The Real Estate industry has hired a hot piece of art that everyone is eager to acquire. A lot of successful people of this era are the ones who have greatly invested in it. There are many ways you can pour your money into the sector. One of them is the Property Management business.
Having an idea of owning a business is one thing, but implementing it is a whole different topic, requiring different skill sets regardless of the idea. At the same time, it is imperative to understand the business thoroughly. It all begins by knowing who property managers are, what they do, how they do it, the challenges and risks encountered, and other vital things.
Are you new to the world of real estate and wish to start a Property Management Company? Then you are at the right place. Stay with us till the end, for this article will help you considerably.
1. Is Property Management a Real Deal?
Property management, indeed, is a real deal. Everyone pays attention to where money is; therefore, knowing if something is a deal will draw a person to invest in a certain business. Anything that has to do with real estate has become in demand; the increased population and the advancement of science and technology have highly contributed to the rise in demand.
If you research booming businesses in any search engine, the real estate industry is always in the top ten list of greatest investments in this modern world. People now own more wealth in terms of house property rather than financial assets. In France, almost 60 percent are homeowners.
Cities are growing, and a lot of people are moving to the cities for work or residential purposes, leading to a rise in demand for good management companies.
Before starting the company, you need to know what is involved and what the important positions and roles are in it. One of the most important in this business is that of a Property Manager. He:
1.1. Acts as a Local for Distant Owners
There are a lot of real estate owners who do not live in the regions where their properties are located. In such cases, property managers act as the local overseers of the owner’s property and run all the activities relating to property management.
1.2. Regulates Tenant and Landlord Relationships
The estate owners have a lot of landlords and tenants. It is often very difficult to keep up with all the dealings related to their buildings. In such situations, property managers need to ensure that matters, laws, and regulations concerning all landlords and tenants are intact and everything in lease agreements is followed.
1.3. Collects and Deposits Rent
The rent or security deposit for tenants is given to the property manager, who in turn gives it to the owner. This system of collection differs from property to property. It can either be a physical collection or an online collection. It all boils down to the most convenient method.
1.4. Handles Maintenance
All the maintenance requests made by the tenants are often handled by the property managers as per the agreement between the manager and the owner. That is why there are times when the property manager pays for all maintenance costs and hires a third party, and at other times, the property owner opens an account for maintenance costs.
1.5. Leases Vacant Units
Vacant units are often a loss to property owners, especially residential properties. Property managers can find tenants who can occupy vacant rooms through their networks. They can show the tenants around and convince them to stay. There are many other roles that property managers perform, like handling taxes and supervising other employees, among several others.
2. How Do You Start a Property Management Company?
Now that the roles of management and its managers are set, let us dive into the theme of the article – How do you start a property management company?
2.1. Understand the Business Sector
If you want to succeed, you need to know what you are dealing with, in and out. It would be best to know the strengths and the weaknesses of the business you are trying to do so that nothing surprises you.
Do extensive research on everything that entails property management and real estate management. Learn how to attract clients, build a network, stay in business, and learn strategies to overcome challenges.
How well the company runs will depend on how thorough you are with the field you are in, which includes the business plan, the goals, and the marketing strategies. The first step is to understand the industry.
2.2. Build a Business Plan
A proper business plan is necessary for any big or small business. A successful property manager will have a business plan with a legal structure and a financial structure. Your business’s direction and flow will move according to the business plan you have set. Sit down with experts in the field and people with experience so that you can have a plan.
Moreover, successful management firms have a business plan that outlines their goals and the strategies that will be used to reach them.
2.3. Set Up Required Documentation
Starting a management company, just like any other, requires many legal documents. The documents that help you prove that your company is legal and the authority recognizes it and allow your clients to trust you more. A few documents you need include a real estate broker’s license, property manager’s license, and real estate license.
Your firm needs business insurance as well; investors will be willing and more convinced of your business when it has all the necessary documentation. Documentations should be about more than just your business. Even other additional property managers admins should have certifications, too. If any other documents are needed from the national association, please also have them.
2.4. Brand Your Management Company
After everything is set, you need to know how to market your company in the property management market so that many people can know about it—marketing attracts more potential clients. Marketing shows what makes your company stand out among many other companies that are operating, and that is the best that you can use to attract more customers and retain them.
Luckily, there are a lot of platforms that you can use to brand or market your service. You can develop a website and use the best SEO strategies to ensure that you achieve the results. You can also make use of social media platforms for paid or unpaid advertising.
Thoroughly following all of the above ways will ensure the establishment of your company and stabilize it with good repute and income in the long run if carried honestly and consistently.
3. How Do You Become a Property Manager?
If you are a fresher in the field of property management, it is always recommended that you first start as an employee in the field and work your way up the chain.
By beginning as an employee, it will be easy for you to learn everything in many ways, know all the risks, and how to avoid them. Do research on all rental properties, whether student housing or residential properties and pick one of your interests.
You can become a property manager by obtaining a diploma in management or an equivalent degree which provides real estate education. If possible, receive training and certifications in the field, as it will help boost your career path. Then, pass the licensing exam. With relevant skills and networks, apply for and manage your first property.
3.1. Is There Any Software Required for Property Managers to Learn?
Property managers have to handle many things, such as tenants, landlords, and other third-party companies, which is often overwhelming. Even if there is a team of people, there is still a need for better ways to run the business. Like many other businesses, there is a software solution for everything. Property management software can help property managers run all these activities smoothly.
Such software has features responsible for the business’s accounting, management and leasing, property search, marketing, and reports. With them, you can save time, easily find potential clients, perform automatic communication, and have an all-time customer support system. Spreadsheets, Tenant Cloud, Rent Manager, and Appfolio are some of the software that property managers can learn.
