A property management company is similar to many other service companies. And like any company, your management business will require somewhere to operate and all of the gear that goes along with running a successful contemporary operation. To keep prices down, many new owners of rental businesses begin working from home, and if their company outgrows that installation, they consider leasing commercial office space and hiring employees.
Like any entrepreneur, you need to get down the basics to launch your property management company. You are the jack of all trades working on legal, marketing, sales, operations, leasing, showings, and the list goes on and on. This article is meant to review the landscape of starting a property management company with the ability to scale and become massively successful. We’ll start at ground zero - creating your business entity - and climb all the way up to scalable marketing and operations as you rapidly grow. Strap yourself in because any property management company will benefit from reviewing this guide.
Business Legal Entities
Speaking of jack-of-all-trades, lets brush up your legal skills. As a home management agency you will want to ascertain which kind of legal entity you would like to do business as; typically a Limited Liability Corporation (LLC) or a integrated company (S-Corp or C-Corp). Fee's normally run around $150-$200 for your authorized record production through services such as LegalZoom, and business registration fee's, trademark fees, along with your state Attorney General's office can be as low as $10 up to a few hundred dollars. There are pro's and con's to every kind of company including different tax consequences. At Latchel, we’re structured as a C-Corp, mostly because we have a large pool of investors that have ownership in the company and we give stock grants to our employees. Most property management firms won’t need to operate in this way, so they’ll either choose to become an S-Corp, which passes through income to each shareholder allowing you to distribute shares of the company, or most likely, they’ll form as an LLC with ownership percentages and income pass through as an LLC.
Determine if your organization must acquire a Property Management License in your own state. Of the 50 states including the District of Columbia, the majority of states do require particular licensing for a property management firm. The overall view throughout the country is a property management firm falls within the reach of a property agents action. Therefore, 41 states take a Real Estate Brokers license to your property management firm, permitting the licensee to run both land management and property sale actions. The remaining four states DC (DC, MT, OR, SC, SD) just requiring a specific Property Management permit, restricting that firm to land management tasks only.
Many real estate entrepreneurs partner with a broker who already has a property management license so that they don’t need to go through the licensing process. They may obtain a license 2-3 years down the road, but this method allows you to jump start your company without being hindered by licensing law.
Pick Your Name
Select your small business name and trademark it. When you have your management business name, create your business stationery like your own business card and flyers created. It's possible to discover talented freelance artists on sites like Design Crowd as well as Fiverr.
Picking a name for your company can be difficult. You may want to peruse a few marketing resources on how to pick a name. Think about the connotations of that name. Can that name conflict with different languages that may be spoken in your area? Chevy famously released a bomb in the Spanish speaking community when they launched the Chevy Nova (No Va? Does that mean “Doesn’t Go” in Spanish?)
Get a Web Site
Using a presence on the internet is absolutely crucial today and a cheap advantage for you. You are going to require a high quality property management site to get your prospective customers and renters to locate your new firm. Therefore, even before you start an extensive marketing and advertising effort, you are going to need to make this internet presence. As soon as you have your website up and running, you can produce a custom made business email accounts.
My advice is to contact Jason at DoorGrow to set up your company for rapid growth. Not only will DoorGrow build you an amazing website, they are experts in the rapid growth of property management companies. They make sure that your lead funnels are set up to get you the highest impact on revenue. What is a funnel you ask? A funnel is the journey that any of your prospective customers take before entering into a service contract with you. Believe it or not, this funnel must start far before you ever book an appointment to speak with a prospect.
Now, lets talk email before moving on. At Latchel, we use Gmail for Business. Google gives you access to their entire Google suite of products making shared documents easy to manage. Each email account only costs $5, so it is one of the more affordable business accounts. In addition, Google integrates with thousands of other platforms making it easy for you to scale your technology.
You’re an entrepreneur. You’re scrappy. You probably utilize your current mobile phone for cellular communication with tenants, home owners, and builders, since you will probably spend much of your time from the office running your company on the street. This will quickly become a bad idea.
