Real estate. It’s a can’t-miss way to make a fortune.
At least that is what most people believe. But running a property management company is much harder than it appears from the outside looking in. For example, you will have to handle repairs and complaints for the properties you manage. Guess who will be the first one called if something goes wrong at 2:00 in the morning. That’s right, it’s the property manager.
After all, you are managing people’s homes, condos, or apartments.
However, running a property management company can be extremely lucrative. This article will give you some tips for getting ahead in this highly competitive industry. Let’s take a look at how to successfully launch a property management company.
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Just about everything that deals with real estate, whether it’s construction, lending, or management, requires a license. So one of the first things you will need to do is to find out the licensing requirements in the state where you live. For instance, if you live in California you will need a real estate broker’s license. Other states have similar requirements. It helps to find out what licensing you will need before you get started.
Why is licensing so important? Well, licensing not only allows you to legally operate a property management company but it will also be needed if you expect to insure your company—which of course you do.
Have you ever heard the phrase “jack of all trades, master of none”? Well, don’t be that person. That is what happens when you try to be all things to all people. Instead, pick an area of focus and stick with it.
For example, if you are going to manage commercial properties then don’t get into managing multifamily housing. If you don’t know where to begin but live near a college or university, then you might want to consider student housing. In fact, student housing is one of the most profitable segments of real estate in the U.S. today.
However, this specialty will require that you have professional assistance, such as the help of student housing architecture firms. These firms understand how to design for the needs of students. They will help you to maximize the return on your investment.
Participate in a property management association. Doing so will help you to connect with other property managers, and importantly, with contractors and other service providers who work in your area. This will be helpful, as you are going to need to have a stable of reliable contractors on call to handle issues with the properties you manage.
In addition, the association will have helpful resources such as a document library with the standard contracts you will need to use for tenants and property owners alike. Granted, joining an industry association is not free, but it’s an early investment that will help to get your business heading in the right direction.
You are running a business, not a charity, and you need to know how much to charge. While a big part of this is understanding your costs, another part is knowing what the going rates are in your area. This is yet another reason to join an association.
Real estate is competitive. Most property owners are stingy. As such, you will need to study your market to find out the rental rates for low- and high-end properties and determine how much property owners are currently paying for property management services. From there, you need to look at how you will structure your prices to ensure that your property management company will be profitable.
If would be great if you could open a property management company one day and then manage 2,000 units the next. Well, if your dad is a millionaire property developer, then that might be the case.
However, we mere mortals will need to grind it out. This means that we will need to find agents and developers we can work with and build up a stable of reliable contractors. Both sides of the equation are important, so don’t try to grow too fast by signing up as many properties as possible without any contractors to do the work. Instead, know your limits and have a plan to get to scale.
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