How to Start a Property Management Business

Between mortgage rates hitting all-time highs and inflation pain keeping inventory deflated, the real estate market has been overwhelmingly tepid in 2023. It’s a no man’s land out there.

In the face of this challenge, many agents and new entrepreneurs alike have seized the opportunity to start a property management business. Why? Because property management flourishes even in the most challenging markets.

Whether you’re ready to diversify your business income and create an additional revenue source for your real estate agency or you want to focus full-time on property management, read on to learn how to set yourself up for success as you start a property management business.

Why Start a Property Management Business?

Opening a property management company offers a number of powerful financial incentives for entrepreneurs. Some of these benefits include:

Infinite Scaleability: Unlike many industries where you’re inherently limited by time and production constraints, property managers with highly efficient systems in place can build their business to scale easily and efficiently. Even better, as you grow, the snowball effect becomes more apparent, with profit margin  increasing dramatically. Start with a single property and you could find yourself managing a large number of rentals in short time.

Never-Ending Demand: Housing is a fundamental need for every human being and investors need support to maximize their ROI. Even in the most difficult markets, property managers provide an essential service. This translates to a wide customer base for new property managers.

Recurring Income: Recurring income is a dream for entrepreneurs. Unlike extremely volatile sales commissions, rental management fees remain consistent month-after-month; when you take value-added services on top of your base management fee into account, you’re looking at handsome monthly profits.

5 Simple Steps to Start a Property Management Business

Whether you’ve been tossing around the idea of whether or not to start a property management business for some time or this is a new concept for you, it’s easy to get the ball rolling on building your business empire.  Use the five steps below to discover what you’ll need to do to get your idea off the ground.

1. Create Your Business & Brand Identity

Answer the Question: Who Am I?

Brand identity is the beating heart of any successful property management business, and its importance cannot be overstated. It’s the personality, the face, and the soul of your company.

Brand identity defines who you are. It’s the visual and emotional representation of your business, helping customers connect with you on a personal level. A strong, well-defined brand identity creates a sense of trust and credibility, making your audience more likely to choose your products or services over competitors.

Your brand also sets you apart in a crowded marketplace. A distinct identity highlights your unique value proposition, making you stand out amidst the noise. Customers are more likely to remember and recommend businesses with a strong identity, as it helps them make sense of a world brimming with choices.

Next, Register Your Business

You’ve selected the perfect business name and you’re ready to start collecting customers! Don’t get too carried away, because you need to register to legally conduct business as a property manager.

Working with a qualified business attorney can save you a world of headache, as you’ll need to register an LLC or corporation in your local jurisdiction; additionally, most states require special licensing for property managers and brokers. You do not want to run afoul of these requirements, as they could be financially and legally devastating!

Research the requirements for property managers to operate legally in your jurisdiction and make sure you are in full compliance before you begin accepting customers.

Finally, Tackle Logo Design & Branding Materials

After you’ve nailed down the perfect brand name, it’s time to partner with a designer who can deliver a professional property management logo for you. Don’t be tempted to cut corners and try to crank something out on your own. If things go as planned, this logo will be around for years and will be plastered across everything from business cards and yard signs to your office signage and staff uniforms. It’s worth investing in a professional product from a graphic designer who understands how to deliver an optimized product for you.

Collaborate closely with your chosen designer, offering feedback on various revisions. Ensure the logo works well across various platforms, from signage to websites, and maintains clarity when scaled. Remember, don’t rush the process; creating a standout logo takes time and thoughtful consideration.

After your logo has been developed, you’ll be ready to create the marketing materials you’ll use for prospecting and building your customer base.

2. Get Familiar with Landlord-Tenant Law

Mastering the ins and outs of landlord-tenant law is easily one of the most important priorities for anyone who wants to start a property management business. These laws serve as the legal framework that governs the relationship and responsibilities between property owners and tenants. Compliance with these laws is mandatory and ensures that neither party’s rights are infringed upon. Knowledge of the law prevents unintentional breaches and costly legal disputes.

By overlooking an important legal protection, not only do you place your investor in a difficult spot, but you could unwittingly make yourself liable for the infraction. Consequences of ignoring the legal structures in place include expensive litigation, government fines, and even the potential loss of your license.

Creating Leases and Property Management Agreements

Both your leases and property management agreements need to respect landlord-tenant law; remember, these are legal documents designed to protect both parties.

