Whether you’re starting out as a property manager or have been running your business for a few years, there’s always room for improvement. Once you get your property management company up and going, unexpected challenges are inevitable.
For instance, you have to manage various stakeholders including HOA board members, landlords, unit owners, contractors, tenants, insurance providers… the list goes on.
However, as challenging as it can be to successfully operate a property management company, it can also be incredibly rewarding. Not only does the property management field have relatively low entry requirements, but it’s very affordable to start this type of business. All you need is a passion for real estate and a willingness to learn. Here are a few helpful tips on how to run a successful property management company.
1. Sort out the legal stuff
It’s important to determine the right legal structure for your property management company. This will determine the taxes you’re liable for, the amount of paperwork you have to file, and your level of personal liability.
Property managers who want to establish a long-term business are recommended to opt for a Limited Liability Corporation (LLC) or an incorporated business (C-Corp or S-Corp). Each option comes with its own pros and cons, so you’ll do well to consult with your lawyer or CPA to figure out the best choice for your needs.
Next, get an appropriate license that allows you to legally operate as a property manager in your state. Every US state has its own licensing requirements for property managers. Generally, you may need a Property Management License or a Real Estate Brokers License.
The next step is to come up with a name and logo for your company. Check with the U.S. Copyright Office before you register the name and design a logo to make sure it’s not trademarked.
When choosing a name for a property management company, it’s important to use relevant keywords that signify what your company’s all about. For instance, you may want to include words like “home” and “property management”.
Lastly, be sure to open a bank account with a financial services provider that you’re familiar with and that offers fair rates. All of these legal prerequisites will set a strong foundation for your business and contribute to your future success.
2. Cultivate an online presence
People don’t use the Yellow Pages to find service providers anymore. They use the internet instead. That’s why you need to cultivate on online presence, starting with an attractive, fast and reliable website.
For example, an investor that’s looking for a property manager in your area will most likely start his/her search on Google. Even if you give someone your business card, the first thing they’ll do is Google your business to find out more about you. The easier it is to find and use your website, the better.
Just make sure the company or person you hire to design your website has experience with building property management company websites specifically. The website must be user-friendly for landlords and residents alike, and it should also provide relevant tools to facilitate better communication between different stakeholders.
Most importantly, your website design should help you attract new clients and entice visitors to contact you without having to chase after them.
3. Build a good team
A property management company is only as good as its team. You cannot manage multiple clients if you don’t have the right talent in your corner. Thanks to property management software, you don’t need to hire nearly as many people as you used to. Here are the most important members of staff that you need to run a smooth operation:
- Accountant: It’s important to hire an accountant that specializes in real estate management because they’ll be familiar with the legislation. Your accountant will take care of your company’s books, track income and expenses, offer tax forms and relevant business advice. Your accountant should also provide you with up to date and honest reports as that show that they’re maintaining the records properly. With a good accountant by your side, you’ll never have to worry about the IRS.
- Real Estate Attorney: A real estate lawyer will protect you from any possible legal risks and make sure you stay out of trouble. They’ll also educate you about your company’s fiduciary duty while helping you to limit liability and protect your assets.
- Contractors: You also need to establish relationships with experienced contractors in your area. This includes contractors for landscaping, termite and pest control, HVAC services, locksmiths, painters, home inspectors, electricians, roof inspectors, pool service providers, and plumbers, to name but a few.
A team comprising of the above-mentioned service professionals will make it easier to face any possible scenario you come across.
4. Leverage property management technology
As a modern property manager, you must use technology to your advantage. You’re truly spoilt for choice with multiple property management tools and software options that allow you to automate most administrative tasks, saving you both time and money.
With good quality property management software, you can effortlessly optimize your website and market your business to attract new clients.
The best way to determine the best property management software for your needs is to create a checklist of your preferences. Some of the most important features to look out for include:
- Financial record management tools
- Property marketing tools
- Tenant vetting tools
- Rent tracking
- Record-keeping tools
- Lease management
- Maintenance request management
With this combination of tools, you can take care of most of the responsibilities that come with running a property management company.
You should also make sure that the type of software you choose is suited to the type of properties that you manage. For instance, a property management company that specializes in vacation home listings would require vacation rental software.
This type of software typically consists of customized tools that allow you to advertise vacancies, manage maintenance and cleaning schedules as well as calendars and check-ins, etc. There are many short-term rental software providers available out there, and you can easily find one if you do the right research.
One of the most versatile property management software providers available is Condo Control Central. It allows you to effortlessly communicate with clients and residents through various means including email, text, public announcements, etc. You can also use this software to automate almost every aspect of your business while enjoying updated analytics.
