How to Start a Property Management Company | Buildium (2024)

Before you do anything else, you’ll need to be properly licensed, file your business name and create a business plan—which we recommend doing first so you can size up the opportunity in front of you.

How Do You Write a Property Management Business Plan?

A business plan serves as the framework for your entire property management business. The point is to plot out every aspect of your company from your startup capital all the way to breaking even.

Per theSmall Business Administration(SBA), a formal business plan has these things:

• Executive Summary
• Company Description
• Market Analysis
• Organization and Management
• Service or Product Outline
• Marketing and Sales
• Funding Request
• Financial Projections
• Appendix

The SBA also furnishes business plan examples for those writing one for the first time.

Pro Tip: A business plan for property management, specifically, will outline the types of clients you intent to target (multifamily, single-family, associations, etc.). It will also outline the services you will provide. For example, do you intend to operate as a boutique property management business offering concierge services, or will you target smaller owners looking for basic help with rent collection and leasing?

What Property Management Certifications and Licenses Do You Need?

There are only a handful of states that don’t require some kind of licensing for property managers. Before you set up your business, make sure you have the up-to-date licensing to practice in your state, especially since housing regulations tend to change fast these days.

• Real Estate Broker’s License: A licensed real estate broker has taken courses and passed an exam that covers property management as well as topics such as insurance, taxes, and contracts.
• Property Manager’s License:A property manager’s license also requires coursework and an exam.

Some certifications, while not required, will help augment your business. A certified property manager, for example, holds a real estate broker’s license and has completed coursework on property management topics.

Finally, there are associations, both national and international, that can help you network, give your business credibility and nurture your staff with continuing education and certification in property management. Those include:

• Institute of Real Estate Management (IREM)
• National Apartment Association (NAA)
• National Association of Residential Property Managers (NARPM)
• National Association of Realtors (NAR)

Get a breakdown of licenses, certifications, and associations through our blog post:Property management certifications that give you an edge.

How Do You File Your Property Management Business?

Next, you’ll need to file your business for tax purposes and choose a legal entity. This is critical so that your personal assets are protected andseparatefrom your business.

Most property management firms are set up as an LLC, or limited liability corporation, but S-Corps and C-Corps are also strong contenders with more legal protections.

You will have to think about whether you want to file as a pass-through business like an LLC—where money passes through the business directly to you—or whether you want to file as a C-corporation and be paid as an employee.

C-corporations risk having a double taxation problem, but you shouldn’t have to worry about that if you have a good accountant who knows the laws. S-corporations pass through the taxes to the shareholders, so there is no chance for double taxation. The profits are taxed as personal income instead of business income.

Learn more about filing the tax status of your businesshere.

Do you have a revenue goal in mind for your first fiscal year? If not, start thinking about one—it should be in your business plan. How much income do you expect? What are your expenses going to be? How much should you put aside for the unexpected?

Keep all of this in mind as you start planning out the financial future of your company.

How to Set Up Your Property Management Accounting

Keeping track of your owners’ properties can be basic as updating a spreadsheet (although we don’t recommend that). There are comprehensive property management accounting platforms, however,that can not only help you keep track of rent and fees, but can monitor expenses and pay regular bills.

They can also help you track money coming in and money going out. Income can include rent and other revenue streams received from renters, for example. While money going out can involve repairs and other payments to vendors for maintenance.

Pro tip:Setting up your bank account structurewill create the foundation for disciplined accounting. First, you’ll always want to keep your security deposits in alegally compliant trust account, with a separate account for your owners’ properties and yet another operating account for your business.

If you need an accounting refresher (like pretty much everyone), check out our Accounting for Non-Accountants 1)webinarand 2)guide.

What Expenses Should You Expect?

Record every monthly, quarterly, and yearly expense you have. Don’t leave anything out. Keeping track of every penny that goes out the door will help you set realistic revenue goals and help you stay out of financial trouble.

Your expenses will most likely include:

• Payroll and Vendor Fees:This is the salary for your employees (and yourself), as well as the money your contractors charge you for services.
• Overhead:That includes supplies as well as rent and utilities for brick-and-mortar locations.
• Other Service Fees:This includes any software you use to manage your business or to help you find prospective property owners and residents.
• Membership Fees:If you belong to any property management associations, include the cost of membership in your calculations.

Forecasting Revenue and Setting Goals

You can expect most of your revenue to come from management fees, which is usually a percentage of the rent charged. Some businesses, however, charge aflat fee for basic services. Owners can then opt for more services for a higher fee.

Other income will come from late fees, key or lock replacement fees, finders fees for bringing in residents, maintenance bill mark-ups, and other smaller fees and charges. Check out a full list in this post: Income and Expenses: What Property Managers Need to Know.

Once you’ve laid the groundwork, it’s time to start getting the pieces together that will fuel your efforts—the people and the tech they’ll use.

