You’ve already decided to start a property management business. The first thing you’ll need to do is put together a comprehensive property management business plan. Having everything written out will help you run a very focused business. Your property management business plan should contain a detailed proposal in which you address all of the following:
- Setting up your company
- Choosing a business model
- Setting up short-term goals
- Learning local laws and getting certified
- Setting up an organizational structure with potential employees
- Defining base services to clients/owners/tenants/guests
- Defining perks and extra services to clients/owners/tenants/guests
- Setting up a fee structure
- Maintaining properties
- Getting the properties – locations, size, target rent, target tenants
- Marketing to tenants and guests
- Maintaining clients/owners/tenants/guests
- Setting long-term goals
Property management can be a lucrative way to get involved in real estate and become your own boss. Let’s say you enjoy the nuts and bolts of managing properties, from getting the yard work done to communicating with guests. If this is true, starting your own property management business could be the start of something great.
Property management businesses are always in demand. This is because property owners frequently want to rid themselves of the burden of taking care of a property or two. Especially if those are in another town or state.
So first, you’ll need a plan.
Property management business plan: Before you start
Before starting any business, you should put together a business plan. A property management business plan is specific to your business, market, and ideal customers. Different states have different requirements for property managers, so be sure to check up on yours. And, your property management business plan should reflect those differences.
In your property management business plan, you must indicate who are your clients going to be and how you will get them. Choose a business model and think about your short-term goals, then outline them. According to Moneycrashers, the easy part will be getting set up as an LLC, which you can do online, by yourself, without an attorney. You will then need to set up your office – whether at home or elsewhere – with all the necessary office materials.
Learning your laws and updating your resume
In some states, such as Texas, New York, and Colorado, you must be a licensed real estate broker before you can manage properties. If you are already a licensed broker, or agent working towards becoming a real estate broker, then you should mention this in your property management business plan.
Denise (Deni) Supplee, a property management specialist and the Operations Director of SparkRental, emphasizes the importance of knowing your laws. “Not just the state landlord-tenant laws,” she adds, “but also contact your local housing and zoning offices to be sure that there are no registration or inspections required.” Supplee recommends getting very familiar with the Fair Housing Law.
Your education and certification levels should be reflected in the plan. If your state requires you to be a real estate broker or to work with one, you will need to detail when and how you will get your license. Also detail how you will take your continuing education credits. Your state may only require that you register or get a license as a property manager. If so, make sure you understand which classes you’ll need to take in order to obtain that license or certification. Be aware of the deadlines, as well.
You may plan on going at it alone for a while. But as you expand you’ll need employees. So, start thinking about an organizational structure right now. Will you have a portfolio or departmental structure? Think about it, and add it to your plan.
Issues your plan needs to address
Your business plan will need to reflect your entire business. From who your clients are, though how you’ll get them, to how you’ll keep them, and everything you need to do for each of those. You should also define your base services vs. that little bit of extra you can offer.
Clients: who are they and how to find them
Your clients are the people who own properties you will be taking care of. Joining real estate networking groups, Facebook groups for rental advertising and other business networks will benefit you either directly or through word of mouth. Just be wonderfully social and friendly.
Also, many people are now renting their properties out to short-term vacationers. Add a section to your property management business plan about vacation or Airbnb properties. Take beautiful pictures and draft well-written narratives about the unit you’re managing. Offer perks like welcome gifts or baskets, and local recommendations about your city and neighbourhood. Everyone will appreciate it.
Keep in mind that the guest experience is constantly changing. Make it your mission to know what people want and need right now. Be the person who always offers a little extra.
Dedicate space in your property management business plan to the tenants and guests. They are the ones who will be living in the property you manage. Think about how to find them, should you post online ads, rely on word of mouth, or put effort into beautifully written vacation listings. It depends on the property you’re managing and the type of guest you want to attract.
Also consider how you will vet them. Supplee suggests the vetting process needs to be rigorous. “Screen those prospective tenants so thoroughly you know what they eat for breakfast. It goes beyond just doing a credit check. Conduct criminal background and eviction histories on all those over 18. Never go by a hunch or a feeling.”
Common property management business plan sections
We already mentioned you’ll need a section on your continued education and how to get it, and a section on who your clients are and how to get them.
The key to creating the property management business plan is to treat the plan as if every one of your potential clients was going to read it. Make sure to put as much information into your property management business plan, in an organized fashion so that you can refer to it later and look things up as needed.
Make sure you clearly define the base services from extra services. The base services are:
- Evaluating properties
- Marketing properties
- Screening tenants
- Collecting rent
- Regular inspections
- Repair and maintenance
All pretty straightforward, right? It’s how you do some of these things that make people see you’re giving them a little extra. Think of a unique way to offer these services, and market those as extras. Creativity pays off.
According to Jeff Miller, the co-founder of AE Home Group, when it comes to property management, “systems take the longest to build.” He adds that beginners should “use an off-the-shelf system like Hostfully to get a head start in the process. As you learn your specific business’ needs, iterate and improve from there.”
Maintenance of the property is something that you should elaborate on in detail. Teris Pantazes, CEO and Founder of EFynch.com, says you should have a clockwork-like system for maintenance. “For your own operations, make sure to have failsafe reminders in place to NEVER forget deadlines. And this includes accounting or annual maintenance that needs to be taken care of.”
He suggests you add secondary reminders to deal with things like “county inspections, license renewals or scheduling tenant closeouts – there is never an excuse for missing these.”
And speaking of repairs and maintenance, there will always be unexpected repairs. While Pantazes advises to “have a good method of getting bids for projects on the home. This would include a plan for both planned and unplanned repairs,” Supplee urges to “make the inspection report mandatory! This protects the landlord should there be damage and the tenant forgets to turn it in.”
Pantazes claims the best advice he can give for developing a business plan is to have “a feature of your service and make sure it is extraordinary. You need to have one feature that you can PUMP in addition to the nuts and bolts of the business.”
Jeff Rohde, author at JScottDigital.com says one of the most important things when developing your property management business plan is the focus on a “specific real estate asset class, and then ‘drill down’ to a specific sub-class.”
A residential example would be to decide if you’re doing for a single or multi-family homes. After that, narrow it down by price range, geographic area, and a number of units. A commercial example would be deciding on multi-tenant retail or office type of property. “After you chose that, focusing on the class of property (A, B or C), and the property size in terms of square footage.”
This is how you’d develop your niche, because, as Rohde puts it, “tenant personalities and issues, wants and needs, will be similar. Owner personalities and investment goals will be similar. And the skill set that the property manager develops will easily transfer to similar properties to manage.”
Consider your property management business plan a living document that you can use and add to as your business grows over the years.