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How to Start a Property Management Company

How to Start a Property Management Company

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How to Start a Property Management Company

If you’re looking to start a property Management Company, you’ve come to the right place. Since we’re going to show you exactly how to do it.

We’ll start with key property management industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.

Then we’ll discuss keys to not only starting a property management business, but succeeding in it!

How Big is the Property Management industry?

According to IbisWorld, there are 239,987 property management company in the U.S., that generated $61.8 billion in revenue last year. This represents an annual growth rate of 1.6% over the past 5 years.

What are the Key Segments of the Property Management Industry?

The Property Management industry includes companies that primarily handle the maintenance of commercial, industrial and residential real estate. Residential property management is, by far, the largest source of revenue for the industry. This is followed by non-residential property management and a mix of other property management accounts for the remaining portion of revenue.

What External Factors affect the Property Management Industry?

A number of factors affect the performance of the property management industry. These drivers include:

Office rental vacancy: Office rental vacancy rates measure the extent to which office space is occupied. The office rental vacancy rate is expected to fall in the coming year, representing a potential opportunity for industry operators.

Rental vacancy rates: Rental vacancy rates measure the percentage of total US residential rental properties without tenants. When the residential vacancy rate is high, industry demand falls, and vice versa.

Per capita disposable income: As per capita disposable income falls, consumers tighten spending habits, discouraging businesses from expanding or causing them to close branches. This trend, in turn, reduces demand for the leasing of commercial space.

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What are the Key Customer Segments in the Property Management Industry?

The largest customer segment in the property management industry are households, followed by commercial properties.

What are the Key Costs in the Property Management Industry?

Wages – Wages, are, by far the largest expense category for industry operators.

Purchases and marketing – Purchases estimated to account for 6.1% of revenue. Marketing costs are minimal and estimated to account for about 2.2%.

Rent, utilities and depreciation – Rent and utilities costs vary widely in the industry. Depreciation costs are low in the industry, as very little depreciable equipment is needed to run a property management company.

Other costs – The industry attracts a number of other costs. This includes interest expenses, agent and broker fees, and legal and insurance fees, though some of these costs are associated with purchases due to their necessity in managing property.

What are the Keys to Launching a new Property Management?

  1. Choose your niche – Some of the larger property management companies have a diverse portfolio, but if you’re just starting out, it is advisable to figure out which type of property you’d like to manage: residential (single family, multifamily), commercial (retail, office), or industrial
  2. Certification and Licensing Requirements – Most states do not require a Real Estate agent license, but there are a few that do. Find out if you are in one of those states. Also check with your local authorities to determine if there are other certification and license requirements.
  3. Set up your office – You need to have your own office – whether it is in your home or somewhere else – to meet with potential clients. Invest only in necessary office equipment, and upgrade or expand as your business grows. Establish office policies, like when the rent is due and how you’ll handle late payments.
  4. Network – Prospective clients will need to know you exist. One of the best ways to build your connections is by joining real estate or property management associations.Once you get established, you can expect referrals from those people in your network.
  5. Establish an online presence – One of the best way to market your business is by having a company website where prospects can find your services online.


What are the Typical Startup Costs for a new Property Management Company?

The cost of starting a property management business is dependent upon size and a host of other factors. Starting a property management business usually costs $2,000-$10,000.


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Additional resources in the Property Management Industry

For additional information on the property management industry, consider these industry resources:

 

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