How Should You Structure Your Property Management Team?

There are two basic models you can set up for your property management business. The first is to start off as a general property manager who handles all management responsibilities. That would include leasing, inspections, resident communications, owner communications, fees and rent collection, and maintenance.

The other option is to hire staff members to perform more precise roles. You may have one staff member handling leases and other managing maintenance, with repair specialists or contractors working with them.

In that case, you would have a more defined organizational chart, with tiers of staff members reporting up to you.

Defining Your Team

If you’re just starting out, your staff is going to be minimal. It may even just be you for the time being, and that’s fine. As you grow, you’ll organically bring on people to help you.

Your staff may be made up of full-time or part-time employees, or contract workers. The first step is to decide what kind of work you need done and then determine if it’s worth putting someone on the payroll or outsourcing.

Full- or part-time employees you may consider are:

• Additional property managers
• Admins or receptionists (if you have a brick-and-mortar location)
• Maintenance staff
• Sales representatives
• Payroll and accounts payable
• Leasing agents
• Showing coordinators
• Move-out coordinators
• Field managers
• Maintenance managers
• Office managers (for a brick-and-mortar location)
• Service coordinators
• Marketing specialists

And just because they aren’t on the payroll, doesn’t mean that a team member or company isn’t a dire need. Below are some contractors that property managers rely upon:

• Accountant (a good accountant will always be your most trusted advisor)
• Real estate lawyers (also a partner to make sure you are in compliance with the law and protected from potential liability)
• Contractors such as painters, plumbers, roofers, groundskeepers, pool cleaners, locksmiths, chimney sweeps or HVAC specialists
• Customer/resident service reps
• Information technology (IT) staff

When hiring any vendor, make sure to get a copy of their license, insurance certificate, and bond certificate (if they have one) to protect your company if something goes wrong. Also, try to fight for a reduced rate for your property owners—they will appreciate that you worked hard to save them money.

Pro tip: There are software solutions that can be the hub for all your operations. Buildium, for example, provides a platform that helps you handle accounting, 1099 filing, communication and maintenance tasks, reducing the need for extra staff.

Property Management Staffing: Finding and Hiring the Right People

Once you’ve determined which full- and part-time positions you need, it’s time to find the staff that can make it happen. There are two steps to this process. First, you need to get strong candidates in the door for an interview. To do that, write clear job descriptions and use ads that really speak to the culture (and benefits) of your company. Post your ad in the right places for your audience.

Associations such as the NARPM have their own job boards for property managers and most mainstream job sites such as Indeed and ZipRecruiter also list related jobs.

Once you’ve hired the right people, you’ll want to keep them. You also want them to become evangelists for your company and culture. Remember, happy employees are one of the most powerful tools for attracting new talent, as well as representing your brand to residents and property owners. They’re the first to spread your reputation, after all.

To keep your employees happy and boost your business, create astrong company culturefrom the get go. Provide competitive benefits, stay connected with their needs, and push them to learn and pursue their professional development.

Building Relationships with Property Owners

It’s a no-brainer that valuing employee relationships can build a solid business, but so can relationships with property owners in your community.

Doing so starts withsetting expectationsbefore a property owner even becomes a client. Talk to prospective clients before you sign a contract to understand what it is they’re looking for in a property management firm and explain exactly what you can provide for them.

Keep the lines of communication open at all times, send monthly owner draw reports, and give them the opportunity to ask questions and share feedback. At the same time, you should feel confident providing your own proactive feedback to owners and identify opportunities for additional revenue streams.

You want to deliverthe best customer serviceyou can for your owners and the best living experience for your residents.

What Property Management Technology and Software Do You Need?

For every business, there is a software solution.

Quickbooks can manage all things financial for your business operating account, from invoices to P&Ls. You can also use it to manage taxes and audits.

Google provides web-based tools that rival Microsoft’s Office Suite. Create documents, spreadsheets, and even slide presentations. And you can store and share your documents on Google Drive.

MailChimp can help you organize your email, while SurveyMonkey can help you gather feedback from residents.

There’s no question you’ll need software tools to help you do business. Picking the right ones is a matter of listing out your business functions and researching which software tools can save you time, resources, and money.

For property managers, in particular, there are property management SaaS (software as a service) platforms that cater to the specific needs of your business without having to cobble together too many software solutions.

Buildium, for instance, gives you the power toaccept rent payments online, as well as centralize your property accounting. You can handle your maintenance requests, property inspections, and even renters insurance through it, as well.

For those who will often be out and about, usingmobile-enabled technology for property managementcan keep your business agile and operating from anywhere.

A big part of getting your business to take off is your branding and marketing.

Your branding defines who you are and what you do as a company. It should be a direct representation of your culture and values. Are you a boutique property management company that provides specialized services? Do you focus on HOAs or luxury Class A properties? All of these factors contribute to your brand.