5. Price your services properly
When pricing your services, you want to strike a balance between profitability and competitiveness. Your rates should never be too low to the point where it’s difficult to break even. At the same time, your services shouldn’t be too expensive either as that can chase away potential clients.
To determine the best price for your services, consider factors such as the standard prices in your area, your experience level, etc. Here are some of the fees that you must incorporate into your rate:
- Setup fee: This is a once-off charge that’s meant to cover account setup costs.
- Ongoing management fees: As the name implies, this is a monthly fee that your clients pay to cover daily expenses like rent collection, communication costs, doing inspections, and responding to maintenance requests. Most property management companies charge about 5% to 10% of the clients’ monthly rental income.
- Leasing fee: This is a once-off charge that covers the cost of advertising a vacant unit and eventually placing a new tenant. It’s usually a percentage of the unit’s monthly rent amount.
- Eviction fee: As the name implies, this fee is designed to cover the time it takes to act as a middleman between the property owner and tenant/s.
Do some research on how much your competitors are charging to determine a competitive pricing structure. Make sure your pricing will place you in a comfortable position to deliver your services with ease. Remember, you must make enough to deliver a certain standard of service.
6. Create a marketing strategy
A business without a marketing strategy cannot honestly hope to grow past a few clients. An organized marketing strategy must include methods to search for and attract new customers through traditional and modern methods.
Traditional marketing methods include referral programs and word of mouth. You may also decide to join a local real estate investment club in order to meet investors and landlords.
As previously mentioned, a well-functioning website is a great marketing tool, especially when paired with other online marketing channels like social media. Online marketing gurus point to Facebook, Twitter, and LinkedIn as the best marketing channels for property managers.
However, starting a podcast is the latest online marketing craze because it’s a great way to leverage popular voice technology. It also helps to use SEO aka search engine optimization to improve your website’s visibility on search engines like Google. That way, when someone searches for property management companies in your area, your website is more likely to show up on the first results page.
7. Network, network, network
No matter how large your company grows, you can never be too good for good ol’ networking. Keep in mind that in real estate as in any other industry, it’s not always about what you know, but rather who you know.
It’s important to create connections with fellow industry professional including lenders, real estate agents, contractors, insurance providers, etc. You should always keep in touch with your current clients as well because they most likely move in the same circles as other property investors who might need your services in the future. Sure, networking takes time and effort, but it’s well worth it.
8. Thoroughly screen tenants
If one of your clients needs you to fill a vacant unit, it’s important to thoroughly screen tenants and don’t be in a rush to place someone without doing your due diligence. Placing the wrong tenant into a client’s property can cost a lot of time and money down the road and compromise your reputation.
Use resources like PublicData.com to acquire credit-related information about potential clients. While you do have to pay to conduct a search on this platform, it delivers faster and more thorough results than free options.
You should also visit the Department of Corrections, Department of Criminal Justice or Bureau of Identification in your state to check the potential tenant’s criminal record information.
The good news is you don’t necessarily need the other person’s permission to seek this information because it’s public record. Don’t forget to check the tenant’s history for liens and evictions. Be sure to check the felony record and sex offender registry as well.
Once you get the all-clear, you may present the person with a standard lease agreement knowing that they don’t have any past issues that might negatively affect your client’s property.
Failure to conduct proper due diligence on tenants before you place them can lead to issues that can prevent you from looking for and acquiring new tenants.
9. Take care of regular maintenance
The appearance of your clients’ properties is a reflection of your effectiveness as a property manager. Remember those prospective clients will use your current projects as a reference and benchmark for your quality of service. If you can’t take care of the assets in your care right now, how can you expect potential clients to trust you with their properties?
Always respond on time to repair and maintenance requests, and ensure those common areas are in mint condition at all times. This requires that you conduct regular inspections and stick to a maintenance schedule that includes landscaping.
10. Keep your clients in the loop
Make sure your clients know what state their property is in at all times. This means you must report to them regularly with regards to the property’s maintenance needs, costs, tenant information, finances, etc.
Running a successful property management company takes a lot of time, effort and dedication. You need to constantly keep up with the fast-paced real estate industry while managing the daily tasks involved in the process.
The real estate industry is incredibly lucrative, as most property investors and landlords don’t have time to manage the day-to-day operations that come with owning a property. If you’re really passionate about managing property and are willing to put in the hard work required to operate a property management company, then you can easily build a flourishing business.
Be sure to maintain positive relationships with all your stakeholders and keep up to date with the latest legislation. That way, you’ll chase after new clients with confidence knowing that you can easily handle the tasks required to keep them happy.