Thinking about opening a property management business? We tell you what you need to know to get started.
Property Management Overview
Property management companies provide a valuable service to property owners and tenants, whether they are renting the property as a residence or a short-term vacation home. While some landlords are geographically removed from their assets, others prefer not to be involved in the day-to-day activities of property ownership and hire a property management firm to supervise their property for them.
Property managers typically perform a range of activities for their clients. Everything from securing good tenants to general property maintenance can fall under their umbrella, so property management professionals need to be prepared to deliver multiple management functions and be capable of effectively prioritizing daily tasks.
As compensation for their services, property managers receive a percentage of rental fees. Although service rates vary, they usually run somewhere in the neighborhood of 7% of collected rents with discounts offered to landlords who hire the company to manage multiple properties or locations.
Hiring Staff for a Property Management Firm
Depending on the scope of the property being managed, it can take a team of professionals to manage a single client. But even smaller property management firms need a handful of dedicated employees to achieve success, starting with a capable office manager and/or administrative assistant.
Your startup may also require the hiring of additional property management executives and subcontractors to provide first-rate service to your clients. Professional trade organizations like the Property Management Association not only provide access to industry developments, but also create opportunities for your business to network with potential hires and to obtain referrals for subcontractors in your market.
How to Attract Clients to Your Property Management Startup
Securing an initial roster of clients can be difficult, particularly if you aren't prepared to take a proactive approach to customer acquisition. These days, it isn't enough to hang a shingle and hope for the best – you need to aggressively pursue potential clients and convince them to contract with your property management firm.
The biggest mistake you can make as a startup property manager is to wait for your clients to approach you. Instead, you should already be identifying several target clients in your area and devising a sales strategy to convert them to paying customers. When you approach prospects, it's important to discuss your qualifications, but even it's even more important to communicate the characteristics that set your management firm apart from everyone else in the industry.
Creating a Business Plan for a Property Management Business
A common mistake for an entrepreneur is to not create a business plan.
The key benefit of writing a business plan is that it establishes both a framework and a roadmap for your business. Without it, you'll be flying blind, choosing short-term opportunities at the expense of long-term benefits.
Start by defining your business mission. The process of writing a mission statement doesn't have to be complicated. With a carefully crafted mission statement in place, it's time to initiate the hard work involved with writing the rest of your property management company's business plan.
Prior to opening a property management business in your area, it's essential to see how strong the competition is. Try our link below to find competitors in your city. Just enter your city, state and zip code to get a list of property management businesses in your community.
How tough is the competition in the market you are considering? If the competition is too tough, you may need to think about starting the business in a different area or even start a completely different business instead.
Studying the Market
Once you've finished assessing the competion, it's a smart move to learn as much as you can from somebody who is already in the business. It's very unlikely that the local competition will talk to you. It'd be crazy for them to teach you the business.
On the other hand, an individual who has a property management business on the other side of the country may be more than happy to give you a few tips, after they realize you reside far away from them and won't be stealing their local customers. Indeed, many experienced entrepreneurs enjoy offering advice to startup entrepreneurs. If you are persistent, you can find a business mentor who is willing to help you out.
What's the best way to find an owner of a property management business in a different locale who can assist you?
Easy. Find them using our link below and start calling until you are successful.
Advantages of a Property Management Business Purchase
Every entrepreneur dreams about building a highly successful company from the ground up. But the harsh reality is that startup property management businesses experience a high failure rate compared to entrepreneurs who buy existing property management businesses.
The decision of buying vs. starting a business shouldn't be taken lightly. By buying a profitable property management business, you'll shorten the amount of time it takes to achieve a return on your investment because you'll have the advantage of a proven operation and an existing customer base.
Consider Buying a Franchise
The probabilities on your surviving in business zoom upwards if you purchase a franchise in lieu of doing everything yourself.
As part of your process in starting a property management business, a smart move is to investigate whether there are good franchise opportunities available that might help you on your entrepreneurial journey.
The link below gives you access to our franchise directory so you can see if there's a franchise opportunity for you. You might even find something that points you in a completely different direction.
These additional resources regarding getting started as an entrepreneur may be of interest to you.
If you currently own a property management business, these resources will come in handy:
If you sell to property management businesses, you're in the wrong place. These resources are more appropriate for you:
If you are interested in starting a different kind of business, please browse our directory of guides below.