Start Your Property Management Business in 13 Steps

Key considerations to keep in mind when opening your property management business:

1. Licenses — Many states require property managers to have a real estate license. Check your state’s requirements and obtain the necessary licensing.
2. Certification — Consider obtaining certifications such as Certified Property Manager (CPM), Residential Management Professional (RMP), or Certified Manager of Community Associations (CMCA) to enhance your credibility.
3. Management tools and software — Invest in property management software to streamline tasks such as tenant screening, rent collection, maintenance requests, and financial reporting.
4. Niche — Decide on the types of property management services you will offer, such as residential property management, commercial property management, rental property management, and homeowners association (HOA) management.
5. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
6. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
7. Legal knowledge — Stay informed about the laws and regulations governing property management in your area, including landlord-tenant laws, fair housing laws, and property maintenance codes.

You May Also Wonder:

Is a property management business profitable?

Yes, you can make between 8% and 12% of the total rent of all the properties you manage. You just need to offer great services both to the property owners and the tenants.

How can I find real estate investors to use my property management services?

You can connect with real estate investors on LinkedIn and message them directly. You can also network with realtors, some of whom may be investors or who know investors.

What types of properties can a property management business handle?

A property management business can handle various types of properties, including residential properties such as single-family homes, apartments, condominiums, and townhouses. Additionally, they can manage commercial properties like office buildings, retail spaces, industrial properties, and mixed-use developments. 

How can I handle lease renewals and rental rate negotiations with tenants?

Handling lease renewals and rental rate negotiations with tenants requires effective communication and negotiation skills. Start the process in advance to allow ample time for discussions. Review market trends and comparable rental rates to determine a fair rental rate. Communicate the renewal terms and proposed rental rate clearly to the tenant. Listen to the tenant’s concerns and negotiate in good faith to reach a mutually beneficial agreement. 

How can I handle property inspections and ensure tenant satisfaction?

Schedule regular inspections to assess the property’s maintenance, address any repair needs promptly, and ensure compliance with lease terms. Provide clear communication to tenants about inspection schedules and procedures. 

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a property management company has pros and cons to consider before deciding if it’s right for you.

Property management industry trends

Industry size and growth

• Industry size and past growth – After years of steady growth, the US property management industry was worth $101 billion in 2021.((https://www.ibisworld.com/united-states/market-research-reports/property-management-industry/))
• Growth forecast – The US property management industry is expected to grow around 8% annually through 2028.((https://www.fortunebusinessinsights.com/united-states-property-management-market-106247)). 
• Number of businesses – In 2021, more than 310,000 property management companies were operating in the US.
• Number of people employed – In 2021, the US property management industry employed nearly 900,000 people.

Trends and challenges

Trends in the property management industry include:

• More and more renters are seeking single-family home rentals and tend to stay in those homes longer. This means less tenant turnover, which is good news for property managers.
• The perceived value of property management services is rising, which means that property managers are more in demand.

Challenges in the property management industry include:

• Increasing regulations regarding residential rental properties are presenting challenges for residential property managers.
• Rent prices are increasing, which makes it more difficult for property managers to find qualified renters.

Consumer spending

• Potential customer base – 36% of US households rent their homes.
• Average prices – The average rent in the US is $1,098.

Demand hotspots

• Most popular states – The most popular states for property managers are Texas, Georgia, and Oklahoma.((https://www.zippia.com/advice/property-manager-salary-by-state/))
• Least popular states – The least popular states for property managers are South Dakota, Hawaii, and Idaho. 

Price differences across the country

• More expensive – Rents are highest in Hawaii, California, and the District of Columbia, with rents between $1,600 and $1,900.((https://www.statista.com/statistics/1219332/average-apartment-rent-usa-by-state/))
• Less expensive – Rents are lowest in West Virginia, Arkansas, and North Dakota, with rents between $750 – $900.

How much does it cost to start a property management business?

Startup costs for a property management business range from $3,000 to $7,000. The main costs are for education and licensing, and a website. 

Education and licensing requirements vary by state but can usually be completed in a few months for under $3,000. You can also become a certified property manager through the Institute of Real Estate Management. You must have three years of experience to become certified. 

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 - $200	$175
Business licenses and permits	$100 - $300	$200
Insurance	$100-$300	$200
Business cards and brochures	$200 - $300	$250
Website setup	$1,000 - $3,000	$2,000
Cost of propety management education and licensing	$1,500 - $3,000	$2,250
Total	$3,050 - $7,100	$5,075

How much can you earn from a property management business?

A property manager earns 10% of the rent collected. If you’re working by yourself from home, your profit margin should be about 90%.

In your first year or two, you could manage 40 units at $1,000 rent each, bringing in $480,000 in total rent. Your annual revenue would be 10% of this amount, or $48,000. This would mean more than $43,000 in profit, assuming that 90% margin. As you grow your client base, you could start managing 150 units at $1,000 rent. At this stage, you’d rent a commercial space and hire staff, reducing your profit margin to around 40%. With annual revenue of $180,000, you’d make a tidy profit of $72,000.

