Property management is one of the most lucrative real estate ventures that you can set up in 2019. An increasing number of real estate investors are opting to delegate property management to professionals. Consequently, there has never been a more ideal time to start a property management business. But how to become a property manager? And what are the steps to creating a property management business plan? In this article, we will explore the nuts and bolts of how to start a property management company and teach you the basics of writing a property management business plan.
The Importance of a Property Management Business Plan
A business should be built on a solid foundation, and the first step of laying it begins with a coherent business plan. This is essentially a document that encapsulates your business and outlines the essential aspects of your activity. More importantly, a business plan is a legal requirement in most states. It is also worth noting that the specifics of how the business plan is structured vary from one state to another. But generally speaking, here are the main points that should be included in a property management business plan proposal:
- Setting the company’s structure
- Creating a business model
- Ensuring compliance with local laws
- Establishing an organizational structure
- Defining base services and extra services
- Defining a property management marketing plan
- Outlining a fee structure
- Setting objectives
After going over the basics, let’s delve into further details on how to craft a property management company business plan.
What You Have to Know When Creating a Property Management Business Plan
As you can see from the points discussed above, a property management business plan does contain a wide range of elements. Having a firm grasp of all of them is essential for ensuring state law compliance. Here is a brief look at what you need to be aware of when creating a typical residential property management business plan.
1- State laws
The first step of creating a property management business plan is familiarizing yourself with state laws. Proceeding without checking local regulations can lead to several compliance issues. For example, some states (like New York and Florida) only allow licensed real estate brokers to become property managers. Conversely, other states have more lax laws when it comes to property management eligibility. In addition to this, the property manager should also be aware of all the laws that pertain to the tenant-landlord relationship.
2- Education requirements
Besides reflecting the business, the property management business plan must also reflect the managers themselves. This is why you have to include relevant education credentials in the plan. Moreover, some states will require you to take several classes before granting you a property manager’s license. To avoid any unnecessary delays, make sure to take the classes before the set deadlines.
3- How to get property management clients
The client is the cornerstone of the management business. These are the investment property owners that managers seek to service. Needless to say, the ability to generate property management leads has to be reflected in the plan. The most effective lead generation methods for a start-up property management company are still networking and paid ads.
4- How to find tenants
Finding clients is only half of the equation. The other half is finding the tenants that will occupy the rental properties that you are managing. The rental properties business plan must contain a section that outlines the manager’s prospecting ideas. Luckily, there is a wide array of options when it comes to finding tenants. This includes everything from online listings to word of mouth.
Now that you’re familiar with the prerequisites for creating a property management business plan, let’s take a look at how you should structure one.
How to Structure a Business Plan
Most business plans follow a similar template and feature no more than five sections. Here is an example of a simple and intuitive property management business plan structure:
Section 1: A general overview of the business
The first section should focus on some basics aspects of your real estate management business as well as its overall objectives. This is where you need to identify the ownership of the business and provide a basic overview of what you want to accomplish.
Section 2: Details about the property management company
This section is where you will be adding more details about your property management company. You will have to define several aspects of your activity. This includes a thorough description of your business model, a SWOT analysis, and your long-term and short-term goals.
Section 3: How your business operates
This section of the property management business plan is dedicated to the operational side of the company. In other words, you need to specify everything that pertains to the day to day running of the business. Examples of this are the services you offer to clients and tenants, your fee structure, and the organizational chart of your company.
Section 4: Your marketing plan
As we mentioned earlier, a property management business plan must contain a comprehensive marketing plan. This section should feature as much detail as possible since every aspect of the business needs to be covered. Make sure to expand upon lead generation and client retention strategies.
Section 5: Your financial projections
Creating financial projections is an integral part of a property management business plan. Since this section reflects the financial side of the company, you will have to create a balance sheet. Additionally, you will need to do a profit and loss projection for the first year of operation.
The Bottom Line
Creating a real estate property management business plan requires a fair amount of work. Having said that, the process becomes more streamlined and enjoyable once you have grasped the basics outlined in this article. Just make sure to pay close attention to every detail and avoid rushing through the steps.
Once you have set up your property management business, you’ll be glad to know that there are several tools that can help you do your job! Head over to the Mashboard and start using the best tool for property managers.