Is starting a property management company worth it? Establishing a profitable business is tempting, but we know it requires great hard work, patience, and many other qualities. Businessmen who run an investment or developmental business are moving on projects and don’t have time to manage the developed projects or real estate. Some landlords who own many housing properties may also have a full-time job.
Some people own real estate but do not have the expertise to manage their properties, but it is not a matter of worry because the property management companies specialize in looking after properties and make your life much easier. The question arises: Is starting your own property management company worth it? In this article, we will be giving you a quick review of
- What are they?
- How do they work?
- How can you start one?
- And are they worth it?
What is Property Management Company?
To some people owning properties, leasing them and then earning rent might look like a simple job. But sadly, the reality is quite different, and so much is involved in this business. Property management supervises, controls, maintains and oversees commercial, residential and sometimes even industrial real estate.
This is often taken in context by a third party. So, the firm or company that makes this act its job is called Property Management Company. These companies administer the real estate on behalf of the owner and work to protect the properties’ integrity while generating income and revenue.
Property management companies can manage various real estate and offer multiple and diverse services based on what type of property or service a particular firm specializes in.
For example, some property management companies deal with only residential real estate and apartment complexes, while some firms are amazing at managing commercial properties.
What do Property Management Companies do?
Landlords or owners pay a fee to a property management company as they take on various tasks. They lighten the burden from peoples’ shoulders by dealing with routine operations and emergencies concerning their property.
The involvement of a property manager in a property and all the responsibilities are stipulated in the contract between the landlord and the firm and can change depending upon the landlord’s personal choice.
For example, some landlords would only want to avail services such as finding tenants and collecting rent, while some might want (in the case of an absentee landlord) them to manage all the aspects concerning the real estate. Nonetheless, a property management firm can perform the following typical services:
- Dealing directly with prospects and tenants, including listing the property and finding a suitable tenant
- Drafting and administering lease documents and understanding landlord-tenant law regulations
- Collecting rents and keeping a record of all financial statements, and preparing reports for the landlord
- Handling all maintenance issues and dealing with tenants’ complaints
- Manage budgets and handle taxes
- Dealing with tenant disputes and late payments and can even pursue evictions if needed
- Cleaning units when a tenant leaves and preparing the property for new renters
A full-service property management company can do it all, but a landlord or owner can choose the services they want to avail themselves of and what they want to manage on their own. Also, landlords are very much aware of everything that’s happening on their property, there is ample communication between both parties, and the landlord has the final say in all big decisions.
Is Starting a Property Management Company Worth It
Before starting any business, a person doubts whether it would be rewarding and profitable and how much risk there is diving into that world. But it is a matter of fact that the real estate industry is one of the most profitable and lucrative industries in the world.
People who know how things work in the market can earn a lot, but it requires a great deal of hard work, knowledge and talent. So if you think you have all the qualities, skills, experience and network to begin with and have a great potential in managing properties, starting your own property management business can be quite a rewarding business to be in.
You should not expect your business to bloom after a few months of running it. Businesses take time to flourish and grow, and considering prospects learning from your mistakes and being patient and hardworking can get you a generous amount of profit in the future. So it is quite worth it!
The graph below shows the industry data for property management in the USA.
- The average growth rate for the last five years is about 7%.
- The revenue went down in 2022 by a percentage of about 2%.
Pros and Cons of Running a Property Management Business
Every business has its challenges and risk, and while property management can also be risky, it is quite affordable and easy to start. There are always two sides to a coin. Following are the major pros and cons of running a property management business.
- A relatively easy field to get into
- It has lucrative prospects
- It is a growing field
- You can earn a fair amount of money
- It is exciting and not monotonous as you can work with different people and properties.
- You gain experience and skill and can start your investments
- It is quite challenging and risky
- Your business might not flourish even after a few years
- There is high competition, and it might grow more in a few years
- Hiring and managing staff can be quite challenging
- The tenants can be hard to deal with and require assistance at odd hours
- There is a risk of conflicts, and you need to be very cool-headed to manage them in a professional way
Why Start a Property Management Company?
If you are still in a cumbersome dilemma of whether you should start a property management company, you should relax and look at what type of future you are looking for yourself. Owning a company like this is not a piece of cake, but it is also not metaphysics.
If you have a license, a great network of investors and brokers in the real estate market, patience, talent, knowledge, and communication skills, then this business is just for you!
In the USA, a survey by NARPM reported that most property management companies earn 20% profit from their revenue. It is expected that the global property management market size might to USD 22.04 billion by 2023, at a Compound Annual Growth Rate (CAGR) of 8.8%.
These figures show that the industry is expected to grow more and more in the future and might be enough to start your company soon.
The requirement to Start a Property Management Company
After accustoming yourself to the business of property management, the next step is to figure out how to start it and what things you need. Following are the requirements.
- License and certifications
- A business plan
- Your property management niche
- The name of your company
- A website for online presence and property management software is one of the essential things you need to invest on
- Setting up a fee structure
- Hiring a real estate attorney
- An office except if you plan to work from home at the start
- A property management company insurance
- A good network of investors and clients in the industry
What is the Cost to Start a Property Management Company?
One of the main attractions of the property management business is how easy it is to get into this. In the USA, the startup cost of the business is relatively low and affordable, about $2,000-$10,000, according to the portfolio.
Frequently Asked Questions
Why do some property management companies fail?
Some property management companies fail because they do not have a proper business plan. They usually run out of cash and have a poor reputation that causes them to go bankrupt.
Are all Property management companies the same?
No, all property management firms are not the same. They might specialize in certain property types or services etc.
Is a license required to start a property management firm?
Yes, most states require a license and additional certifications before starting your company.
The property management business is one of the most rewarding and growing career options in the real estate industry. If you have all the skills and time, you should consider starting one. The startup cost is affordable, and it has a lot of advantages.
You can avoid cons by learning from your mistakes and improving your business. The competition is increasing day by day, and prospects look bright. There are not many difficult requirements for starting one, but the responsibilities can take a toll on you, so you should be ready for many things. I hope you got your answers to your question, “Is Starting a Property Management Company Worth It “.
From an expert point of view, we suggest you thoroughly research and study the business before starting. This article can prove to be one of the best guides for this. No business is easy and requires a lot of work and dedication. Property management is a tough but relatively profitable job. If you are familiar with the industry and have knowledge and contacts, you should consider starting a property management firm because it is worth it!
Sheena Whitlock, a property expert, and blogger with over 15 years of experience in the field. The knowledge and skills Sheena has acquired during her career have given her invaluable insight into the property management business.
She has done her Property Development BSc (Hons) from the University of Portsmouth and completed her Master’s Degrees in Property Management from the University of Chicago.
As a professional, she has spent time working for various companies as a property management officer and currently works at Asset Info Hub where she shares her knowledge and experience on various property matters with people around the world, questioning their queries via blogging and virtual consulting services.