New property managers and old real estate pros alike often think of starting a property management company of their own. They have all the skills, knowledge, and experience to do it successfully.
The benefits of starting a property management business are many, and it’s one of the most affordable and straightforward real estate businesses to start. Real estate professionals in any subset of the industry can gain leases and screen tenants easier as a property management company, and they stand to increase their net income considerably as a result.
Running a property management company can look deceptively simple, especially if you have some experience, but there is a lot to consider that might not be obvious at first. This guide will walk you through some essential knowledge, what kind of tech tools and business structure it takes, and what you should know before taking on your first project.
Ideas on Starting a Property Management Company
Learning the business is no piece of cake, and there is a fair amount of study and testing involved for degrees and certifications. Here are a few tidbits of knowledge about starting a property management company that you don’t usually find out until a few years down the line:
Know the Law
Property managers need to be aware of the many legal constraints on doing business. Two federal laws have a lot to say on the subject: The Fair Housing Act protects tenants from discrimination, and the Fair Credit Reporting Act governs how landlords and property managers can use an applicant’s credit report. There are also state and local laws to know, so check for any that apply in your state. Any property management company needs to know these laws thoroughly, because failure to comply can come with steep penalties.
The Importance of Screening Tenants
Every new landlord and property manager faces the immediate grind of sorting through applications to find good tenants, interview them, check their backgrounds, run checks, and take the numerous other steps that come before offering a lease. A fledgling property management company can either brace for that lengthy to-do list or explore how screening technology can make the process faster, easier, and more effective.
Filing for your property management company’s business license and choosing a legal entity are some of the most confusing parts of starting. Doing so helps protect your legal assets and distinguishes you personally from the business. Property management companies typically structure themselves as a limited liability corporation (LLC). Some use S-Corps and C-Corps instead, and either might be a better choice, depending on your circumstances.
The most significant factor is whether you want to file as a pass-through business or be paid as an employee. Money passes directly through an LLC to the owners. A C-Corp pays owners as if they are employees.
There is the risk of double taxation with a C-Corp, while S-Corps pass through taxes to shareholders, avoiding any chance of double taxation. Profits are taxed as personal income. It’s advisable to consult with a tax expert if you’re unsure of which business structure to choose, because the decision can make a significant difference in the bottom line.
Arming yourself with plenty of data is the best way to start a property management business, no matter which route you take. Researching the above topics will give you a good start on what you need to start your new enterprise.
4 Tips to Start a Property Management Company
Starting a property management company is relatively simple and can be an affordable business choice in the real estate industry. That doesn’t mean it’s a stress-free process, however. Here are some of the most valuable tips for getting started:
1. Write a Business Plan
Most people know you need a business plan to start any business. It gets harder to understand the importance of doing so when you know the industry inside and out. Having extensive knowledge and years of experience in the same job gives you an edge, but don’t let that lull you into thinking you don’t have to cover all your bases to start a property management business.
2. Check Your City’s Certification Requirements
Many states require property managers to obtain and maintain a real estate license to do business. Some states require a simple certification. There are many programs across the country to become certified in property management. Always check to make sure to have all the required documentation before beginning so you can avoid any delays.
3. Get Some Help in Marketing
You’ll need to get help in advertising and marketing your business unless you happen to be a marketing pro who’s also a real estate genius. Marketing is a world of its own, with tricks and trade secrets that are largely unknown to the rest of us. You’ll need that expert knowledge to get the word out and gain clients, even if you already have a base.
4. Join Property Manager Associations
Property management associations can be a great help. They give you a chance to network with other property managers and real estate agents, meet vendors, stay abreast of the industry, and allow you to get some exposure to new tools, technology, and information.
Starting a property management company is an exciting venture in a massive nationwide industry. Getting factors such as permits, tax status, and a business plan out of the way early is a great way to stay ahead of the game.
A Screening Platform to Ease Your Property Management Workload
The tenant and screening process is a heavy load for property managers, but it doesn’t have to be. Rent Safe’s innovative online platform makes the process easy and transparent for management companies and tenants alike.
Tenants can fill out custom online applications and upload required documents, and managers can correspond and monitor progress through our online dashboard. Make the choice to set your property management company up for success by giving Rent Safe a call today.