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Why Do Property Management Companies Fail and How to Be Successful!

Why Do Property Management Companies Fail and How to Be Successful!


Starting and running a successful business is hard. One sector that continues to grow to meet demand is the 76 billion-dollar property management industry. In 2019, there were over 280,000 property management companies employing over 800,000 people. Additionally, it is an industry continuing to show nearly 5% growth year over year, that’s a lot of competition. So, why do some property management companies succeed, and others fail? Read on to find out more.

What is a Property Management Company?

Property managers serve as third party representatives for the property owner. So, they handle all aspects of the day-to-day operations associated with rental property portfolios. That said, these duties may include, but are not limited to:

  • Accounting Duties
  • Maintenance Coordination
  • Tenant Communications
  • Property Leasing
  • Application Screening
  • Filing Evictions
  • Marketing
  • Rent Collection

Why Do Property Management Companies Fail?

Many things can cause the downfall of a property management business. The general requirements to enter this fast-growing industry are low, but so is the success rate. Out of everything that could go wrong, read on to discover the top 5 most common reasons, so you know what to avoid!

  1. Expanding Too Quickly Without Proper Infrastructure
  2. The Company Develops a Bad Online Reputation
  3. Spreading Themselves Too Thin
  4. Not Embracing Technology
  5. They Overpay for Maintenance

Expanding Too Quickly Without Proper Infrastructure

The thrill of new contracts and quick profit can blind some new business owners. Property management encompasses a variety of time-consuming tasks. Therefore, expanding too quickly without the properly trained or an adequate amount of staff is a recipe for disaster. Instead, plan for future growth and opt for a careful and methodical expansion rate. Additionally, invest in flexible employees with strong work ethics along with technology applications to streamline your processes. So, if you begin with the right tools from the start, growth is far easier to manage.

The Company Develops a Bad Online Reputation

The internet is a vast source of both good and bad information for consumers. Basically, in terms of property management, these consumers viewing your information and reviews could be both potential clients or renters. Online reviews can make or break a business, and according to Forbes, one negative article on the first page of results can damage up to 22% of your business! Therefore, companies must be customer service focused to avoid the build-up of negative reviews.

Spreading Themselves Too Thin

This one goes back to expanding too quickly. Basically, not much hinders your company’s growth more than an overworked and burned out staff. So, not having the proper company infrastructure or team, procedures, and technology will cripple your efforts and, ultimately, your business. Another factor of being spread too thin is having properties that are a significant distance from one another. This can not only put a strain on staff but vendors and resources as well. Additionally, a marketing strategy will also need to keep up with the various location needs, so having a proper plan in place to deal with this is integral to success.

Failing to Embrace Technology

Every task a property manager does consists of various steps and processes. That said, employees can quickly become bogged down in calls, follow-up emails, processing rent checks, and preparing leasing documents. So, if rental management companies fail to adopt the systems and technology readily available to them, they can suffer enormous consequences in both time and money.

Top 10 Property Management Software

  • AppFolio
  • Yardi
  • Voyager
  • Buildium
  • ResMan
  • Yardi RENTCafe
  • Condo Control Central Software
  • Rent Manager
  • Building Engines
  • RealPage
  • RealPage OneSite

They Overpay for Maintenance

Property managers are the middleman balancing owner’s financial well-being with tenant satisfaction. Maintenance is a considerable expense as a property owner and manager. Besides, owners rely on their property management company to coordinate with trusted and budget-conscious vendors who will complete work efficiently. Also, it takes time to build a trusted relationship and a pool of go-to vendors. Not setting up best practices for finding, vetting, and managing vendors will prove to be disastrous, not to mention costly. Additionally, handling maintenance directly affects tenant satisfaction and, ultimately, turnover.

Tips for Building a Successful Rental Management Company

Running a successful property management company involves overseeing multiple types of long- or short-term rental properties. Property owners that lack the time, know-how, or desire to manage their portfolio rely on these companies to handle the day-to-day minutiae. Below we take a look at the characteristics of a great property management company and tips you can use before starting your own.

  1. Brand Your Business: Create an easily recognizable logo. This will be the face of your business and presents a cohesive and professional appearance. So, use this as a visual representation of your company on items like posters, flyers, videos, business cards, websites, and brochures. Also, color selection can influence mood or even influence behavior. Also, be sure to choose colors that represent what your company stands for.
  2. Have a Solid Business Plan: To run any successful business, you need a well-thought-out and detailed business plan. Therefore, this document helps to keep you on track but also provides a concise way to present your vision to prospective investors. Any good business plan should include the following elements:

Elements for a Successful Property Management Business Plan

  • Executive Summary
  • Company Description
  • Products and Services Offered
  • Operational Plan
  • Marketing Plan
  • Management Structure
  • Financial Projections

3. Register as a Legal Entity: There are several different options you have when becoming a legal entity. Each has their benefits or considerations, but you must choose from the following:

Types of Legal Entities for Property Management Companies

  • Sole Proprietorship
  • Partnership
  • Limited Liability Corporation (LLC)
  • Incorporated Business

4. Secure Financing: Whether you choose to seek bank small business approval or independent investors, starting a property management company takes substantial capital. Below is a shortlist of expenses you can expect to incur.

  • Securing a trademark
  • Incorporation
  • Insurance
  • Licensing
  • Website design
  • Office rent and supplies
  • Building utilities
  • Payroll

5. Purchase the Right Insurance: Anyone will tell you that the rental management industry is prone to liability issues. That said, a company needs to have adequate coverage to protect itself against these issues. So, reach out to a trusted insurance professional to see what coverage options are best for you.

6. Prioritize Hiring the Right People: A fantastic business model is nothing without talented staff to support it. Besides, depending on your goals, budget, and projected growth, you may need to begin with the following types of positions. Besides, remember to reevaluate regularly and hire additional support to accommodate growth.

Positions Within a Successful Rental Company

  • Maintenance Coordinator
  • Property Manager
  • Office Secretary
  • Payroll Administrator
  • New Business Representative
  • Leasing Professionals

7. Market Your Business: So, you are in business, now get the word out! The first best step is to create a company website that outlines the services you provide. If you are tech-savvy, website builder programs are available to create a professional website on your own quickly. Otherwise, consider hiring a marketing firm to point you in the right direction. Also, don’t underestimate the importance of a social media presence in today’s day and age. In addition, create accounts on Twitter, Facebook, LinkedIn, and Instagram to more easily engage with prospects.

8. Take Advantage of Property Management Tools: Nowadays, there are tons of available programs that save property managers both time and aggravation. Therefore, check out some essential areas below where software can help streamline your rental business.

Standard Software for Property Management Companies

  • Property Management – Schedule meetings, organize billing, store rental property information, and more.
  • Accounting – Track revenue, running payrolls, manage expenses, and create financial reports.
  • Maintenance Management – Track renovations, vendor contact information, and schedule repairs.

9. Find Investment Properties: If you have extensive investment and real estate experience, a property management company can offer additional services to their clients. Also, some choose to help find potential investment properties for their clients and collect a fee for that service. So, if you go this route, consider outlets such as Mashboard, which locates properties that match your criteria on property type, listing price, return on investment, optimal rental strategy, and market availability.


Opening and operating a profitable business is not without its uphill battles. That said, if you plan and steer clear of these common mistakes property management companies make, you too can be successful. So, are you an investor looking for trusted property management advice? Reach out to Bay Property Management Harford County, the areas leading rental property management experts, to see what our services can do for you. We offer full-service property management in Aberdeen and throughout the Harford County area.