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Starting a Property Management Company — Checklist

Use this free checklist to help you follow each step as you set up your own property management company.

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Property Management Business Plan — Free Template

Use our free template in MS Word format to create a compelling property management business plan.

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How to Start a Property Management Company:

$7,000.00 USD
3 Months
How to Start a Property Management Company:

If you're passionate about properties and the work that goes into successfully managing them, you might be wondering how to turn your interests into a profitable business. We've formulated this guide to show you how to do precisely that.

1. 

Choose a business name.

1.1 

Jot down your ideas.

Jot down your ideas.

Your property management company needs a name that is easily recognizable and memorable. As you begin creating your business, you need to decide on a name that will help you to stand out. Start by writing down your ideas.

Use NameSnack to find property management business name ideas if you need a hand.

1.2 

Pick a name that inspires confidence in people.

Pick a name that inspires confidence in people.

Top property management companies like Pinnacle, Alliance Real Estate, and Lincoln Property Company have names that sound organized and professional. You want to choose a name that communicates a sense of trust.

Your target market will be able to help you do this. Consider posting questionnaires on your social media platforms and in property management groups to obtain feedback.

1.3 

Trademark your business name.

Trademark your business name.

If you have decided on a property management business name, make sure that you secure a trademark as soon as possible so that no one else takes it. You can register a trademark at www.uspto.gov.

2. 

Create a business plan.

2.1 

Familiarize yourself with the key elements of a business plan.

Familiarize yourself with the key elements of a business plan.

A business plan should outline the purpose of your business and any practical steps that you intend to take to establish and grow the business. Writing a plan for your property management business will help you to organize your strategy and present your vision to potential investors or stakeholders.

Your property management business plan should include the following:

  • Executive summary.
  • Company description.
  • Products and services.
  • Marketing plan.
  • Operational plan.
  • Management.
  • Financial plan/projections.

Your business plan can be a point of reference as you launch your property management company.

2.2 

Formulate your business plan.

Formulate your business plan.

Once you're familiar with the contents of a good business plan, you can get to writing one of your own.

We've put together a free property management business plan template to help you do this. You'll find it toward the top of this page.

If necessary, you can adjust your management, marketing, or operational sections in response to new financial constraints.

3. 
3.1 

Learn about the main business structures.

Learn about the main business structures.

Your property management business needs to be set up as a legal entity. The structure that you choose is important for tax purposes.

There are four basic business structures:

  • Sole proprietorship: A business that is owned and operated by just one person. All taxes and liability issues are the personal responsibility of the sole proprietor, who will likely need to use a schedule C form to report profits and losses.
  • Partnership: Two or more partners who share the business's tax burden through individual tax returns.
  • Limited liability corporation (LLC): An entity that assumes liability but still passes taxes on to the owners. May use corporate tax rules in some situations.
  • Corporation: A distinct legal entity that assumes all liability and is taxed as a business at corporate tax rates. Has members and shareholders.
3.2 

Choose your preferred business structure.

Choose your preferred business structure.

You can run your property management company using any one of the aforementioned structures. However, there are distinct advantages to setting up a corporation. For one thing, you can avoid the hefty tax burden that you may encounter if you choose to operate as a partnership. Additionally, you may want to avoid any structure that leaves you with personal liability.

Consult a lawyer and a tax professional to determine which legal structure makes the most sense for your business.

4. 

Secure financing.

4.1 

Calculate your expenses.

Calculate your expenses.

Starting a property management company is not cheap. Your property management company will need money for things like:

  • Office rent.
  • Payroll.
  • Supplies.
  • Building utilities.
  • Maintenance equipment.
  • Background check services.

We've rounded up the most common expenses associated with opening a property management business to help you get a sense of what you can expect to pay.

4.2 

Explore a variety of loan options.

Explore a variety of loan options.

You'll want to explore multiple avenues when starting your property management company. You can meet with your local bank to find out more about small business loans, or you can find a qualified lender that offers SBA loans.

As long as the interest rates aren't too high, loans can be an effective way of adding capital to your business so that you can purchase whatever you need to get your property management operations up and running.

4.3 

Apply for a business credit card.

Apply for a business credit card.

Business credit cards are great for short-term cash flow. Interest rates for credit cards are high, but if you just need a short term injection of capital to pay bills, a business credit card or line of credit might be the best solution.

5. 

Obtain state licenses.

5.1 

Find out which license and/or permit you need.

Find out which license and/or permit you need.

Your state probably has a license or permit that you will need to obtain for your property management business. For example, in the state of California, property management companies are required to obtain a real estate broker's license.

Find out what specific criteria you need to meet by visiting your state's small business website.

We've rounded up a list of common, state-specific licensing requirements to jump start your research process.

When you're ready, search your state's small business website using the terms "property management" or "real estate" to find out if there are any special requirements that apply to your business.

5.2 

Apply for the license and/or permit.