4. What to Look for When You Recruit Employees?
If you want to own a management agency, it is impossible to run the business all by yourself. You will need employees who will help you in keeping the company afloat. A few criteria must be set when searching for and building a team.
As you look for team members, hire people with enough knowledge in real estate matters. They should not only have the theory of it but also have practical experience in handling properties. Since your business is new, it is best if you hire more experienced members of the team since they already know what to do
The certification of the team members is prime for a successful property management company. Certification is simply the document that shows that the team members qualify for the position they want to take on, for they have all the knowledge and skills and have received training to do what they can. Licenses such as leasing agent licenses and broker’s licenses are all very crucial certifications
4.3. Technical Skills
Possessing some technical skills is as important as understanding the field you are working on. Technology allows members to be accurate and carry out activities with ease and simplicity.
Employees are required to learn or know how to run property management software that the company uses. For a complete team, you will require legal advisors, accountants, managers, real estate agents, and others.
Recommendations have proven to be a good way to discover valuable talents and skills. Before hiring them, go through each company’s recommendations and reviews before deciding to work with them. The reviews will help see and rate how well the reviews are in regards to management.
5. What Are the Types of Fees Involved?
Running a business is more challenging than it may seem. There is a whole of money involved with it, such as ongoing management fees charged per project fee. Often, these fees are the ones that are used to run the business. There is a need to understand such fees.
5.1. Start-Up Fees
This is the initial fee set by the company for a client to open an account with the company. Some companies do not charge start-up fees; even if they do, it is often a little. The company often uses the initial fees for the inspection of the property.
5.2. Monthly Management Fees
The company looks after the condition of the property, so monthly fees for management are involved. The most common types are flat fees and percentage rental fees.
5.2.1. Flat Fees
This is a fixed fee charged to a tenant based on the size of the flat and the services provided by the agency. Generally, the amount is about 0.25 percent per annum of the cost it took to construct each flat.
5.2.2. Percentage-Based Fees
When tenants give their rent, a percentage is given to the company every month. It depends on the agreement that the client had with the company. The percentage that is taken is for the rent collected and not otherwise.
5.3. Maintenance Fees
The agency will deal with all the maintenance that a client needs. The company will either use their own money to pay for the maintenance, or the client and the company can decide to open a different bank account.
5.4. Additional Management Fees
Apart from all the fees listed above, the company can charge other extra fees, viz, Tenant Placement, Eviction, Lease Renewal, and Early termination.
5.4.1. Tenant Placement Fee
A property management company often places new tenants in a client’s flat. It is not easy for the clients to get tenants, but property managers have a lot of networks that allow them to find tenants who can occupy the vacant rooms easily.
5.4.2. Lease Renewal Fees
Times when tenants want to renew their fees, often the company will be in charge of all the processes and documentation that are necessary for renewing an agreement
5.4.3. Eviction Fees
Evicting tenants is difficult, and most people try to avoid it as much as possible. Property managers are great at handling eviction. In most cases, clients must pay up to evict a tenant.
5.4.4. Early Termination Fee
A contract signed between a client and the company usually has a duration. If a client needs to end the contract earlier than the agreed time, then the client has to pay some amount to the company for compensation.
Property management companies and property owners cover this protection against tenants who bring discrimination claims in the apartment. This insurance is often not covered, but given the times, it is crucial to most firms.
6. How Do You Rank Well in the Business Market?
The property management business has become very popular, and everyone is trying to get a spot. Therefore, ensuring your business does well in the field is imperative
6.1. Excellent Customer Care
The success of any business depends on how the customers like your business and the flow of it. Therefore, in every step that you take for the company, have your customers in mind.
Perform proper research to understand what they need, how they need it, and when they need it. Stay professional, warm, and accommodating to your customers. If you manage to please your customers and retain them, your business will flourish.
6.2. Reasonable Fees
People might prefer other agencies if they offer reasonable prices. There will always be a challenge with regard to property management. Ensure that you are neither overpricing nor lowering your service fees too much for clients to doubt the quality of your work.
6.3. Set Goals
It is crucial to know what you want, how you want it, and when you want it. Goals will guide you toward achieving what you want for your business. Set realistic goals and stick to them throughout your business ventures. Make sure to set a reasonable business plan, all decisions aligning with them.
6.4. Focus on Networking
Surround yourself with property owners by attending events. From those formal and informal gatherings, you can pull great deals and contracts with potential clients. Remember to stay professional while networking.
7. What Are the Risks Involved?
7.1. Legal Risks
There is a lot of documentation regarding any real estate business. To run a property management business, you must adhere to all local and national laws. It is really easy to make a point, given the fact that there are a lot of things that have to be legalized. Ensure that you are working with certified contractors and that every system in the property is up to date according to the laws.
If inspections happen, it will be of help if the documents you have are legalized. It is always in your best interest to have a real estate lawyer who can handle all your company’s legal work.
7.2. Operational Risks
In most cases, managers handle all the necessary and immediate operations. As a property manager, you will work with other third parties. It would be best to remember that whatever they do will reflect on you and your company’s reputation. If third parties, such as independent contractors, do their jobs well, it will all reflect on you.
Therefore, they must ensure that all the operations necessary in a property are under strict and professional supervision to save and uphold the company’s reputation.
Diversifying your source of income is the best thing you can do in the present to help you in the future. After starting your business, the next thing you need to put your effort into is ensuring you stay in the business. Champions are the ones who stick to the end through thick and thin and choose to stay motivated and innovative.
As a property management firm, you will encounter many risks from clients, tenants, or third parties. There will be seasons where the business is good and seasons where it is slow. Regardless of the situation, staying focused and consistent, with patience and hard work, will help any business do well in the market.