Organized. Punctual. Straightforward. Honest. When tenants and landlords are scouting for good property managers, these are some of the qualities they hold in high esteem. Property managers and their businesses oversee the accounting, rent collection, maintenance and tenant placement of real estate. Everything from apartment blocks to government buildings use property managers to keep things running smoothly, and almost all of the day-to-day operations are on their shoulders.
While it's not a legal requirement, landlords with multiple properties will benefit from outsourcing their real estate responsibilities to an official property management business. This saves time and takes the stress out of rent collection, tenant screening and budget management. Tenants often find that when working with a property management business, repairs are completed quicker and rental disputes are mediated appropriately.
With their expertise so widely in demand, property managers have a good amount of freedom in choosing what type of properties they’d like to oversee, how many, and where. For those who want to pursue a career in this field, read on for some insightful tips on how to start a property management company.1
Lay the Groundwork
Starting a property management company is a complex job with many challenges to consider. For example, tenants can call at all hours of the day to make unreasonable requests, landlords might try to skimp on maintenance costs and contractors tend to overcharge. Holding it all together while keeping everyone happy—and still turning a profit—can be a challenge.2
However, if you work hard, put the time in and follow all of the rules and regulations, it can also be highly rewarding. The North American property management industry is valued at $5 billion, with an annual growth rate of 2.5%. Over the past 10 years, its annual revenue has grown from 61.84 billion to $88.4 billion, with residential property management experiencing the fastest growth.3
Those with experience in the industry say it could take between two to three years before you see any real profit. However, once you have a few hundred properties under management, your revenue builds quickly.2 An important part of knowing how to start a property management company is deciding which type of property would best fit your business strategy. There are four common types of property management:4
- Residential: This encompasses all types of personal residences, vacation properties, apartments, condos and real estate owned (REO) properties.
- Commercial: Commercial properties include all forms of private and public business-related buildings, such as shops, malls, restaurants, offices and gas stations.
- Industrial: Industrial properties cover things like factories, warehouses, mills, and distribution facilities.
- Special-purpose: These include sports arenas, churches, schools, resorts and theaters.
Depending on the state, there are certain legal requirements for running a property management business. While there is no official education required, it's highly beneficial to have a degree in real estate, finance or business administration.5 Property managers need to be well-versed in state laws regarding eviction procedures, lease termination, tenant screening and the handling of security deposits, and most of these subjects can only be mastered through higher education.
You will also need to know the laws regarding health and safety standards; in fact, you may need to gain accreditations in this particular category. Businesses are usually required to perform risk assessments on buildings, provide safety advice to tenants and ensure preventative and protective measures are in place.6 This can include locks, secured windows, smoke detectors, lighting and security cameras.
In certain states, property management businesses are legally obligated to have licensed real estate brokers, so be sure to check local and state laws to see what’s required of you.7
The Responsibilities of a Property Manager
A property management business takes on full or partial responsibility for the management of real estate units. To know how to start a property management company, you must have a full understanding of the duties and responsibilities expected of you. While the most common duties of a property manager are maintenance and rent collection, many property management businesses offer additional services. Some large apartment buildings and residential blocks choose to have a property manager living onsite for faster service and emergency issues.8
Here are some of the duties that may be expected of you when starting a property management company:
Ensuring your real estate is properly maintained is arguably a property manager’s most important job. Poor maintenance could lead to an accident or injury, which often results in legal action against the property management business. For example, old and rickety stairs could lead to a devastating fall and a potential lawsuit, all of which would need to be handled by the property manager.
All properties must be regularly monitored and assessed for any damages, leaks or hazards. The legal ramifications of failing to comply with health and safety standards could end up costing far more than the maintenance itself.9
From the landlord’s perspective, rent collection is the most important duty of the property manager. To keep your landlords happy, you must enact a strict rent collection policy and ensure tenants pay on time. To ensure prompt payment, property management businesses must set collection dates, late payment penalties and a clearly defined eviction process.7 Payment portals or rent collection boxes are a good way to standardize and streamline this.
Property managers are also commonly tasked with meeting and screening prospective tenants, managing tenant disputes and dealing with their day-to-day issues.7 It’s important to screen tenants to make sure they’re able to pay their bills fully and on time, maintain their living space and create a safe and friendly environment in the building. When issues arise between tenants, the property manager will act as a mediator and enforce whatever building rules are being broken.
Accounts and Budgeting
Property management businesses are expected to handle the accounting of the property, track all expenses and ensure the books are balanced. Property management businesses would typically hire an accountant and bookkeeper with experience in real estate to deal with these tasks.7
Property Management Software and Tools
When learning how to start a property management company, know that you don’t have to handle everything on your own. Several software packages can help you run various aspects of your business and lighten your workload. Some examples of property management software include Buildium, AppFolio and Yardi Breeze.10 These packages can be highly beneficial not only to your company but also to the landlords and tenants with whom you work.
Software platforms provide a single point of contact online where tenants can pay rent, landlords can check payments and you can do all your accounting and bookkeeping. Before starting your business, be sure to research all the software available and find one that suits your needs. With a comprehensive knowledge of the software tools that other property managers use, you’ll have a much better understanding of how to start a property management company.
Earn the Qualifications to Excel in Property Management
As mentioned above, property managers aren’t required to have a specific degree to enter the field; however, it’ll give you a significant advantage and make you more adequately prepared for the job than any other education could. The most direct and comprehensive route is to earn your Master of Science in Real Estate. More focused, faster, and more cost-efficient than an MBA, yet more in-depth and rigorous than a real estate certificate program—an online MSRE gives you a comprehensive knowledge of the processes and policies that clients will expect you to be familiar with, as well as helping you to identify your specialty.
Set up some time to talk with a Yeshiva University Admissions Advisor and determine if an online MSRE is right for you.
- Retrieved on January 25, 2022, from g2.com/articles/what-is-property-management
- Retrieved on January 25, 2022, from biggerpockets.com/blog/pros-cons-property-management-company
- Retrieved on January 25, 2022, from ipropertymanagement.com/research/property-management-industry-statistics
- Retrieved on January 25, 2022, from aceableagent.com/blog/property-management-definition-and-types/
- Retrieved on January 25, 2022, from baymgmtgroup.com/blog/how-to-become-a-property-manager/
- Retrieved on January 25, 2022, from mynd.co/knowledge-center/tenant-safety-whats-required-of-property-management-by-law
- Retrieved on January 25, 2022, from thebalancesmb.com/what-is-a-property-manager-2124842
- Retrieved on January 25, 2022, from buildium.com/blog/the-great-debate-which-is-better-on-site-or-off-site-property-management/
- Retrieved on January 25, 2022, from protechpropertysolutions.co.uk/health-safety-in-property-management/
- Retrieved on January 25, 2022, from investopedia.com/best-rental-property-management-software-5089988