To that end, it’s important to consider the various clauses and restrictions you choose to put into place carefully. Some of the clauses you’ll likely want to include in your leases include:

Terms, Renewals & Termination
Use of Premises and Occupants
Pet Permissions
Payment Terms & Late Fees
Security Deposit & Handling

Again, working with a qualified real estate attorney is imperative to ensure nothing gets overlooked and your leases are fully compliant with all local and federal housing laws.

3. Implement Property Management Software

Most modern property managers rely on a suite of software tools to keep their business operating efficiently. These tools make it possible to manage all of your properties from one central dashboard. While features and functionality vary from platform to platform, most property management software provides the following:

Rental Listing Syndication
List your properties for rent and create an advertisement that highlights the key features of the unit; then, you can publish this vacancy to popular listing platforms like Zillow & Apartments.com.

Tenant & Owner Portals
In 2023, both property owners and tenants expect to have convenient tools available for managing their accounts with you online. Property management software typically has built-in portals that make it easy to publish statements, notes, and other important documents directly to your residents and the investors you represent.

Repair Portals
Don’t drive yourself crazy trying to answer phone calls and emails from angry tenants with repair issues; property management software helps take the guesswork out of repair work. Tenants can request repair work at any time and the system will automatically document it and prioritize it for you within your administrative dashboard.

From Appfolio to DoorLoop, Buildium, and Rentec Direct, there are a number of great property management software options available. Be sure to carefully research the benefits each offers and ultimately select one that will work with in tandem with your property management website!

4. Focus on Finances

It’s impossible to ignore the countless benefits that come with focusing on your bottom line. If you want to start a property management business that won’t just exist but will thrive, you need to identify financial tools that will help you to head in the right direction.

Start by choosing an accounting platform and keeping fastidious records. This will provide a number of unique benefits for your business, including:

1. Financial Clarity: Accounting software provides a clear and organized overview of your income, expenses, and profits. It ensures that you’re well-informed about your financial status at all times, enabling better decision-making.
2. Efficiency and Accuracy: Manual bookkeeping can be error-prone and time-consuming. Accounting software automates many processes, reducing the risk of human error, while also saving valuable time that can be allocated to other aspects of your business.
3. Tenant and Owner Relations: By accurately tracking rent payments, maintenance expenses, and owner disbursements, you foster trust and transparency with tenants and property owners. This leads to better relationships and increased client retention.
4. Tax Compliance: Accounting software helps you keep your financial records organized, simplifying the process of tax preparation. This not only ensures that you pay the correct amount of taxes but also prevents potential legal issues.
5. Business Growth: Tracking financial performance allows you to identify trends, areas for improvement, and opportunities for expansion. It helps you make informed decisions, develop effective strategies, and achieve sustainable growth.
6. Risk Mitigation: Monitoring your finances helps detect irregularities or discrepancies early, allowing you to address potential issues before they become major problems. This minimizes financial risks and liabilities.
7. Professionalism: Using accounting software and maintaining organized financial records adds a level of professionalism to your property management business. It instills confidence in clients and partners.

5. Add in the Extras

Once you’ve got the ball rolling on the big pieces, you’ll be ready to fill in all of the gaps as you get your property management business off the ground. Additional tools you may want to adopt include:

• A Dedicated CRM: Carefully track deals as they make it through your sales pipeline by using a dedicated property management CRM (client relationship management) tool. Not only will a CRM help you to increase efficiency and boost your close rate, but it will also ensure nothing gets missed when new property management leads land in your inbox. If you’re looking for a tool for your business, DoorGrow CRM offers a number of impressive features that you’l love.
• Self-Showing Tools: What if you could collapse additional time for your business by making property showings a thing of the past? Tools like Tenant Turner and ShowMojo automate the leasing process and make it easier than ever before to fill your vacancies. Best of all, these platforms can help reduce the staffing costs associated with responding to inquiries and scheduling visits.
• Maintenance Software: Eliminate the back-and-forth between tenants and vendors when repair requests come rolling in; using maintenance software like Property Meld can help you to more easily collaborate with your service providers. It even works in tandem with GatherKudos, the review gathering tools designed for property managers to solidify a positive online reputation.

There are countless others that deserve to make the list, but you get the idea! Scaling your business becomes easier when you begin to harness the power of the various software tools at your disposal.

Looking for additional support for to start a property management business? Learn how the DoorGrow Foundations program is designed to help you launch your business and get your first rental door.