In my 28-year real estate career as a broker and coach, I have worked with many agents who have asked about either adding property management to their current business or becoming a full-time property manager.
From the outside looking in, property management looks easy. Work with real estate investors to help them market and lease their properties, collect the rents, and occasionally make repairs… How hard can it be?
However, the truth is property management is very technical, and if you don’t set your systems up correctly from the beginning, it can be a very difficult and costly business to get into. In this article I will share the seven steps that will get you into property management successfully and sustainably.
1. Complete Your State’s Property Management Requirements
It may shock you to learn that not all states require a license to become a property manager. Idaho, for instance, is one of five states that only requires a person to be over the age of 18 and have a high school diploma to manage properties for others. Many states don’t require you to be licensed if you are managing property that you own or are Airbnbing your own house.
The remainder do require either a real estate license or property management license in order to manage properties for anyone other than yourself and direct family members. This includes managing short-term rentals such as VRBO and Airbnb.
It’s also important to note that in order to receive your license in most states, you will need to pass a criminal background check. Many others, like my home state of Colorado, also have special requirements for managing brokers. These can include additional insurance and specialized bank accounts.
Whatever the case, the first step is to visit your appropriate state’s website. Don’t rely on this article or any other blog, as state requirements change frequently and you want to ensure you are in legal compliance before starting to manage properties for other people.
2. Get Additional Property Management Education
To avoid common mistakes and to be the best property manager you can be, consider taking additional courses or certifications that are specific to property management.
Most real estate licensing education providers do cover the basic principles and requirements of being a property manager. However, they don’t cover the best practices that are required to be a successful property manager.
Property managers are responsible for collecting rent, paying expenses, and managing budgets, so understanding financial management is key. Therefore, your first goal should be to become proficient in budgeting, financial management, and reconciliation.
Second, you will need to learn how to manage physical properties, including scheduling routine maintenance and repairs, managing vendors, and ensuring compliance with safety regulations.
Lastly, you need to learn how to run your property management business. Look for courses like PM Success from property management coach Tony Cline that will teach you how to find property owners to work with. You’re going to need several clients if you wish to be successful and profitable.
Tony also teaches you how to manage maintenance requests, handle tenant disputes, and set clear boundaries with your property owners and tenants alike. Otherwise, you’ll be getting calls in the middle of the night when a tenant’s bathroom light bulb burns out!
3. Gain Property Management Experience
Of course, classroom examples are not the same as what you’re actually going to be going through as a property manager day after day. Therefore, once you have your required license in place and have taken some property management classes, you should gain some real-world experience before picking up your first client.
Successful property managers are skilled at finding clients, marketing properties, showing them to potential tenants, and closing leasing deals. Developing your marketing and leasing chops under another person will help you learn faster, develop better skills, and zero in on the right habits.
So how do you get real practice without the risk? Consider shadowing or even working for another successful property manager before going out on your own.
Do this by building a strong network of contacts within the industry, including other property managers, real estate agents, contractors, and property owners. Attend industry events and seminars to meet new contacts and build relationships with existing ones.
Ask if you can shadow a senior property manager or help them with their current clients. Even if the tasks they ask you to do seem entry level, you’re going to gain the experience necessary for a successful property management future. Besides, some may even pay you to show properties or conduct pre-leasing and exit walk-throughs.
4. Get Your Legal & Trust Accounts in Order
Now that you have your state requirements, education, and some experience in hand, you’re ready to go out and set up your property management company. This is the biggest step!
First you will need to register your business with the state, get the necessary insurance, fill out the appropriate contracts and forms, and set up trust accounts.
Some states require an additional license for property managers to operate as a separate business, so be sure to check with your state for necessary qualifications.
Next, contact your attorney and CPA to decide the best type of business classification for your needs. In many cases, a limited liability company (LLC) will suffice. You will also need a real estate attorney to instruct you on the legal jargon you should include in your contracts, disclosures, and forms to ensure you and your clients are protected.