Once you define your brand, it’s time to start marketing. Whether you do it yourself or hire a firm, you should push your business actively through your website, social media, paid advertising, and local networking.

How to Grow Your Portfolio from Zero

At this point, you may have only one property in your portfolio, or none at all. You’ve got to bring in a lot of leads to start building your portfolio, something called “feeding the top of the marketing funnel.”

This is when you cast a wide net, pull in potential property owners and investors and then start talking to them about your services to gain their interest and bring them closer to signing with you.

But those leads don’t come from thin air. You need to start with a multi-faceted marketing strategy to attract potential clients. You can do that with the following tools:

• Your Website:Your website is your digital storefront. Optimize it for both property owners and residents to make a great first impression with your branding.
• Content Marketing:Create a blog that addresses owners’ and residents’ concerns, Doing so sets you up as an expert in your field, a trustworthy partner in providing the best services for owners and residents alike.
• Social Media:Get on the right social media channels for your audience and start posting. Engage with your followers by asking them to comment, and always respond to requests, complaints, or compliments. You can also share content and comment on other’s posts, as well. Social keeps you top of mind without the resources it takes to create new content.
• Review Sites:If your owners or residents are happy with your services, ask them to write a review on Google, LinkedIn, the Better Business Bureau, or Yelp to boost your reputation and attract more prospects.
• Local Business Events:Make connections and share your expertise to attract new business in your community and stoke word of mouth, especially with local investor groups.
• Paid Search: Target certain search terms that potential clients are using and bid on them to have your name appear first in search.
• Matchmaking and Marketplace Services:Use one of these services, such as All Property Management, to do the marketing work for you.
• Professional Referrals: Encouraging referrals from other real estate professional contacts like brokers or investors is a start to building long term, lucrative relationships. Pro tip: It’s possible that you pay a cash referral to brokers and give them first right of refusal for any property sales that pop up with your owners.

Want to read more about filling up your marketing funnel? In this post, learn how toup your lead generation game.

You have your first client. Congratulations! Now it’s time to talk about fees and get that contract signed. Here are some tips to help you determine your fee structure and how you should handle contracts.

How Do You Set a Pricing Structure?

It’s mandatory to do your research when it comes to setting fees. Check out what other property managers are charging for similar services on comparable properties. Look at your own revenue goals to see if you can offer more competitive pricing and consider the types of properties you are taking on.

Staying competitive may depend on the pricing structure and what’s bundled in yourongoing management fee,which includes your baseline service.

While most of the time this fee will bundle handling residents, accepting rents, staying on top of maintenance, and conducting inspections, you want to make sure you don’t assume a one-size-fits-all approach that makes it near impossible to turn a profit.

If you are already going in with a sizable portfolio, you’ll need to know how much you’ll pay each property manager. If you bring them on as independent contractors, will you compensate them by the number of units, gross rents, or percentage of rent collected? These are all tricky questions, again, that can be answered by knowing your market and its workforce.

That said are three common ways property managers usually set their ongoing management fee:

• Percentage-Based Fees: Some suggest that property management fees fall between 8 and 12 percentof the rent, while others recommend different rates. The reality is that this will depend on your local market, and your own services formula, so make sure that you do your research.
• Flat Fees: Some property managers charge a flat fee for basic services and offer other services as a package, or à la carte basis. It allows property owners to customize their services and choose only what they need.
• Per-Project Fees: If your property owner needs services on an ad hoc basis, this is the best and most affordable option for them. They won’t be paying for services they don’t use regularly, which they will appreciate.

À la carte fees to consider are setup fees, leasing fees, late payment fees, vacant unit fees and eviction fees:

• Setup Fees: This is a one-time fee for getting set up in your system. It’s even easier to justify when you have a property management platform in place. Pro tip: Many of our clients work property management technology into their sales pitch to demonstrate the value added through features like owner reporting and resident-facing portals.
• Leasing Fees: When a property is vacant this one-time charge helps you cover your services from finding a new resident to getting them moved in (e.g. rental listing syndication, showings, screening, leasing, and move-in).
• Lease Renewal Fees: This fee covers lease renewals, which can be a smart idea if there is a rigorous renewal process in place.
• Eviction Fees: While you’ll clearly want to avoid evictions through proper tenant screening, sometimes they happen. This fee will help cover the time you spend following the legal process as a representative for the property owner.

Again, knowing your market and having a firm idea of how you spend your resources will give you some more direction on how to best set your pricing, which will adapt over time. Learn more about setting pricing structure and feeshere.

Creating Solid Property Management Contracts

Remember that old saying, strong fences make good neighbors? Well, solid property management contracts make stable business relationships. A contract should spell out the roles and responsibilities of the property manager.

