Running a property management company may not be easy, but it is a lucrative and versatile way of making money. This business can stick it out in times of recessions and pandemics since people will look for housing, and landlords will need managers to be in charge of their investment properties.
Property management can offer many benefits, such as an additional revenue stream, residual income, generational wealth, and work-from-home opportunities. According to IBISWorld, the industry indicates steady growth as of September 2023. In the United States, the number of property management businesses has an annual growth rate of 2.1% between 2018 and 2023.
If you have a dream of starting a property management company, this blog article will give you some fundamental ideas on how to do it right as a newbie.
There are legal requirements to comply with for starting a property management company. They may vary by state or locality. Thus, an effort on your part is necessary to research what are those requirements.
For example, in California, you need to get a license before you can work legally as a property manager. A license is a vital requirement if your responsibilities include the control of the deposit or rent payments from a tenant of a single-family rental home or the leasing or showing of the property for which your property management company gets paid.
It is different in Idaho because this state does not require property managers to get licensed. Now you see the legal requirements differ by jurisdiction. Therefore, you should research applicable laws in a locality you belong to or consult a real estate lawyer for legal advice on the matter.
Property managers can focus on any of these niches: short-term or vacation rentals, residential, commercial, or homeowners association or HOA. Your chosen specialization will determine your skills and how you communicate or establish relationships with clients.
You can base your decision on which niche you find your work most fulfilling or what type of client you want to serve. For example, working as a residential property manager will give you more collaboration opportunities with maintenance service companies and renters. Working with commercial properties, on the other hand, will push you towards business people.
Some property managers choose more than one niche, but if you are just starting, it is advisable to focus on a particular area and master it. Then, you can move to another niche if you want.
It is less risky to specialize in a particular area as you are starting. But if you believe in your skill set and network, you can also begin in multiple areas. Of course, you can choose to scale down later, but the knowledge you get from your being gutsy will be priceless.
There are two different approaches you can take when running a property management business. You can either be an independent property manager or join a franchise. Of course, the two surely have their upsides and drawbacks.
Being independent can save you money in terms of start-up costs. Another advantage is you can run and grow your business without external pressure. As an independent property manager, you can still join local and national property management associations for educational purposes, mentorship, and vendor collaborations.
Meanwhile, joining a franchise gives you the advantages of a broad network, working with a recognizable brand, marketing opportunities, and tapping into the franchise business model. The downside is you need to pay a monthly fee to keep your membership in the franchise.
It is better to operate your business in the neighborhood in which you live. It is also preferable to choose a small town or city or any location that is familiar to you.
After picking a location, use marketing strategies, such as online ads, SEO, pay-per-lead, postcards, etc. Keep your chosen marketing tactic for at least six months and determine whether it is working or not.
Your clients, the landlords, should see in you that you know what you are doing. This might take some confidence on your part to show them what you got even if you are still a newbie.
Before you meet a potential client, be prepared and do your research regarding comparables on nearby listings. You should also present to the prospective client your marketing strategies.
It is an excellent business idea to start a property management company because this business is versatile when it comes to a recession or any market downturn. However, before you establish your property management business, you should understand the legal requirements of this business. Learn the basics of the trade to ensure your success.