Last, go to your bank to create your business operations and trust accounts. Trust accounts are different from operational accounts. In most states property managers are required to keep tenant deposits and rent payments separate from the property management business’ operating account. This is because the money in the trust account belongs to the client (property owner) and can never be used by the brokerage or management company.
Even if your state doesn’t require trust accounts, I consider it a necessity for anyone who’s serious about becoming a property manager. Commingling funds and misappropriation of your client’s money is the most common litigation in the entire real estate industry. Don’t fall victim to this common mistake. You can end up in hot water!
5. Find the Right Property Management Software
Great software is essential to any property management business—it’ll save you time and money. Many property management software today offers end-to-end capabilities, from lead management through final accounting.
Here are some must-have software features for property management:
- Leasing: Accept tenant applications, do background checks, and submit and sign leases, all within the program.
- Collect rent: Manage online and automatic payments, late payment reminders, utilities, and pet fees.
- Accounting: Manage bank reconciliations, vendor payments, and financial statements.
- Reporting and analytics: Produce owner and tenant analytics as well as tax documentation for the clients and the business.
- Marketing: Create fliers and even post listings directly to popular rental listing websites like Zillow, Trulia, and HotPads.
- Owner and tenant portals: These offer secure access to reports, maintenance requests, and even fund transfer services to property owners and tenants.
- Maintenance: Manage tenant requests, vendor communication, and billing.
- Business management: Keep track of the business’ expenses, income, and employee time sheets.
There are a number of piecemeal and all-in-one software options in this space. In particular, I’d recommend trying out TenantCloud’s system, since the company offers a free version of its software that includes listing management, applicant screening, access to a vendor network, rental payment options, and more.
6. Get Clients
It is commonly said in sales that, “Until you have too many leads, you don’t have any problems.” While you may have already spent a considerable amount of time making sure that you are compliant with the state, you have gotten the right experience, and set up your bank accounts and systems, now it’s time to go out and get your own clients.
Five Guaranteed Ways to Get Property Management Clients
Trying to tackle all of these strategies at the same time is overwhelming. So, start with the first and second strategies and add the others to your tasks as your revenue grows.
- Referrals and word-of-mouth: Ask all your friends, family, and colleagues to refer your property management services to rental owners. Once you receive a few clients, offer incentives or discounts to them for helping you bring in new business.
- Networking: Join professional organizations, attend local real estate events, and link up with investment groups to build relationships with real estate agents, landlords, and property investors.
- Digital marketing: Create a strong online presence with a professional website, social media profiles, and listings on property management directories. Use search engine optimization (SEO) and pay-per-click (PPC) advertising to drive traffic and generate leads.
- Direct mail: Send targeted direct mail campaigns to property owners and real estate investors in your area. Include information about your services, testimonials, and a strong call to action.
- Local advertising: Place ads in local newspapers, magazines, and websites that cater to property owners and investors. Consider sponsoring local events or sports teams to increase brand recognition and attract potential clients.
7. Stay Up to Date
Continue to educate yourself on industry trends, regulations, and best practices through seminars, workshops, and continuing education courses. Stay up to date with the latest technology and tools that can help make your job easier and more efficient.
Consider joining a professional organization for property managers, such as the National Association of Residential Property Managers or the Institute of Real Estate Management, to gain access to training, resources, and networking opportunities.
Continuing education and certifications will not only allow you to outperform your competition, it will also help you stand out from them. This will ensure you will be successful in property management for years to come!
Property management can be an outstanding and profitable career… that is, if you take the time to set your business up correctly! Don’t make the mistake of trying to wing it. If you do, you are likely to waste time and money, or even worse: break the law.
There are many experienced property managers who have walked this path before you and have already cleared the land mines, pitfalls, and obstacles. Learn from them first, then build the property management business of your dreams. I wish you the best of luck!