Awell-thought-out contract will include:

• Management fees
• Off-duty coverage
• Work hours and vacation time
• Workman’s comp, liability insurance, and indemnification from loss and damages
• Whether you or your property managers will live on-site
• Maintenance and repair budgets
• Emergency funds
• A detailed description of the services promised
• A timetable for invoicing and any penalties for non-payment

We recommend to always have a lawyer look over your contracts to make sure everything is locked down, and to put it together a template for all of your contract negotiations.

You and your team will interact with residents every day. Creating a memorable resident experience, where renters are engaged and happy, keeps your properties running smoothly, helps you attract other residents through word of mouth and builds your reputation with property owners.

To do that, target the right residents for your properties, foster a sense of community, and keep the lines of communication open.

Providing the Right Experience and Amenities for Your Residents

The kind of resident experience and service you provide will depend on the preferences of the residents your properties attract. Residents are looking for more than four walls and a roof. They want a convenient arrangement that lines up with their lifestyle—and feels likehome. Apartments in the city may attract young professionals, but they may also attract retirees looking to downsize. Houses and condos may attract families.

Take your resident population into consideration for every aspect of your property management business, from emergency planning to facilities to run-of-the-mill communications.

For example, an older population may be more comfortable receiving communications via email or letters in their mailboxes. Their social media platform of choice is most likely Facebook. Meanwhile, a young family may prefer text notifications.

Pro tip: Use an onlineresident center(or a portal) so your residents can access the information they need, pay their rent, and communicate with you through the convenience of a mobile app.

If you are managing multifamily properties with communal spaces, have you considered the kinds of amenities you’d like to offer your residents? Perks such as an event calendar work spaces, outdoor fitness areas and mailboxes for Amazon packages help properties stand out. Often, you often won’t be able to control what the amenities are, but you can create an amazing resident culture and control how you market them.

How to Handle Complaints, Requests, and Disputes

For everycomplaint, request, and dispute, hear out your residents and let them know that you take their issues seriously. If it’s something you can resolve or fix, do so as quickly as possible and give your residents a timeline.

If it’s something you can’t fix, explain why.

How to Create Emergency Plans

Property managers need emergency plans for everything from fires and burst pipes to earthquakes and hurricanes. Your plans should be clear, detailed, and tailored to the kinds of emergencies and natural disasters common in your area.

Learn more about creating emergency planshere.

Once you decide—or the market decides for you—which kind of properties to target (single-family, multifamily, condos, etc.), it’s time to start thinking about the requirements you’ll need to meet to manage them.

Handling Maintenance and Repair

Choosing to offer maintenance and repair services could be a big sell for potential clients who don’t want to deal with the time and cost of maintaining their properties or fixing unexpected issues.And it’s a win for your business, too, since you can mark up the cost of repairs while taking one more worry off your property owners’ plates.

Here are some things to keep in mind if you choose to offer those services:

• Include a clause in your contract that spells out exactly which services you will provide and how they will be paid for.
• Make sure yourliability insurancecovers all work you do as well as all employees and contractors who do the work for you.
• Put a reliable work order system in place. You can even use a platform such as Buildiumto encourage residents to submit work orders online. Then use it to track the work from start to finish.

Assembling Your Leasing Services

A big value add that many property management companies offer is filling vacancies. Clearly, you’ll want to minimize unoccupied units that will cost you and your owners money in lost rent.

Likewise, you’ll want to make sure you have a lean and mean process to get high-quality residents into their homes quickly, efficiently, and with a strong first impression from lead to lease. Technology can deliver in spades here. Below are all the ways technology can be the rocket fuel for your leasing process.

1. Marketing Listings: To market a listing, you’ll need to advertise it and attract quality renters. Many property management platforms have rental listing syndication that you can use to blast out a single listing to multiple sites such Zillow and Trulia with one click.
2. Showings:Once you attract interested renters, you’ll schedule showings, which can be a full-time job in itself. That’s whyshowings and scheduling softwarecan be a massive time saver.
3. Tenant Screening: Next, you’ll want to screen applicants using a partner such as Transunion, who specializes in background checks.
4. Leasing:Finally, you want to make the leasing process fast, convenient, one-hundred percent organized. Property management software also has an easy solution for you to avoid all the paperwork andcollect signatures electronically and stored online.
5. Property Inspections: As residents move in and out, and also during the term of a lease, you’ll want to conduct inspections. Why not conduct your inspections through a mobile app? Doing so will ensure damage beyond normal wear and tear is recorded, repaired, and paid for by the right party, while staying compliant with city and state building codes.

How to Remain Compliant

And speaking of building codes, compliance is a very big part of your job that can’t be overlooked. It will be up to you to stay on top of rules and regulations on things like elevators, sanitation, and building permits. You will also have to pass regular inspection with the fire department, which will look for property placement of smoke detectors, extinguishers, and signage for fire exits.

Learn more about legal considerations and compliancehere.