Property management is a surprisingly easy and affordable field to enter, requiring minimal training or experience, and almost no start-up capital for small businesses. That said, it is a multi-faceted business that involves bonding with many types of people (landlords, tenants, contractors), understanding local laws between landlord and tenant, and creating protocols for you. both effective and efficient. It is definitely not for everyone. Buying a rental property and becoming a homeowner come with many issues and responsibilities, and starting a property management business is no different. In fact, it comes with its own set of challenges and risks.
However, if you understand everything that is going on and enjoy managing real estate, a property management business can be very rewarding. Here’s how you can start one.
4 steps to creating a property management company
Step 1: start your business
As with all businesses, you will have to go through the process of setting up a legal entity (most property management companies are LLCs or limited liability companies), setting up a fax system and ” an email account, a desktop, business cards, etc. in. The good news is that you can do most of these tasks simply and inexpensively until your business starts up enough that you can afford more expensive services.
You can set up an LLC yourself without hiring an attorney. Go to your state’s official website and search for the LLC filing process in your state; then download your free organizational articles template and archive it (submission fees typically range from $ 50 to $ 150).
Setting up an office can be as simple as reserving a room in your home for business and possibly setting up a post office box for correspondence if you don’t want to give out your home address.
You will need a telephone number and a fax line. You can use your cell phone for everything; if you prefer, you can set up a separate work phone number through a variety of online services, which will automatically forward calls to your mobile phone. Plus, there are many online services that offer paperless faxing for as little as $ 10 per month.
Here are some questions to ask yourself when starting a small business.
Step 2: find customers
Real estate investors and owners can be found in greater volume at local real estate investment clubs. Join as many as you can and be aggressive in networking because this base is your bread and butter. You can find a directory of real estate investment clubs in all 50 states on EZ Landlord Forms, to help you find investment clubs in your area. Here are some helpful business networking tips to get you started.
You also need to network with people who are likely to recommend businesses in your own way. Realtors specializing in investment property are a great source of referrals, as many of their clients are new to the industry and will ask for recommendations for a variety of services. Local lenders are another great source of referrals and direct offers. Hard money lenders sometimes get stuck with rental properties and not in the realm of property management, so they tend to outsource them. Also check out these non-traditional venues and events for networking opportunities.
Step 3: Filling the rental units
Finding tenants is relatively easy, but finding qualified tenants can be more difficult. The first thing to remember is that your target market may search for homes differently than you do; While your first impulse might be to jump on Craigslist, your tenant group might search the local daily or weekly newspaper, or maybe just read the local newspaper in Spanish. Think about how your target tenants search and find apartments for rent, then focus on that medium.
Remember, you must comply with the Fair Housing Act, which means not targeting a particular demographic. Above all, make sure that your ad does not mention a certain type of tenant (for example, “perfect for one professional”), as these are considered discriminatory (in the example above, discrimination based on family situation). Learn about the Fair Housing Act before you start listing units.
When showing rental properties to applicants, be sure to confirm the meeting an hour or two in advance, to minimize time wasted due to no-shows, and carry plenty of application forms with you. rental (or better yet, leave a pile in the rent). Once you’ve narrowed your search for tenants down to a few strong applicants, manage your credit (using a service like Equifax Identity Report), criminal records, and eviction reports, as history almost always repeats itself.
Be sure to use a state specific lease, which includes all required addenda and disclosures. Most novice property owners and managers underestimate the importance of a solid lease, but it is the first document the judge will ask for in any landlord-tenant dispute. You can find free rental application, a variety of tenant selection services, and state-specific rental packages on EZ Landlord Forms.
Step 4: Property management
Good property management companies strive to minimize risk (i.e. the risk of litigation and damage to rental housing) and maximize client profits (by drastically reducing vacancy rates and rental accommodation). maintenance / repair costs). One way to do this is to offer incentives to tenants under your management (RentedSpaces recently published an excellent case study of an effective incentive program), which can range from simple offers like a drop in rent upon acceptance of long-term contracts. leases to complex point-based systems for redeemable rewards. It is essential that property managers are proactive and responsive when dealing with tenants, as most issues can be easily resolved if resolved immediately, but when they do develop they can lead to lawsuits, damaged rental properties and defaults. .
Finally, property managers will need multiple contractors on call to perform maintenance and repairs. These should range from inexpensive maintenance personnel to fully licensed contractors to tackle the most serious repairs. It is difficult to find competent but affordable contractors, but by trying out many different contractors and getting referrals from trusted colleagues, property management companies need to build strong, long-term relationships with a number of successful contractors. quality. Angie’s List can also be a good place to look for qualified contractors.
Property management is not for everyone and requires both a love of working with people and a willingness to act quickly and firmly when tenants break their leases. It is a business that can be started with almost no start-up capital, as it is primarily a people-focused service and does not require physical office space, merchandise, or equipment.
This is a guest article by Brian Davis of ezLandlordForms.com.