How to Start a Property Management Company in 6 Steps

Are you a real estate agent who dabbles in property management for some of the homes you've sold? Maybe you're a serious investor who wants to make property management part of your business plan. Perhaps you're simply thinking of winging it, getting into property management. When it comes to starting a property management company though, the why doesn't matter so much as the how. So how do you start a property management company? While you may have been in real estate for some time, there are certain things you need to do before you open up shop. In this video, we'll cover the six steps you should absolutely take before starting a property management company. Let's take a look. Step one, setting up your property management company. Before you do anything else, there are some critical areas you need to cover. Getting licensed and certified, registering your business, and writing a business plan. Let's go through each of these in a little more detail. First, licenses and certifications. Keep in mind that there are only a handful of states that don't require some kind of license to be a property manager. If you want to know what each state requires in detail, you can check out the all property management article. I'll drop the link in the description. There are two types of licenses your state may require. The first is a property manager's license, which means you'll have to take a course and then pass an exam. The second is a real estate broker's license. This will be important if you're planning to buy and sell the properties you manage. A licensed real estate broker is knowledgeable in property management, insurance, taxes, and contracts. There are also associations that offer their own certifications to help boost your knowledge and credibility as a property management business. Those include the Institute of Real Estate Management, the National Apartment Association, the National Association of Residential Property Managers or NARPM, the National Association of Realtors. Next, registering your business. You have to file your business with the IRS for tax purposes. You'll have to choose which type of legal entity best fits. The three options are a limited liability corporation or LLC, S-Corporation, and C-Corporation. An LLC is also called a pass-through business, where money passes through your business directly to you. As an S-Corp or C-Corp, you'll become a paid employee of your company. Check with your accountant to figure out the best type of entity for you. Then, there's your business plan. Don't skip this step. A business plan creates a framework for your business and forces you to think through every aspect of your operations. It includes an executive summary that lays out the type of property management business you're starting, as well as your goals, a company description. Again, are you going to be a boutique service, more investment-minded, etc. A market analysis. Where are the opportunities in your market? What's your ideal customer profile or ICP? Staff organization and management structure. A service and product outline. What services will you offer? And this, of course, is informed by your market analysis. Lastly, a funding request. If you're looking to raise money or get a loan to start your business. Ask yourself these questions as you put your plan together. What kinds of services will my property management business offer? What kinds of properties will it serve? Will I have a brick-and-mortar location with staff on site? Or will my staff work remotely? Now that you've got your business plan on track, let's talk about your finances and accounting. Step 2. Organizing your finances. Property management and accounting are like two peas in a pod. As a property manager, you handle the income and expenses of your owner client's properties. And that involves your system of record, a solid method of bookkeeping, your reporting, and the kind of accounting software you want to use. It's a lot, but it's so critical. Don't wait until your business is up and running to get your accounting in order. From day one, you should be ready to record incoming and outgoing transactions. This is important for three reasons. First, accurate accounting allows you to not only monitor your business's financial success, but also the success of your clients as well. Second, accurate record keeping will ensure you're paying your bills and your vendors on time. And third, property accounting keeps you compliant with tax laws. Now, you're also going to need to set up your bank accounts. Make sure you have a separate bank account for your business. One that you don't use for personal finances. Then, set up a trust account to hold security deposits. This is an important step, and many states have regulations concerning the holding of security deposits in escrow. This is a huge subject, and we could spend several videos on it. If you want to dive into all the details of property management accounting, look for the link in our description below and an accounting guide. In the meantime, start with this one question. What system will you use to keep your accounting running smoothly? You can use something as simple as a spreadsheet to set up your books, or you can choose a generic software like QuickBooks. But why not an accounting solution made for property managers? With purpose-built software, you'll be able to follow every transaction online, keep an organized chart of accounts, manage accounts payable from work order to billing, and automatically reconcile expenses at the end of the month. To learn about Bullion's property management accounting software, check out the link below. All right, let's move on. Step three, finding and hiring the right people. Now it's time to think about building out your staff. You can't do everything yourself, so think about where you'll need the most help to get your business off the ground. You may need to hire another property manager to work with you. And if you're planning on offering leasing, that might be where you need to hire right away. Full or part-time staff members you may want to consider are admins or receptionists, sales reps, payroll and accounts payable, leasing agents, showings coordinators, move-out coordinators, field managers, marketing specialists, real estate agents, and maintenance staff. Some contractors to consider include an accountant, a real estate law firm, both super important, general contractors for painting, plumbing, groundskeeping, cleaning pools, changing locks, all that maintenance stuff, as well as information technology or IT. Again, it's all based on your business's services and goals, which you laid out in your business plan, right? Now, let's talk about marketing. Step four, marketing your property management company. Your marketing toolkit will help you in two ways. First, you'll get the word out about your business to clients. Then as you bring on owners, it'll help you attract residents and fill those vacancies. The best ways to market yourself and your properties is through a website, digital marketing, traditional ads, listings, referrals, marketplace or lead gen services, and events. First, let's start with getting those owners in the door. This is where networking really comes in handy with other real estate professionals. Build a network of agents and other real estate professionals who can refer you to their clients. But don't stop there. Reach out to contractors, maintenance professionals, cleaning services, anyone who works in the real estate space. They can all help by pulling in referrals and recommending you to their clients. Next, make sure you have a solid website where owners and prospective residents can find you. You can build one yourself, or you can use a software solution to create your own branded site. And if you're looking to ramp up your portfolio of clients even faster, check out Alt Property Management, a building and company that connects you with property owners looking for a property manager in your backyard. Maybe not your specific backyard, but you know what I mean. Step five, creating your resident experience. Now it's time to think about every part of the resident experience from lead to lease, to move in, to move out. You should have processes and tech in place to support. Lead to lease. Make it easy for prospective residents to find your listings on numerous rental sites and fill out a rental application. Your tenant screening process should also be transparent and lease signing seamless and organized. Now on to maintenance. Make sure you have a resident portal that allows residents to make requests and give you the power to triage, assign and follow work orders from start to finish. Next, emergencies. For more urgent needs, have staff available to answer residents' phone calls, emails, and texts. Finally, make sure your properties comply with all ADA and local requirements. And that brings us to our final step. Step six, choosing your property management software. No doubt you'll be using a few software tools to run your business. Choosing the right solutions is a matter of evaluating what areas technology could help you save the most time, resources, and ultimately money. For example, you may need accounting software, a communication solution, and cloud storage for important documents. Or you might look into apps to coordinate apartment showings, help you screen prospective residents, and let current residents pay online. Of course, you could cobble together a handful of solutions to handle those types of tasks, but do you really want you or your team to spend the time doing that all day? All-in-one property management software like Buildium, however, wraps many of those features into one place. Buildium allows you to take marketing, leasing, accounting, maintenance, communications, and a host of other tasks online. Plus, with Buildium, you get more all in your all-in-one software, like the ability to create revenue streams from something as routine as collecting rent each month. And if you're looking for a more niche feature or service, chances are you can find it in Buildium Marketplace, an ecosystem of industry-leading integrations. Check out the links in the description to learn more about Buildium or to schedule a demo. I might be biased, but it's the most recommended property management software for a reason. Okay, so that's it. Hopefully you're well on your way to starting a property management business the right way for you. Got a question about something we didn't cover or want to know more about? Ask us in the comments below. Thanks for watching, and be sure to check out more of our videos right here on Buildium's YouTube page. See you next time.