Group (the UK)
- YIT Corporation (Finland).
If you are considering starting your own property management company in the United States of America, you can be rest assured that you wouldn’t have to spend a fortune to get the company into full swing operation. As a matter of fact, you can start a property management business from the comfort of your home or from a very moderate office space; it could be shared office space or virtual office space. The bottom line is that the start – up cost is low and the turnover can be pretty high.
It is important to note that the economy of a nation has a major influence on the property management industry of that nation. If the economy is unhealthy, the property management industry will experience struggle and if the economy is booming, the property management company will boom as well.
Starting a Property Management Company from Scratch Vs Buying a Franchise
One of the thoughts that may crop up in your mind when you try to build your own property management business might be buying a franchise. But the question is; are there really property management business franchise available?
When it comes to starting a business, in most cases your best bet is to start from the scratch especially if you have a long range vision of the kind of business you want to build; except you are an investor who is interested in expanding your investment portfolio and to make more money.
Also if you don’t have the experience of starting a business brand from the scratch and you are scared of taking the risk of building a new business brand, then you can opt for franchise. Starting a property management company is not as tedious and demanding as other aspects of the real estate industry; which is why most people will prefer to start their own property management businesses from the scratch.
You can start the business on a small scale, from your home and managing one or two properties and then grow the business to as big as you want it to be. In a nut shell, starting from the scratch is the best option when it comes to starting a property management business.
Possible Threats and Challenges You Will Face When Starting a Property Management Company
No matter the part of the world a business is located and whatever the nature of the business is, there will always be challenges and threats.
When it comes to property management, some of the threats and challenges that you are likely going to face in the United States of America and of course other parts of the world are unfavorable government policies, global economic downturn, arrival of bigger and well – structured property management companies and unreasonable tenants et al. No doubt; unreasonable tenants can be a pain in the neck for property managers.
Writing a Business Plan for your Property Management Company
If you can successfully pen down your business concept and the strategies you intend working with to achieve your business aims, goals and objectives, then you would successfully create your business blue – print. This is not only needful when you want to set up a conglomerate or multi – million dollars corporations; but also ideally it is important to do this, if you call what you want to do a serious business.
This means that so far as you have decided to start a business, you must have a detailed business model to fly with. Here is a sample property management business plan template to help you get started.
A Business plan is the blue print of your business; it is a business document can aid you to successfully set up a business and also administer / manage the business. It is not enough to just write a business plan for the sake of writing one, your business should be able to pass reality check; you must put relevant facts, figures and statistics into consideration when writing your business plan.
The truth is that, the main idea of writing a business plan is not just for the sake of having a business document in place; but to have a detail guide on how to effectively set – up, run and manage your business. Your business plan should outline and cover strategies on how you intend to operate your property management company.
When writing your business plan, ensure that you are moderate when it comes to setting projections on income generation et al. It is better to be on the safer side which is why when you are calculating your future income, you should be underestimating and make your plans based on it than to overestimate and get yourself into tight corners when things don’t work as planned. Please ensure that these key areas are covered when writing your business plan;
Executive summary and Company’s descriptions: you are expected to write about the concept of your business, descriptions of your company, your company’s vision statement, and mission statement, where your company will be located, the problem you intend solving and perhaps why people should patronize your services.
Other key components that should not be missing in your property management business plan are your product offering, SWOT analysis, marketing and sales analysis / strategies, pricing, costing and financial projection, management techniques, expansion strategies, publicity and advertising strategy, budget and start – up capital generation.
Choosing a Location for Your Property Management Company
As regards choosing a location for property management business, you may have your office in one part of the city and manage properties all across the cities and even across the country; the numbers of properties you manage and the locations where they are located is to a larger extent dependent or your relationship with property owners and also your business network.
So, when it comes to choosing a location for your property management business, ensure that you choose an office facility that is visible, a location where people driving pass or walking pass can easily spot your office. You should also choose a location that is not saturated with property management companies, except you have a unique selling strategies and competitive advantage.
Please do not make the mistake of locating your business in a place where majority of the residence are retired people and they live in their own retirement apartments; of course you will struggle to make headway in such areas. You should position your property management business in a busy city, a place that people move to in search of jobs, or better living; a place known to be suitable, peaceful and safe for people to live and conduct their business.
Starting a Property Management Company – Technical & Manpower Details
Computer (software) and the internet are the major technical tools you would need to run your property management company. When it comes to securing an office facility, your financial capacity is part of what you need to consider before choosing between renting and leasing an office facility. If you intend starting on a small scale, then you should consider starting from your home, sharing office with someone or renting a virtual office space.
In order to successfully run a standard property management company you should get set to hire a minimum of 8 employees. These are the key roles that you should look for qualified professionals to occupy in your property management company;
- Chief Operating Officer
- Project Manager
- Company’s Lawyer / Secretary
- Admin and HR Manager
- Head of Assets Management, Acquisition and Disposition
- Business Developer
- Sales and Marketing Firm
- Front Desk Officer
Starting a Property Management Company – The Marketing Plan
- Marketing ideas and Strategies for Property Management Business
Your ability to market and convince people to patronize your services will go a long a way to help you grow your business. This is why a property management marketing plan is one of the most important documents you need to succeed.
