The rental industry is expected to grow exponentially in the coming years. This multi-billion-dollar industry has sparked a new wave of entrepreneurs starting property management companies to fill a need as investors grow their portfolios. Starting a property management company is much like any other small business. That said, there are some differences specific to the real estate industry. So, are you an ambitious individual looking to start a property management company? Continue reading below for tips and advice on how to be successful in your new venture.
What is a Property Management Company?
Before embarking on the exciting world of rental management, it is essential to understand what these companies do. Property management is an important sector of the real estate industry. That said, it involves managing daily operations for one or more rental investment properties on behalf of their owners. Furthermore, these tasks often include but are not limited to –
- Managing property finances and budgeting
- Targeted marketing to minimize vacancy
- Screening potential renters
- Preparing and executing leasing documents
- Collecting rent and assessing late fees
- Handling evictions
- Coordinating routine and emergency maintenance of the property
- Addressing tenant questions, concerns, or complaints
- Ensuring the property remains in compliance with all applicable laws
Successful property management companies have a varied group of experienced professionals, including leasing staff, property managers, accounting, maintenance technicians, and trusted local vendors. In addition to the workforce, leveraging technology is critical to performing daily tasks efficiently and accurately.
Steps to Starting Your Own Property Management Company
If the above sounds like the perfect business opportunity for you, the next step is to plan for your small business. Ideally, property managers will already have experience in the industry or a degree in asset management or the real estate field. In addition, depending on your location, property management company owners may need to obtain a broker’s or property management license.
However, even if not required by law, it is a great learning opportunity to get you started. So, let’s review the steps needed to start your new rental management business below.
- Research Locations
- Learn the Law
- Choose a Name
- Set Up Banking
- Get Educated and Licensed
- Hire a Team and Embrace Technology
- Get the Word Out
Just like investing in real estate, setting up a management company relies on a great location. Moreover, the ideal location has a thriving rental market and steady growth in jobs, income, and population. Thus, while you could technically manage rentals anywhere, a deep understanding of the local market is the main reason owners turn to professional management. So, focus on one area that is growing but not already oversaturated with other rental management firms.
Learn the Law
Every state, county, and local jurisdiction may have varying requirements for rental owners and management companies. So, check for any special licenses, business insurance, or other requirements for your business to be legally compliant.
Choose a Name
Decide on a company name and register it as an LLC, and we recommend consulting with a qualified attorney. However, once the company is legally established, you can secure a business location and list the address.
Set Up Banking
As a business owner, properly setting up business accounts to monitor and organize finances is critical. Property management includes standard accounts but the need to also plan for holding deposits in escrow. So, if you are unfamiliar with this process, contact a qualified attorney or accounting professional for advice. Also, it is important to create a flexible budget and operating plan to help keep your business and expenses in check.
Get Educated and Licensed
As we mentioned, some locations require certain licenses or education courses for property managers. So, always complete any legal requirements promptly. However, these licensing programs are full of helpful industry knowledge that any property manager could benefit from. Therefore, consider taking licensing classes or basic real estate classes to further your understanding of the industry, even if not required.
Hire a Team and Embrace Technology
A company is only as good as its employees, and assembling an experienced and enthusiastic team as a new property management company is key. Your team will need to fulfill various tasks, including managing maintenance, handling customer service needs, leasing, marketing, and basic accounting functions for owners. While not every person hired will initially come with experience in this field, those individuals with excellent customer service skills, attention to detail, and a drive to solve problems will likely thrive in this industry.
In addition to the right staff, the right property management software can help get your business up and running. Typically, this software comes in various price ranges with customizable features based on your individual needs. In general, technology can help streamline key processes such as basic accounting, screening, tracking maintenance, and electronic document signing while keeping records safe and secure.
Get the Word Out
When starting any business, letting everyone know you are on the scene is an important step. That said, the digital age we live in demands a strong online presence and certainly a professional website. In addition, social media is a great and almost essential way to reach a large audience of potential clients but also renters looking for the properties you will manage. If your budget allows, hiring an experienced SEO company can help ensure effective exposure.