As you scale, you’ll want to offload all those tenant and vendor calls to a company like Latchel so that you can keep your focus on growth. If your tenants and vendors have easy access to your cell phone number, it makes switching those to Latchel more difficult. Instead, set up your cell phone with a provider like TalkRoute. This lets you build a phone tree into your cell phone number so that when tenants call, they can press #3 for maintenance and you send them over to Latchel instead of letting them through directly to you. Our #1 option for any phone provider is TalkRoute.
Your other option is to set up a Google Voice number and temporarily forward it to your cell phone until you have another option, like Latchel, configured. Many of our customers use a complete VOIP system like RingCentral or Jive, which also lets you configure transferring and call forwarding.
Property laws and law regulating property management are varied and many. Think about selecting a real estate lawyer to get guidance, both in the commencement of your startup and in case you have any queries or problems on the way. They can help with questions about a rental arrangement, contracts, possible legal obligations, compliance and licensing on your own state. Another choice is doing it online in case you feel confident you've got the expertise.
In all cases, you’ll definitely want an attorney to represent you in evictions cases. Don’t do this yourself. It is a time trap and not worth your time. Learn from the mistakes of many entrepreneurs and offload this piece to an attorney whatever you do.
All companies rely on a fantastic bookkeeper, and in case you are starting out in your own this will probably be you. This is going to be a normal part of your everyday property management responsibilities, as you accumulate rent & charges, pay wages, record earnings, cover contractors, fulfill overhead like telephone bills, electricity, gas etc.. Possessing a good accounting software application that is built for property management can truly help you keep on track. Latchel’s recommendation is to avoid any software that doesn’t have open API access because it massively limits your ability to plugin 3rd party applications. Look for a solution with an open API that isn’t too cost prohibitive to developers. Rentec and RentManager are both options.
You may also want to hook up with a company like Planet Synergy to help offload some of the menial manual work involved for bookkeepers. Planet Synergy provides a team of bookkeeping VAs that will take things like invoices and upload them into software for you.
Sooner or later, your business is going to want to engage the assistance of a CPA particularly when tax time rolls around. An accountant can offer the correct tax forms to your customers so that they in-turn can report rental income and expenses to the IRS. At Latchel, we use the Digital CPA to run our bookkeeping and accounting. The platform that we use to run our company finances is Xero.
When sending reports to owners, go digital as much as possible.
How Do Real Estate Management Businesses Get Paid?
Determine Your Pricing
This is vitally important for your success. Contemplate your pricing structure and what you provide for this pricing as a crucial use of your property management firm. If you have been a property manager for a while, you are going to be aware of what the industry standard is to your region and where you sit on the industry averages. If you are only getting started, below are a few frequent charges to take into account.
Also known as an 'onboarding fee', this one-time fee is billed to landlords to the price of preparing an account with you personally and may incorporate an original property review and 'welcome' materials for potential tenants. A normal setup fee is about $300, but can be as high as one month’s rent.
It's usually equal to a month's rent or some proportion of a lease just like 50%-75%. It insures staging the house, set the property available for lease, revealing it to potential tenants, providing software, screening potential tenants, preparing the rental, and transferring the renter in.
This is the bread and butter. It may be up to 10 percent of monthly rental income, or as low as 3 percent based upon the regional market. It insures daily operations like communicating with tenants, collecting rent, managing inspections and responding to maintenance & repair asks. Make sure your management fee is high enough to actually support your maintenance coordination costs. Even better, charge a % fee, plus a fixed amount per unit based on Latchel’s coordination service cost. This way, you can create superior maintenance operations using Latchel’s platform. This fee ranges between $3-$8/unit.
This fee as its name implies is for missed or late lease payments and is suggested in the rental. Some property management companies will continue to keep a percentage to the processing of an overdue charge.
Maintenance upcharge fee
This is sometimes billed for coordinating repairs and maintenance to your rental unit on behalf of the landlord. We recommend nixing the maintenance upcharge unless you’re operating as a General Contractor. To keep incentives aligned, you shouldn’t benefit from an owner paying more for maintenance. For this reason, we recommend eliminating an upcharge, but many property management entrepreneurs still choose to make it a profit center.
Many property management providers will cost, as an instance, an extra 10%-20% in addition to a specific repair. Average yearly maintenance costs to owners are around 1.5 times the monthly lease fee so that it can be a substantial source of earnings when you've got a substantial number of units under management.
