Dec 31

How To Open A Property Management Company

Starting your own property management company can be a game-changing move if you’re looking to expand your real estate portfolio or dive deeper into the real estate investment world. But how do you set up a company that not only survives but thrives in a competitive market? It’s more than just filling out forms and setting up an office. From understanding the right business structure to mastering your marketing, there are key steps that can set your company up for success.

In this guide, we’ll break down how to establish a standout property management business, from choosing the right structure to scaling for long-term success. Whether you're an experienced investor or exploring a new niche, these steps will help make your business stand out and succeed in the real estate management business.

What Is A Property Management Company?

A property management company is a valuable income-generating opportunity within the real estate industry. It acts as a bridge between landlords and tenants, overseeing the operation and maintenance of rental properties. These companies handle a wide range of responsibilities, including marketing rental properties, screening tenants, addressing maintenance concerns, and ensuring compliance with local housing regulations.

In essence, property management companies serve both property owners and tenants. For property owners, they perform essential real estate tasks like advertising properties, showing units, conducting background checks, and collecting rent. For tenants, they address complaints, conduct property inspections, and coordinate necessary repairs, ensuring a smooth rental experience for all parties involved.

Steps To Start Your Own Property Management Company

Starting a property management company can be a profitable venture, whether you're interested in managing residential, commercial, or industrial properties. However, it’s crucial to lay a strong foundation for your business.
Here are the essential steps to successfully establish your own property management company:

Step 1. Determine The Type Of Company

Before starting your property management business, it’s essential to decide which type of properties you will manage. Here are five common types of property management companies:

  • Single-family Residential Management: These companies manage single-family homes, condominiums, and townhouses. They handle tasks such as property maintenance, rent collection, and tenant relations, typically dealing with individual renters.
  • Multifamily Residential Management: Similar to single-family management, but for apartment or condominium buildings with multiple units. These companies manage a larger scale of tenants, handling similar tasks but on a larger scale due to the number of renters.
  • Commercial Property Management: These firms specialize in managing commercial spaces such as office buildings, retail stores, shopping malls, and industrial properties. They focus on tenant relations, property maintenance, and rent collection while adhering to specific business requirements and regulations.
  • Vacation Rental Property Management: These companies manage short-term rental properties, like cottages or condos, catering to vacationers. Responsibilities include booking, cleaning, and customer service.
  • Student Housing Management: These companies manage properties designed for student living, often in collaboration with universities. They handle both on- and off-campus housing, aligning with the academic calendar and addressing student-specific needs.

Step 2. Create a Thorough Business Plan

A well-crafted business plan serves as a roadmap for your property management company. It outlines your goals, target market, and financial projections, providing a clear strategy for growth and success.
Key elements to include in your business plan are:

  • Mission and Vision: Define your company’s purpose and long-term objectives.
  • Services Offered: List the services you will provide, such as tenant screening, property inspections, rent collection, maintenance, and accounting.
  • Market Analysis: Provide an overview of your target market, including details on customer demographics and your competitors.
  • Financial Plan: Outline your startup costs, ongoing expenses, and projected revenue.
  • Marketing Plan: Detail how you will attract property owners and market your services effectively.

Step 3. Obtain Licenses and Certification

In many regions, operating a property management company requires obtaining a license or certification. Depending on your location, this may involve completing specific coursework and passing an exam that covers the legal and operational aspects of property management, such as tenant relations and landlord-tenant laws.

For example, in Ontario, you don’t need a separate property management license. However, if you plan to engage in leasing or renting properties on behalf of others, you will need to register as a real estate agent with the Real Estate Council of Ontario (RECO).

Research the specific licensing requirements in your area to ensure you are fully compliant with local regulations before launching your business.

Step 4. Determine Services Offered

Before launching your property management company, it’s essential to define the services you will offer. Start by determining the types of properties you will manage, whether residential, commercial, vacation rentals, or other specialized types of properties.
Next, list the services you will provide to both property owners and tenants:
Possible Services for Property Owners:

  • Marketing properties to attract tenants
  • Screening and finding tenants
  • Showing properties
  • Collecting rent
  • Handling lease agreements and renewals
  • Property maintenance and repairs
  • Managing property-related finances and accounting

Possible Services for Tenants:
  • Addressing maintenance requests
  • Ensuring the property is in good condition
  • Responding to tenant complaints and concerns
  • Facilitating communication between tenants and property owners
  • Offering customer service related to the living experience

Step 5. Join Relevant Associations

Joining industry associations can enhance your credibility and help attract clients. Being part of these organizations shows your commitment to professionalism and allows you to stay updated on industry trends and regulations.
Some key associations you may consider joining include:

  • The Building Owners and Managers Association (BOMA) BC
  • The Association of Condominium Managers Ontario (ACMO)
  • The Professional Association of Managing Agents (PAMA)
  • The Real Estate Institute of Canada (REIC)
  • The Real Estate Council of Alberta (RECA)
Membership in these associations can provide networking opportunities, professional development, and valuable resources to support your business growth.

Step 6. Set Up Your Financial Structures

Managing finances effectively is a crucial aspect of running a property management business. You need reliable systems in place to track income, expenses, and rent payments.

Here are some key steps to properly manage your finances:

Open a Business Bank Account
Set up a separate bank account for your property management business. This ensures that your personal and business finances are distinct, simplifying tax preparation and financial management.

