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How to Start a Property Management Business

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Published on March 10, 2022

Updated on September 23, 2022

How to Start a Property Management Business

Disclaimer: Step by Step Business’ content is for informational and educational purposes only. It’s not intended to be a substitute for professional legal or tax advice. All of our articles are thoroughly reviewed and fact-checked by our editorial team. Read our editorial guidelines for more details.

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Fast Facts

Investment range

$3,050 - $7,100

Revenue potential

$48,000 - $180,000 p.a.

Time to build

3-6 months

Profit potential

$43,000 - $72,000 p.a.

Industry trend

Growing

Commitment

Flexible

How to Start a Property Management Business

Property managers work for building owners to rent out rental property units, collect payments, and perform property maintenance. That might not sound like much, but it’s a $100 billion US industry expected to nearly double in the years ahead. You could start your own property management company with just a small investment and get in on the action. You’ll need either a real estate broker’s license or a property manager’s license, depending on your state, but you can acquire either within a few months and start making money. 

Becoming an entrepreneur, however, requires diligence and knowledge. Luckily, after reading this step-by-step guide you’ll have all the knowledge you need to launch a successful property management company.

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.

Pros

  • Flexibility – Start from home, set your own hours
  • Good Money – Get a percentage of all the rent you bring in
  • Low Startup Costs – Very little needed to get started

Cons

  • Licensing – Takes a few months to get properly licensed
  • Collections – Responsible for collecting on late payments, handling evictions

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.[1]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.[2]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.
property management industry size and growth

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.
property management industry Trends and Challenges

Consumer spending

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

Demand hotspots

  • Most popular states – The most popular states for property managers are Texas, Georgia, and Oklahoma.[3]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. 
property management demand hotspots

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.[4]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.
property management price differences

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 CostsBallpark RangeAverage
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.

property management business earnings forecast

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

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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. 

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. 

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as single-family rental management.

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

What? Determine your products or 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
property management business idea rating

Step 3: Brainstorm a Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

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: “Jim’s Bakery” over “Jim’s Cookies”
  • Avoid location-based names that might hinder future expansion
  • Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

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 Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

  • Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
  • Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
  • Product and Services: Describe your offerings in detail.
  • Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
  • Competitive Analysis: Analyze main competitors, assess their strengths and weaknesses, and create a list of the advantages of your services.
  • Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
  • Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
  • Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
  • Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
  • Appendix: Include any additional financial or business-related documents.

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

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

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 ZenBusiness’s 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.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

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 Licenses/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.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

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. 

Marketing

Some of your business will come from the casual online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness. 

Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products: 

  • Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area. 
  • Instagram: Same benefits as Facebook but with different target audiences.
  • Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Schedule Now”. This can sharply increase purchases.
  • Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers. 

Kickstart Marketing

Take advantage of your website, social media presence, and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:

  • Flyering – Distribute flyers in your neighborhood and at industry events. 
  • Email marketing/newsletter – Send regular emails to customers and prospects. Make them personal. 
  • Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
  • Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
  • Pay–per-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
  • Do a webinar – Share your property management expertise online with a video seminar.
  • Testimonials – Share customer testimonials about how your property management helped them.
  • Create infographics – Post infographics and include them in your content.

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. 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. 

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.

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
unique selling proposition

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: 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!

Property Management Business FAQs

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

You can start a property management business for as little as $3,000. Your biggest expenses are for a website and the education and licensing required.

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.

What licenses do I need to start a property management business?

You’ll need either a real estate broker’s license or a property management license, depending on your state. You may also need other business licenses and permits at the state and local levels. Check with your local governments for requirements or visit MyCorporation’s Business License Compliance page.

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.