Lease Renewal Fee
This discretionary fee is billed when renewing the lease for a present tenant and is normally about $200 or less. Just like a late charge, this is sometimes billed to the renter, and also the property manager may maintain a proportion of their entire fee for processing.
This is optional but it's strongly advised that you charge owners this fee, since you'll probably be called to act as the liaison or perhaps official agent to the house owner in the eviction procedure.
This seems intuitive, and as an experienced property manager, you will appreciate the worth of an expert professional community to your property management firm. Sooner or later, you'll need to outsource work to a different contractor or business to aid in managing your customers' rental portfolios. You know you can not do it all, therefore discover the dependable and affordable contractor and deliver them into the fold. Here are the contractors you want access to:
Remember that building relationships takes time. Alternatively, if you’re light on contractors, work with a company like Latchel to fill out your vendor network for you. You’ll find pre-vetted expert contractors and over time you may build long lasting relationships with them.
Another way is to contact affiliate contracts of your local property management associations. Usually these affiliate vendors will post their information on the association website for you to access.
Property Management Associations
Consider joining a home management association, doing this will; provide you chances to network, meet other land managers, realtors & sellers, share knowledge and experiences, keep you abreast of business information, introduce you to the latest resources and technologies, and also provide you access to more education and qualifications to differentiate yourself from the competitors. Below are 3 associations that will help you grow as a property manager:
For commercial and residential property managers. For residential business pros. For property managers of smaller sized houses, realtors and brokers. For HOA board members, investors and owners, community managers, association management companies and sellers. Professional certifications is something all real estate professionals should take into account. You will not just hone your professional skills but place yourself apart from the competitors. If you do not have them, a few of the most frequent designations are:
Keeping Property Owners and Residents Satisfied
As a professional rental property manager, you understand the value of keeping property owners and tenants happy. In reality, your company’s success is determined by keeping existing customers satisfied. Nearly 70 percent of customers have signaled that they are ready to pay more to get a better customer service experience. That means you're going to want to make every attempt to fulfill your owners and renters by integrating these points:
That is a major one. Bear in mind, tenants are clients too and they appreciate their time as far as you value yours. Within our fast-paced society even in the event that you can't offer a direct response or solution, an immediate acknowledgment is anticipated and valued. Stay organized and track all of your communications with customers as they arrive in.
Maintenance services like Latchel ensure that your tenant’s are covered for immediate response in the case of an emergency. You want to ensure you have 24/7/365 coverage so that if a flood, major leak, or other maintenance emergency occurs, your tenant can reach someone. In the same vein, you want to make sure your contractors are going to be dispatched to resolve the emergency so that property damage does not occur. This is the #1 reason why property managers set up Latchel when creating their property management company.
Focus On Renter’s Concerns
Let us face it, tenants generally only call if there's an issue. Like us, they’re busy too and don’t want to be bothered unless there is a real problem. A fantastic property manager will always make time to get a tenants worries, and attempt to ease their worries by ensuring actions will be taken in a prompt way. The very best entrepreneurs ensure they have systems in place to take care of tenants without having to personally address every concern. What systems can you put in place to do this?
First and foremost, set up your maintenance system. Next, set up a reception or answering service for leasing questions so that you aren’t missing prospective tenants.
But be upfront and honest with customers and do not make claims you can not maintain, summarize a realistic deadline for your maintenance petition for the renter or landlord -- in case you can't locate a contractor to repair their own AC unit for 24 hours, then inform them. A renter lets you know they won't make lease this week, kindly remind them of their prospect of late penalties and their duties under the rental. Clients will love the honesty and effort and feel they're a priority.
Follow Up Communication
So, you have reacted promptly and listened to the tenants' concerns. Keep this up. Now's the opportunity to deliver on your promises and resolve that rental properties difficulty. Assessing your follow-ups, particularly in regards to complaints and upkeep problems. Where there is smoke, there's fire so put out those fires whenever possible. But lets be honest, things work better when you can preempt those fires with fast coordination efforts.
Tenants will value your efforts and won't be as likely to worry when they contact you for something later on. It is important for any property manager to realize that today's success is tomorrows prospect. You can’t get better by staying the same, so always push the envelope to improve.