Growing your business relies on generating quality leads and follow-through. That said, some of the best ways to generate interest are through networking with other industry professionals such as realtors, developers, and investors. In addition to building leads, now is a good time to start building relationships with vendors. These professionals are who you can call on for maintenance issues that are inevitable in the rental management process.
Starting a property management business and running a successful one are two separate things. That said, it takes a lot of effort, knowledge, partnerships, and gumption to succeed in such a competitive industry. While the steps above are a start, they are only the beginning. Another great tool for those breaking into the industry is to consult with a business advisor and qualified attorney familiar with landlord-tenant law. They can assist with some of the key items your business needs, such as –
- Property Management Contract
- Legally Compliant Lease Agreement
- Standard Set of Qualifications
- Applicant Screening Rules and Procedures
- Advice on Fair Housing Compliance
- Business Insurance and Liability Coverage
Attributes of a Great Property Management Company
What makes a great property management company? Better yet, what features must a company have to be successful and thrive in the rental industry? Both are valid questions for those looking to enter this competitive field. That said, there are a few things all successful companies have, and new ones should model after. Let’s look at the qualifications any full-service property management company should have below.
Strong Leadership and Knowledgeable Staff
Property management companies are there to guide owners through the complex task of renting out their homes for profit and managing the tenants in place. Therefore, the best firms start with a knowledgeable person at the helm to lead the staff and address any concerns. Rental management firms are made up of property managers, accounting staff, leasing professionals, maintenance techs, and an admin team to handle any issue that comes their way. Ideally, each department supports the other, and through this team environment, positive customer experience and growth are achieved.
Transparent Fees and Reporting
No one appreciated hidden or surprise fees. However, your fees and practices should be upfront, clear, and beyond reproach as a business owner. At any time, the property owner should be able to reach out and receive real-time data on their property’s finances, the status of invoices, or information on the vendors you work with. Anything less can cause mistrust and potential disputes that can ruin your credibility within the industry.
Standard Operating Procedures
A successful business is built on its best practices, and a property management company requires specific procedural needs. Some of these practices include –
- Implementing standard inspection processes and checklists
- Screening for all potential vendors or third-party technicians
- Marketing strategies to maximize exposure and limit vacancy time
- Fair Housing compliant advertising, communications, and interactions
- Transparent financials and reporting standards
- Screening standards and qualifications for all rental applications
In many cases, these procedures will evolve as you get more clients and gain experience in the local area. However, in any policy, transparency is vital to your success and providing the best outcome for owners and tenants.
Established Vendor Relationships
Maintenance and repairs are inevitable aspects of managing and owning rental property. While the option to have in-house maintenance technicians is great, they likely cannot handle every type of repair. That said, larger repairs or renovations will likely be contracted out to a third-party vendor. Therefore, building relationships with local vendors allows you to offer clients efficient and quality maintenance at an often more economical rate.
Exceptional Communication, Attention to Detail, and Responsiveness
Complete lack of or slow communication is an all-too-common complaint in the property management industry. As a property manager, communicating daily with owners, coworkers, vendors, tenants, and prospective applicants is the norm. So, employees must have superior verbal and written communication skills to do their job well and ensure client satisfaction. Especially when it comes to maintenance concerns, keeping parties informed is vital. In addition, emergency repairs do not care about your business hours. So, setting up an emergency call line available 24/7 is critical. Many property management firms choose to hire an outside firm or call center to handle after-hours needs. Furthermore, property managers must keep detailed records of their conversations and actions to help avoid any miscommunication or potential dispute.
Trust the Experts at Bay Property Management Group
Are you interested in learning more about property management? Do you own rental property and find yourself overwhelmed by daily tasks? Bay Property Management Group seamlessly blends local knowledge with trusted industry expertise to deliver effective full-service rental management throughout Southern Pennsylvania, Central Maryland, Washington DC, and Northern Virginia.
With the help of cutting-edge technology, our team provides easy access to property financials and real-time updates for every owner. In addition, our transparent and low management fees afford clients access to an experienced team of managers, leasing professionals, maintenance providers, and accounting staff – all lead by a licensed real estate broker. For more information or to take advantage of a free, no-obligation rental home analysis, give us a call today.