Like any other business, a property management company has required business component needs, to be successful. If nothing else a property management company will need all the equipment for running a modern operation and a work base. A lot of new business owners start working from their homes to manage cost and when the property management business eventually outgrows that particular setup, they rent commercial space and hire staff.
Here are some factors to consider when starting a property management business:
Business Structure. The first thing is to determine the legal entity you want to adopt; it could be an incorporated business (C-Corp or S-Corp) or a Limited Liability Corporation (LLC). The fees are about $150-$200 for creation of legal document through services like Launch by LegalShield or LegalZoom. You also need to register with the Attorney General office of your state and the fee ranges from $10 to hundreds of dollars.
Every corporation has its own pros and cons as well as tax implications, however you need to choose the corporate structure that is right for your business.
Property Management Licensing. You need to determine whether your company is mandated by your state to acquire a Property Management License. Most states in the country require specific licensing when starting a property management service. Property management business is considered a real estate brokerage business in most states. This is why a Real Estate Broker license is required in 41 of the 50 states for property management business, which means the licensee can conduct both real estate activities sales and property management activities.
In fact, only 6 states did not require licensing as at 2018 (KS, MA, VT, MD, ME, ID)
The remaining 4 states including DC (SD, OR, MT, SC) only require a particular Property Management license, which only limits activities involving company to property management.
Contact your Real Estate Commission if you need more information on your state’s requirements.
Pick a name. Choose a business name or/and logo. The next step is to get company stationery like brochures and business cards. Talented freelance designers can be found on websites like 99 Designs, UpWork or Fiverr.
Build your own website. Having an online presence is very important in today’s digital world. You need to build a good property management website where your tenants and potential clients can locate your company. Therefore, you need to create an online presence even before launching your marketing campaign. As soon as your site is up and running, the next step is to create a customized email account for your company.
Phone. A property manager is often on the run, and not always in an office. Your cell phone can be used for any form of mobile communication with your tenants, contractors and property owners, since you’ll probably spend more time away from your office conducting business.
Lawyer. There are so many laws governing real estate and property management. You should consider employing the services of a real estate lawyer to advise you both at the start of your setup and when you have questions along the line. They can help you handle your lease agreements, licensing, property management contracts, potential legal liabilities and your state compliance. You can also handle it yourself if you’re confident enough and have the requisite experience.
Bookkeeping. A good bookkeeper is very essential for the success of a business, and most new business owners end up taking on that role. But a property management company manages, not only their own business expenses; but the monies involved with the property. This will form part of your daily management routine, as you pay salaries, collect fees & rent, pay contractors, record income, meet overhead like phone, gas electricity bills etc. you can stay on track by getting a nice accounting software program designed for property management.
Accounting. Your company would likely employ a CPA at some point especially during tax season. An accountant will help you with the appropriate tax forms for your clients to help them report their expenses and rental income to the IRS.
Office Equipment. This includes copier, fax machine, laptop or desktop computer and scanners.