Should You Start a Property Management Business?
Looking for a profitable business idea for 2020? Who isn’t right? Starting a successful business could very well be a happy, income boosting, and positive life changing event.
Freedom, self-determination, enjoying work you love, and of course, a potential windfall income is possible. And if your company does well, you could one day sell the business for a lot of money.
I’ve seen this process of start ups turning into million dollar businesses happen several times. One way or another, software and technology will be involved. Scaling up for lower margins, better service, and greater revenue is essential to succeeding today in any sector.
Where Are the Best Opportunities for 2020?
And where are the best opportunities right now? Real estate and more specifically rental property offers a solid, consistent income, tax benefits and growing equity. And the management of rental property offers one of the brightest outlooks. Add technology and automation to the picture, and you have the makings of a real winner.
The demand for rentals including vacation properties is expected to be strong in 2020 and beyond. The success of Airbnb is perhaps the best example. In this graphic below, the Urban Land Institute in their recent report on different types of housing offer unique opportunities.
Just recently RealPage, a real estate technology bought Buildium, a property management software company for $580 million. Companies today are cash-rich, and any company that can scale up for more profit is on their radar.
Looking for the Right Niche
But most entrepreneurs are stumped in creating a new business that could survive its first year. A pure IT company for instance requires extensive investment, is risky, and plays a competitive market. It’s only for the cash rich and technology sophisticated. Instead, applying that technology in the services sector is where unlimited potential exists.
How About a Property Management Service?
Consider the income/growth benefits you’re looking for, because property management might be ideal:
- Income: the salaries of property managers range from $60k to $126k depending on location and size of firm
- Technology: proptech software and devices are increasing the number of units managed and making it easier to manage them virtually
- Modernization Trend: property management is the last sector to modernize which means landlords and property managers are playing catch up, and technology is exploding the range of new features that might be offered to tenants
- Low Barrier to Entry: cost of entry into property management is low — limited assets and experience are needed depending on the size and types of services you’d like to offer
- Strong Rental Market Demand: rental housing is in short supply within a growing economy (US, Australia, Canada) and rent prices are rising
- Rental Property Construction: both multifamily and build to rent construction are on the rise
- Moderate Competition: many cities have only limited numbers of property management companies and there’s room for innovative startups
That’s 7 fundamental signs of opportunity. Yes, there are many niches in the residential or commercial property management fields. You can find the right mix of services to offer and do a better job of marketing your firm to beat other firms that may only have a few landlord clients. Some of the firms are “old school” practitioners and vulnerable to obsolescence.
Simple Definition of a Property Manager — a person designated and licensed to manage the operations and financial duties pertaining to a rental property, on behalf of a landlord/owner for a fee.
How Property Managers Make Money
Property managers offer services which they price by flat fee, or as a percentage of rent, plus incidental expenses. Pricing your service fees smartly is necessary.
The services you will charge for include: rent collection, leasing, maintenance/repairs, property inspection, advertising and marketing, cleaning, evictions, accounting and bookkeeping, and outdoor services. Bookkeeping and accounting appear to the hottest service of late.
Start on a Small Scale
To begin a startup on a small scale, you can manage rental properties for Realtors. And there are 2 million Realtors across North America. They have first hand access to many rental properties and landlords, and they’re always looking to manage these more effectively.
If you can prove you’re able to manage them efficiently and professionally, they might give you an opportunity.
Property Management Certification
In many US states, a real estate sales license is required to manage properties. However, if you were to partner with a licensed Realtor or broker, you’ll have the legal right to work as a property management company. There are certification and licensing organizations, namely NARPM and IREM.
It’s wise to begin with some training to give you the appropriate skills. If you’re already a Realtor, then the door is wide open. If expert contractors are needed, you can hire them. You can be hands on, or just a manager overseeing the work and managing the money.
What You Need to Get Started
After you’ve decided that starting a property management company is possible, you need to identify the resources you’ll need to service the rental properties of your choice. They might include:
- a business license
- property management software (landlord software)
- a vehicle
- handyman tools
- service invoices for maintenance/repair tickets (you can still hire licensed electricians, plumbers, etc when required by law)
- a smartphone or mobile device
Keep in mind that property management is more about people than property. Your empathy, communication skills, responsiveness, respectfulness will dictate how much work you’ll have to do. Managing repairs, securing monthly payments, and evicting tenants who break the lease agreement are going to be part of this work. Be professional at all times, and you’ll be paving your road to success.
The Right Software for Your Property Management Startup
Property management software is central to property management businesses. By automating work processes, and letting tenants help themselves, it cuts workload dramatically. I suggest you check out a cloud based solution, with affordable monthly subscription rate is a starting point.
Good luck with your new property management startup business should you decide to start. It’s wonderful to be your own boss and property management is just one exciting opportunity for you.