Choose a Pricing Model
Property management companies typically charge using different pricing structures. Common models include:

Flat Fee: A fixed monthly charge regardless of rental income.
Percentage of Rent: A percentage of the monthly rent (usually between 8-12%) is charged.
Hybrid Model: A combination of a flat fee and a percentage of the rent, offering flexibility based on business needs.

Step 7. Recruit Your Team

As your property management company grows, you will need a reliable team to handle various functions. While you may be able to manage everything on your own in the early stages, as your business expands, consider hiring for key roles.
Here's a breakdown of potential team members:

  • Leasing Agents: Responsible for tenant communication and lease agreements, leasing agents can help manage tenant inquiries and streamline the leasing process.
  • Maintenance Staff: To ensure timely repairs and upkeep, having a maintenance team on hand can help maintain property quality and tenant satisfaction.
  • Accountants: Accountants will handle financial reporting, budgeting, and ensure your business remains tax compliant.
  • Customer Service Representatives: These individuals can manage owner and tenant communication, resolving any issues and providing timely updates.

Step 8. Market Your Property Management Business

To attract property owners and build a strong client base, you need an effective marketing strategic plan. Here are some key tactics to consider:

  • Online Presence: Establish a professional website showcasing your services, customer testimonials, and contact details. Invest in SEO (Search Engine Optimization) to help your site rank higher in search results, making it easier for potential clients to find you.
  • Social Media: Use platforms like LinkedIn, Facebook, and Instagram to engage with your audience. Share valuable insights, success stories, and property listings to build trust and credibility among prospective clients.
  • Networking: Attend local real estate events, property management conferences, and industry meetups. Building relationships with real estate agents, property owners, and other professionals can lead to valuable partnerships and referrals.
  • Referral Programs: Offer incentives to your current clients for referring new property owners to your business. A well-structured referral program can help expand your client base and build long-term relationships.

Step 9. Select the best Property Management Software

Effective property management relies on using the right software to streamline operations and improve efficiency. Here are three types of property management software options to consider:

  • Online Applications: These cloud-based tools allow you to create online listings, manage communication, and store documentation. Popular examples include AppFolio, Buildium, and Rentec Direct. These platforms offer accessibility from anywhere and often come with features like automated rent collection and maintenance request tracking.
  • Desktop Applications: These are installed directly onto your computer and are used for managing listings and communication. Examples include PropertyManager Pro, PropertyManager Plus, and PropertyManager Express. These software solutions are often more secure but limit accessibility compared to cloud-based options.
  • Mobile Applications: These apps are designed for smartphones or tablets, enabling you to manage listings and communicate with tenants while on the go. Many property management platforms, such as TenantCloud and Cozy, offer mobile-friendly versions that provide flexibility and convenience for busy property managers.

Step 10. Catch Up on All Legal and Compliance Matters

Navigating the legal landscape is crucial in the property management business. From landlord-tenant laws to fair housing regulations and local zoning requirements, there are numerous legal obligations to uphold. Failing to comply can result in costly lawsuits and damage to your company’s reputation.
Make sure you’re familiar with state and local laws that apply to property management. It’s wise to consult with a real estate attorney to ensure your business stays compliant with all relevant regulations. Regularly update lease agreements and tenant screening processes to reflect any legal changes. By staying informed and proactive, you can protect your business and build trust with both property owners and tenants.

Step 11. Create a Strategy for Scaling Your Business

Once your property management business has gained a solid foundation and client base, it’s time to focus on scaling. This could involve expanding your service offerings, such as adding vacation rental management or commercial property services, or extending your reach to new geographical areas.

To effectively scale, continue investing in staff training and development, improving tenant retention strategies, and optimizing your marketing efforts. Networking with industry professionals through associations and conferences will help you stay up to date on the latest trends and best practices. These efforts will not only support business growth but also ensure you remain competitive as you expand.

Take Action and Build Your Property Management Empire

Starting a property management company is an exciting venture that requires careful planning, strategic decisions, and continuous effort. By following the steps outlined in this guide, you can lay the foundation for a thriving business.From choosing the right business model to staying compliant with legal regulations, each step will ensure that your company stands out in a competitive market.

The key to success is persistence, adaptability, and ongoing investment in your knowledge and resources. As you scale, remember that the real estate industry is constantly evolving, and your business will need to adapt to stay ahead of the curve.

Craving more expertly crafted content designed to elevate your real estate game? Check out Strategic Success Consulting for fresh strategies, insights, and exclusive materials that will take your business to the next level.

Frequently Asked Questions

Do I Need a License to Be A Property Manager in Ontario?

In Ontario, there is no specific license required to become a property manager. However, it is important to be aware of industry standards and certification processes. For example, joining the Real Estate Council of Ontario (RECO) can help enhance your skills and establish credibility. While a property management license is not mandatory, adhering to the Real Estate and Business Brokers Act is essential for compliance and professionalism in the industry.

What do I need to start a property management company in Alberta?

Starting a property management company in Alberta involves several key steps. First, you must ensure the company meets the required insurance standards and register for a business license. Business registration and compliance with local regulations are crucial. Success also relies heavily on building strong relationships with contractors, landlords, and tenants, as these connections will form the foundation of your business.

How to Start Property Management in BC?

In British Columbia, obtaining a property management license is a critical first step to legally operate within the province. This ensures you meet all regulatory requirements. After securing the necessary license, it's important to refine your contract policies and begin marketing your services to attract clients. Building a strong professional network is essential to your success in this competitive industry.