When it comes to property management business, networking is an effective tool. You can build your client base with your business network; so ensure that you network with real estate clubs and also chambers of commerce in your locations. You can also network with real estate brokers who are constantly in touch with landlords and properties owners.
When it comes to business partnership, as a property management company, local lending institutions; the truth is that most often, they have properties for which they are responsible for and also to outsource such properties to property management companies in some cases lenders sometimes find themselves stuck with rental properties, and are not in the business of property management, so they tend to outsource it to property management companies. You should also look towards partnering with local contractors since they also interface with property owners regularly.
Lastly, don’t forget to leverage on the power of the media by advertising your services using both online and offline platforms. For instance, the phrase “property management companies” is searched about 90,500 times monthly in Google in the U.S alone and the phrase “property management firms” is searched about 30,100 times monthly, which is why you should ensure that you run paid search campaign to capture property owners and even potential tenants who are searching on this subjects within the area that you operate. You can as well utilize the following avenues to market your property management business;
- Introduce your business by sending introductory letters alongside your brochure to stake holders in the real estate industry and also property owners.
- Promptness in bidding for contracts
- Advertise your business in real estate / properties magazines and websites
- List your business on yellow pages
- Attend expos, seminars, and business fairs et al
- Create different packages for different category of clients in order to work with their budgets and still deliver quality housing/ property to them
- Leverage on the internet to promote your business
- Places a “To Let” sign on the properties under your care with details of the additional services you offer do et al.
Factors That Will Help You Get the Right Product Pricing for Real Estate Management Business
It is a little bit difficult to determine the price of a property or the commission that you want to get from a property management business deals except when it involves other services like, maintenance, reconstructions, waste management et al.
The truth is that the real estate industry is based on commissions and properties are valued by professionals based on the area the facility is located, the type of facility and other factors. No property management company can directly control the pricing system in the real estate industry, although they can influence it to a certain degree, but they would have to abide by what is obtainable when it comes to pricing structure in the industry.
Part of what you need to do when it comes to cutting cost is to reduce to barest minimum all maintenance cost by renting / leasing any property under your care to responsible tenants who won’t cause damage to your facility and also ensure that you request for several quotations before awarding any maintenance contract to a contractor; with that you will be able to analyze and come up with a pocket friendly price.
Possible Competitive Strategies for Winning your Competitors in the Property Management Industry
Some factors that will give you competitive advantage in the property management industry include; trust, honesty, good network and excellent relationship management. Most property owners usually look for these traits and qualities before handing over their properties to a property management company.
It is also very important to be flexible in your business strategies; you should have plans to take care of smaller clients as well as bigger clients. Another strategy that you should employ is to ensure that your employees are well taken care of, and their welfare package is amongst the best in the industry. With that, they will be more than willing to build the business with you and help deliver your organizations’ set goals and objectives.
Possible Ways to Increase Customer Retention for a Property Management Business
If your customer service delivery is top notch, you are good with relationship management and the properties under your management are well maintained and with competitive prices, you are sure going to retain your tenants and also attract new tenants.
Strategies to Boost your Property Management Brand Awareness and Create a Corporate Identity
Any business that wants to grow beyond the corner of the street it operates from must be ready and willing to utilize every available means (conventional and non – conventional means) to advertise and promote the business. Boosting your brand awareness will a go a long way to endear you to both property owners and tenants as well.
Below are some of the platforms that you can leverage on to boost your brand awareness and also to create a corporate identity for your property management business;
- Place adverts on both print and electronic media platforms
- Place your flexi banners with your company’s logo and contacts in every property you put up for sale or lease.
- Sponsor relevant TV programs
- Maximize your company’s website to promote your business
- Leverage on the internet and social media platforms like; Instagram, Facebook ,Twitter, LinkedIn, Badoo, Google+ and other platforms (real estate online forums) to promote your business
- Install your Bill Boards on strategic locations
- Distribute your fliers and handbills in targeted areas from time to time
- Attend landlord and residence association meetings with the aim of networking and introducing your business to them.
Creating a Suppliers/Distribution Network for a Property Management Company
In building a robust supplier and distribution network, you have got to be very vibrant when it comes to networking. Do all that lies with you to meet new people, as well as maintain and nurture existing relationships. Why is this important, you just might ask? This is important because you have to be connected with the right people in order to build your business to an enviable and successful state.
One of the strategies that you need to employ in order to stay in business is to continue to expand your network base. When it comes to property management business, the size of your network has a major influence on the revenue you generate from the business. So, ensure that you maintain a healthy network with real estate clubs, chambers of commerce in your location, real estate brokers and of course landlord / Property owners’ association et al.
Tips for Running a Property Management Business Successfully
If you run a standard property management company, you are expected to meet with your employees every morning, or once or twice in a week to review performance and to set new targets for the week or for the months; regular meetings and of course trainings in as integral part of a successful business. Basically, some of the daily activities of standard property management companies revolves around:
- Collecting rent
- Managing facilities maintenance services
- Managing security
- Managing trash and recycling collection
- Property accounting
- Legally representing property owners
- Finding and screening tenancy applicants
- Coordinating repair contractors et al
Generally, it is true that if you want to make huge returns on investment, then you must be ready to work hard and smart. One of the areas through which you must learn to work hard and smart in building a successful property management business, is by engaging in only those activities that can bring about good results.
As such, you and your team members have to be determined to cut back on those activities that they be using up resources like money, and yet brings about minimal results.