From the highly competitive world of leases and land management, it's vital to get your finger on the heartbeat of renters at the properties that you manage. One lousy experience can be sufficient for many residents to leave at lease end, but this is often the biggest timesuck and cost for a property manager. High tenant retention is pivotal to run a higher margin real estate business.
Make care to speak with long-term tenants and ask them to get their views and concerns about the rental house, your management firm, as well as the house owner/landlord. And in all stages of the leasing adventure; signing the rental, moving, paying rent, overlooking a lease payment, complaint resolution, the state of the house, personnel interaction, other citizens, flooding and moving outside -- request comments.
Simply take those comments and learn from them. At Latchel, we take tenant comments for every single work order we coordinate in order to learn and grow. In the event that you or your employees have made some errors, now's the time to be certain they are not replicated. If additional training is necessary for you or your employees make it happen. If you need more assistance by means of cutting edge applications, invest in it. All this is done in order to boost your efficiency and ensure tenant satisfaction.
Communicate with Tenants Often
Wherever possible, keep tenants in the loop for any action that can impact their everyday lives, be it within their leasing property especially or in the larger neighborhood. Give lots of advanced notice to permit the tenants to plan. Therefore, if you're getting the parking lot repaved, do not wait until the afternoon of work to request residents to move their cars. This can be a really significant part pro-active property management and providing exceptional customer services.
Successfully coordinating between all parties is not the easiest task. You must build processes around it and ensure that your team follows those processes.
The phones are silent, there aren't any outstanding maintenance problems and all complaints are addressed. What should you do as a home manager with a small additional time? Get in touch with the owners about their own investment. And I do not mean through the yearly accounts or regular bulletins. I suggest reach out to validate the worth your services even if things are moving smoothly.
Send them an email or call them whenever time allows. Build rapport with them and allow them to know "what is going great" with their leasing property whilst renewing their confidence in your character.
As we have seen previously in this guide, handling your own time in property management is crucial. As a property manager, you understand a good deal of effort and time is spent on solving problems which come your way on a daily basis; by signing lease arrangements, to processing a leasing payment, to coping with terminations of poor tenants, to issuing work orders, to running a walk-through of a condo for property investors. Being exceptionally effective ensures that all of the essential tasks can be achieved in a timely way to maintain occupants happy whilst freeing you up to concentrate on different sections of your property management firm.
Which technologies can help?
systems of record
Utilize property management software that will assist you in becoming more organized and efficient with your workplace jobs. You’ll want to use an accounting software like Rentec or RentManager. If those won’t work for you, you can choose a closed system like Appfolio, Propertyware, Buildium, or Yardi.
While these softwares are great for accounting and systems of record, they fall short when it comes to maintenance. Opt for a dedicated maintenance software like Latchel or PropertyMeld. Both offer great automation tools. Latchel includes services like taking tenant calls 24/7 and dispatching for emergency work. This is a must have, so pick your platform carefully.
As a professional real estate manager operating in real estate, you ought to have the ability to fall back on audio documentation to help you when dealing with renters, home owners, investors, attorneys, contractors, and other specialists. Another benefit of Latchel, is that all communications are recorded in a log (including texts, emails, and calls) so that you never have mismanaged documentation.
Do not multitask; Multitasking in property management may easily lead into the vital things being overlooked, so split your calendar into time blocks. This is going to be challenging for a small home management agency initially, however you'll reap the benefits afterwards when you're more successful.
Utilize a method of note taking when you're working on the fly. Evernote is great for this and it can be shared across your entire team. You can also use Google Drive for this. If you signed up for Gmail for Business then your account comes with shared calendars, documents, and notes.
Becoming Massively Successful
You chose an entrepreneurial path because deep down you believe that you have the potential to create a massively successful business operation. The keyword here is POTENTIAL. You can’t expect to be a massive success over night. The way you get there is by continuously improving. You can’t get better by staying the same, that means challenging conventional wisdom and traditional approaches to do something 100x better than your competition.
Look at the ways to innovate as a property manager. Look for the scalable operations platforms to help you rapidly grow. Look for the marketing methods nobody else is implementing. You only stand above the crowd by standing out.