Apply for the license and/or permit.

In most cases, you can submit and pay for your application online.

6. 

Purchase insurance.

6.1 

Determine what risks you'll be exposed to.

Determine what risks you'll be exposed to.

Property management companies operate in a space that is heavy with liability issues. Any group that is given the responsibility of maintaining a property must be aware that they are in the care of a valuable physical asset that could be destroyed or damaged by weather, fire, vandalism, or some other accident.

6.2 

Purchase the relevant insurance.

Purchase the relevant insurance.

Your property management company should purchase several types of insurance, including:

  • Liability insurance.
  • Commerical property insurance.
  • Business interruption insurance.
  • Automobile insurance.

You can contact an insurance provider or broker to request a quote for your property management company. A representative will be able to give you more information based on the details that you provide them about your business.

Major business insurance providers like Liberty Mutual and The Hartford offer special real estate insurance packages that are designed for property management companies. You may want to ask about these.

7. 

Find an office.

7.1 

Decide whether to work from home or a commercial space.

Decide whether to work from home or a commercial space.

It might be possible to start a property management business in your home, but with photocopiers, phones, employees and records, you may find it easier to have a commercial office space.

7.2 

Choose whether to rent or purchase a commercial space.

Choose whether to rent or purchase a commercial space.

You can either purchase a building or rent an office. Most startups opt to lease space because it is more affordable and gives them flexibility if their needs change.

WeWork and similar companies offer a shared workplace solutions that are worth considering.

7.3 

Search for an office.

Search for an office.

Meet with a real estate agent or consult online listings to find out what is available. If you need an office that can be easily visited by customers, find a location that is in your local business district or town center. Property management companies are always dealing with tenants, utility companies, and tradespeople, so you will probably want an office that is easy for these parties to visit.

8. 
8.1 

Create a company website.

Create a company website.

Register a domain name and build a site that explains who you are and what you offer. Having a website will increase your visibility and legitimacy.

You can use a website builder to create your own website.

8.2 

Set up social media accounts.

Set up social media accounts.

You can enhance your online presence by creating social media accounts for your property management company. Facebook and Twitter pages, in particular, will make it easier for people to engage with you.

8.3 

Join your local chamber of commerce.

Join your local chamber of commerce.

Membership in your local chamber will give you access to exclusive business events and business-to-business networking opportunities. You may also be able to access local business services at a discounted price as a chamber member.

9. 

Hire employees.

9.1 

Outline your staffing requirements.

Outline your staffing requirements.

A growing property management business needs employees in order to keep up with services and continue to scale. Possible property management positions include:

  • Resident manager.
  • Maintenance coordinator.
  • Payroll administrator.
  • Office secretary.
  • Sales representative.
  • Property manager.

Jot down which of these and other positions you'll need to fill, and how many people you'll need to do so.

9.2 
Advertise your vacancies.

Once you have a sense of which positions you need to fill, you can go ahead and advertise the vacancies.

Social media platforms and free job boards are great options worth exploring.

9.3 

Comb through the applications.

Comb through the applications.

Depending on the number of applications you receive, you can do this manually or by using an applicant tracking system.

Look out for free software, as well as free trials of paid software.

9.4 

Interview the shortlisted candidates.

Interview the shortlisted candidates.

By now, you'll have a good sense of who the top applicants are. Interview each of them to determine which individuals possess the skills and values that would make for a good fit.

9.5 

Appoint the best candidates.

Appoint the best candidates.

Finally, go ahead and extend job offers to the most suitably-qualified individuals.

Property management is a challenging but rewarding business. You can use these steps to guide you as you set out on your property management adventure.

Cost of Starting a Property Management Business:

Fee Description

Approximate Cost

Trademark

$225.00–$400.00

Incorporation

$50.00–$500.00 (depending on the state)

Insurance

$30.00–$85.00 /mo.

Office space

$1,000.00+ /mo.

Licensing

$25.00–$100.00 (depending on the state)

Website builder

$4.50–$74.00 /mo.

Property Management Licenses by State:

State

License Required

Alabama

Real Estate Broker License

Alaska

Real Estate Broker License

Arizona

Real Estate Broker License

Arkansas

Real Estate Broker License

California

Real Estate Broker License

Colorado

Real Estate Broker License

Connecticut

Real Estate Broker License

Delaware

Real Estate Broker License

District of Columbia

Property Management License

Florida

Real Estate Broker License

Georgia

Real Estate Broker License

Hawaii

Real Estate Broker License

Idaho

None

Illinois

Real Estate Broker License

Indiana

Real Estate Broker License

Iowa

Real Estate Broker License

Kansas

None for residential

Kentucky

Real Estate Broker License

Louisiana

Real Estate Broker License

Maine

None

Maryland

None

Massachusetts

None

Michigan

Real Estate Broker License

Minnesota

Real Estate Broker License

Mississippi

Real Estate Broker License

Missouri

Real Estate Broker License

Montana

Property Management License

Nebraska

Property Management License

Nevada

Real Estate Broker License

New Hampshire

Real Estate Broker License

New Jersey

Real Estate Broker License

New Mexico

Real Estate Broker License

New York

Real Estate Broker License

North Carolina

Real Estate Broker License

North Dakota

Real Estate Broker License

Ohio

Real Estate Broker License

Oklahoma

Real Estate Broker License

Oregon

Property Management License or Broker License

Pennsylvania

Real Estate Broker License

Rhode Island

Real Estate Broker License

South Carolina

Property Management License

South Dakota

Property Management License

Tennessee

Real Estate Broker License

Texas

Real Estate Broker License

Utah

Real Estate Broker License

Vermont

None

Virginia

Real Estate Broker License

Washington

Real Estate Broker License

West Virginia

Real Estate Broker License

Wisconsin

Real Estate Broker License

Wyoming

Real Estate Broker License

Property Management Metrics:

Occupancy rate.

Property management companies need to maintain high occupancy rates in order to maximize their profits. Empty units or buildings represent an additional cost that is not offset by rental income. To calculate your occupancy rate, divide the number of units/properties you have leased or rented out by the total number of units or properties that you own.

Occupancy Rate = Units Rented Out / Total Units

For example, if you own 100 units, and 75 of them are rented out, you can calculate your occupancy rate using the formula:

Occupancy Rate = 75 / 100 Occupancy Rate = 0.75 or 75%

Tenant retention.

If a property management business has a steady turnover of tenants in commercial or residential units, it will be difficult for the business to have a steady, predictable stream of revenue. Your tenant retention rate shows you how well you are doing at retaining tenants. This rate can be calculated over a period of time, like a full calendar year.

(Current # of tenants / # at beginning of period) x 100 = Retention rate

For example, if you have 10 tenants at the start of the year, and there are 8 left at the end of the year, your retention rate looks like this:

Retention rate = (8 / 10) x 100 Retention rate = 80%

Tips on Starting a Property Management Company:

Source

Quote

Nathan G., BiggerPockets Forums

"I recommend getting licensed and working for a property manager for at least a year before you try breaking off on your own. This will give you the training and experience, plus you'll find out if you even like it. If not, move over to sales and count your blessings. If you do like it, then you can put a plan in place to start your own company. Keep in mind, you typically have to have a Broker's license to open your own company and those take two years or more to earn. The other option is to be a licensed PM and work under another Broker, but then you have to share some of your spoils."

amach3, Wall Street Oasis Forums

"I started a property management company and from my experience it is easiest to manage your own assets first. Think about your property management and investment side separately. Either way, someone has to manage your investment properties so it might as well be yourself. Once you have somewhat of an infrastructure in place, it becomes a lot easier to sell and get new clients. You can point to buildings/units you currently manage and show that you have at least some experience. If I am an investor, why would I hire some no name startup when there's tons of established prop mgt companies with system in place? Think of ways to answer that question."

Jody Foster, Quora

"If you have been working as a property manager for a couple of years already then you should have a rough idea about what you need as you will have been using those tools every day. If you haven't worked as a property manager, then that's the place to start and learn as much as you can on the job."

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FAQs:

How much do property managers make?

Property managers make between $47,000 and $72,000 per year, according to our research. Property managers generally make more money as their years of experience increase.

What are some books about starting a property management company?

  • "Property Management Kit For Dummies" by Robert S. Griswold.
  • "Build a Rental Property Empire" by Mark Ferguson and Lynda Pelissier.
  • "The ABCs of Property Management" by Ken McElroy.
  • "The Landlord Entrepreneur" by Bryan M. Chavis.
  • "Property Management Start-up Business Book" by Brian Mahoney.

How much does it cost to start a property management company?

At a minimum, it costs approximately $3,000.00 to start a property management company when you consider legal fees, office space, insurance, licensing, and basic advertising expenses.

What are local SEM essentials for property management companies?

  • Register for Google My Business.
  • Optimize your website with local keywords.
  • Create Facebook and Twitter accounts.
  • Buy pay-per-click ads.
  • Upload images of the properties you manage.

How do you start a property management business?

  1. Choose a business name.
  2. Create a business plan.
  3. Form a legal entity.
  4. Secure financing.
  5. Obtain state licenses.
  6. Purchase insurance.
  7. Find an office.
  8. Advertise your business.
  9. Hire employees.

Which tools can I use to automate my property management tasks?

There are many different property management software solutions on the market that you can use to simplify the management of a property or properties. Great free options include Innago and TenantCloud, while leading, paid options include Buildium and Hemlane.

Do I need a real estate license to conduct property management?

It depends on what state you are doing business in. In some cases, the person who is responsible for managing properties and collecting rent must have a license. Consult your state's business website for more information.

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