Following the height of COVID-19, the real estate industry exploded. More consumers are looking to rent with recent astronomical housing prices and increasing return-to-office resistance. As a result, the demand for property management companies is also rising in 2023.
Experts project the global property management market will grow by 9.8% between 2022 and 2029 from $19.33 billion to a whopping $37.25 billion. Naturally, you might be interested in getting a piece of the pie.
However, launching a successful property management company takes strategic planning and determination. There’s much to consider before diving into the field headfirst. If you’re wondering how to start a property management company in 2023, these nine tips can help.
1. Research Other Property Management Companies
Before starting a property management company, you should look closely at your competition. Research nearby property management companies and note their customer base and products — for example, if they sell properties and how much units cost.
Additionally, pay attention to whether they’ve integrated leasing software or specialized rental portals for tenants. Because there are some overlaps between brokers and property managers, it’s essential to research indirect competitors like in-house managers and agents.
Prospective property managers should select a name for their company that imparts a lasting impression, something that’ll help potential buyers and renters remember your brand. Ensure you pick a unique name for your property management company that another business in your state has yet to use.
You can conduct a Google search to see if something similar already exists. Additionally, the website address should be identifiable and easy to spell. You’ll see more website traffic if you pick a memorable URL.
A business plan is a blueprint to get your organization off the ground. It’s also a surefire way to avoid mishaps on your path to success when figuring out how to start a property management company. Your business plan should include the following sections:
- Executive summary: A description of your business plan and what you hope to accomplish
- Overview: Any background information, legal structure and features of your business
- Market analysis: What other property management companies are like in your area
- Competitor analysis: A detailed look at your competitors’ strengths and weaknesses
- Marketing and sales strategy: A description of how you intend to market your company
- Operations management: A plan for managing daily tasks, pricing structure, leasing agreements and troubleshooting
- Financial projections: An estimation of costs, revenue and profits for the first few years you’re in business
A comprehensive business plan will streamline workflow for less stress in the future. It’s also essential to have one to align employees with your company’s purpose.
You must register your project management company as a legal entity. There are four types of entities to choose from, such as:
- Sole Property Management Business: Responsible for business losses and profits through their tax return
- Partnership: Allows partners to claim business income on personal taxes for multiple commercial properties
- Limited Liability Corporation: Gives owners of property management companies limited legal and financial liability
- Corporation: Files personal taxes separately from business taxes
Insurance is also critical. Property managers should look into Errors and Omissions Insurance for protection against mistakes, General Liability Insurance and Tenant Discrimination Insurance.
Property managers must be licensed and insured in most states before setting up their businesses. Housing rules change quickly nowadays, but most property management owners should have a Real Estate Broker’s License and a Property Manager’s License.
Both credentials require coursework and exam to demonstrate proficiency in project management. A licensed real estate broker will also take some property management courses.
Voluntary certifications are also available to boost your business. For instance, you may pursue credentialing through associations like the Institute of Real Estate Management, the National Apartment Association or the National Association of Residential Property Managers.
You must open a separate bank account for your property management company. This new account should allow you to differentiate various financial functions, such as keeping lease money separate from security deposits. Some states require this to get a business credit card. Multiple financial business accounts will help you track your revenue and expenses more easily as your launch your organization.
Implementing project management software is also a good idea. For one thing, it’ll make your job as a property manager much smoother while adding convenience to your tenants’ lives.
Property management systems automate daily operations to save you time and money. Adding software will significantly improve your business, from tracking financials to storing lease agreements and renewals. Additionally, renters are interested in property management companies that utilize leasing software to make monthly payments and easily control maintenance needs through their smartphones.
Your property management company’s website is one of the most crucial aspects of your brand. A website can improve your outreach through search engine optimization (SEO), allow you to make important announcements, disseminate information about your property and make it easy for prospective renters to contact you.
About 50% of consumers agree a company’s website influences their impression of the brand. Another 40% prefer seeing images, while 21% like websites with videos. Consider displaying virtual tours of the property and units or a gallery with professional photos for visitors to get a feel for the place.
Your business plan should include a marketing strategy to get the word out about your property management company, including optimizing your website for mobile-user friendliness. Other ways to market your property include:
- Creating social media accounts.
- Improving its SEO content.
- Developing print materials like brochures and business cards.
- Networking with your local Chamber of Commerce.
Marketing requires creativity to advertise your company and its offerings. For example, partnering with local businesses might be another avenue you pursue.
Property managers have much to look forward to in 2023 — now is a lucrative time to dive into the property management business. You can launch a successful property management company by planning and taking expert advice along the way.