What barriers to entry are there?

There are a few barriers to entry for a property management business. Your biggest challenges will be:

• Meeting the education and licensing requirements
• Competition from established property management companies

Step 2: Hone Your Idea

Now that you know what’s involved in starting a property management business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research property management businesses in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a property management company that offers 24-hour maintenance. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your services

First of all, you can decide whether you want to be a residential property manager or a commercial property manager. Either way, you should offer a full range of property management services to be competitive in the market. These services include:

• Finding tenants
• Renter background checks 
• Rent collection and evictions 
• Building maintenance
• Move in/move out walkthroughs
• Move out maintenance

How much should you charge for property management?

Property managers make between 8% and 12% of rents collected, for an average of 10%. You should check the prices of property management companies in your area to make sure that your prices are competitive. When working by yourself, you should aim for a profit margin of 90%.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be developers and property owners. Your best bet is to find them on LinkedIn. Once you have partner properties, your target market will be potential tenants. You can spread out your marketing to include sites like TikTok, Instagram, and Facebook.

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Property Management Company Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “property management”, boosts SEO
• Name should allow for expansion, for ex: “Golden Key Property Management” over “Commercial Property Group”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Property Management Business Plan

Here are the key components of a business plan:

• Executive Summary: Outline the main goals of your property management company, the services you will offer, and why it will be effective in the current market.
• Business Overview: Describe the scope of property management services you plan to provide, including types of properties you will manage.
• Product and Services: List the specific services you’ll offer, such as tenant screening, maintenance, and rent collection.
• Market Analysis: Assess the local demand for property management services and the characteristics of your target market.
• Competitive Analysis: Identify your competitors and state how your company will offer better or unique services.
• Sales and Marketing: Explain how you will attract property owners to your services, such as through digital marketing or real estate networks.
• Management Team: Highlight the expertise and roles of your team members who will contribute to your business’s success.
• Operations Plan: Outline how your daily business operations will be conducted, including property maintenance and client communication.
• Financial Plan: Provide projected financial statements and the financial strategies you will employ.
• Appendix: Include any supplementary documents that support your business plan, such as legal agreements or professional certifications.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to property management businesses. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your property management business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best options, other than friends and family, for funding a property management business. 

Step 8: Apply for Property Management Business Licenses and Permits

Starting a property management business requires obtaining a number of licenses and permits from local, state, and federal governments.

You will either need a real estate broker’s license or a property management license. Check with your state for requirements.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your property management business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as appfolio, Buildium, or Property Matrix, to manage your portfolio, payments, scheduling, application, and leases.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial. 

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful marketing strategies for your future business:

• Local Partnerships: Forge partnerships with local real estate agents, contractors, and service providers to create a network that can refer clients to your property management services.
• Referral Programs: Implement a referral program that incentivizes current clients, tenants, or business partners to refer new property owners to your management services.
• Educational Workshops: Host workshops or webinars on property management topics in your community, positioning yourself as an expert and building trust with potential clients.
• Online Reviews and Testimonials: Encourage satisfied clients to leave positive reviews on popular review sites, and use these testimonials in your marketing materials to build credibility.
• Social Media Engagement: Actively engage on social media platforms by sharing valuable content, industry insights, and success stories to establish your brand presence and attract potential clients.
• Targeted Direct Mail Campaigns: Develop targeted direct mail campaigns to reach property owners in specific neighborhoods, emphasizing your local expertise and personalized services.
• Leverage SEO: Optimize your online content for search engines to increase visibility among property owners searching for management services in your area.
• Host Open Houses: Organize open houses for rental properties under your management, allowing potential clients to experience your level of service and professionalism firsthand.
• Professional Photography: Invest in high-quality photography for your property listings to showcase the attractiveness of the properties under your management, attracting both owners and tenants.
• Customer Loyalty Programs: Implement loyalty programs for long-term clients, offering discounts or additional services as a token of appreciation for their continued business.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your property management business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your property management business could be:

• Full-service residential property management with 24-hour maintenance
• Commercial property management – keep your units fully occupied and maintained
• Single-family home investment property management and maintenance

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a property management business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in property management for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in property management. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a property management business include:

• Property Managers – assist with property management services
• Maintenance Workers – perform maintenance on rental properties
• General Manager – staff management, scheduling, accounting
• Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Property Management Business – Start Making Money!

Property management is a booming industry, and fairly easy to get into. You just need to get the appropriate licenses and start finding real estate investors who need management services. You can start from home as a solopreneur, and work your way up from there, building a big portfolio of properties under your care. Having great networking skills would come in handy for this type of business, so be sure to brush up on those.

You’ve got all the information you need, so now it’s time to launch your new property management company and start your lucrative career!