Are you looking to start a property management company? In this article, you will learn why property management is an industry to consider.

While property management is challenging in many ways, compared to other industries, from my observations, it is generally pandemic-proof, recession-proof, and AI-proof. It also offers various benefits such as residual income, multiple revenue streams, an option to work from home, and a great industry for building generational wealth. There aren't many businesses that check all those boxes. Regardless of what's happening in the world, people will need housing, and property owners will likely need a good manager to oversee their assets especially as the housing law becomes harder and harder to navigate. In fact, September 2023 data from IBISWorld shows that the industry is growing steadily: The number of businesses in this space in the United States saw, on average, an annual growth rate of 2.1% from 2018 to 2023.

If you are the type of person who likes to solve problems and looking to become a property manager or an operator, read on to learn these foundational steps you should take.

First, research the legal requirements for property management in your jurisdiction and get licensed if necessary.

Different states have different requirements. California, for instance, requires property managers to be licensed if their duties "include showing or leasing the property for the owner for which the 3rd party manager managing for a fee gets paid" and if they control "the acceptance or deposit of rent from a resident of a single-family residential rental property unit." But in Idaho, there are no licensing requirements. Develop a thorough understanding of all applicable laws, and consider consulting with a landlord attorney or local property managers within your city. From there, take the necessary action to adhere to all applicable legal requirements such as setting up a corporation, insurance, etc.

There are four main types of property managers, you can become residential, commercial, short-term, or vacation rentals, and HOA (Homeowners Association).

It's vital to pick a niche early on because each type of property manager requires a completely different skill set and relationships with the clients you serve. To decide, consider the type of client you enjoy helping. Dealing with commercial properties, for instance, will have you interacting with business people. On the other hand, if you choose to work in the residential space, you'll have to collaborate with the maintenance vendors, tenants, and property owners. As for the HOAs, you have to read and understand each association's rules and regulations(CC&Rs) in order to properly serve the board members. Some entrepreneurs may pick more than 1 niche but I would not recommend it because I did it and I was technically running 2 different businesses at the same time with different software, structure, and team.

First, you can develop deep expertise in that area. I am a strong believer in the 10,000-hour rule. Second, it's easier to hire as you expand your business and are seeking candidates who specialize in that one specific niche. Third, you will be respected as an expert in your field.

You're not restricted to the niche or niches you pick forever. You can expand as your core business evolves. If you start with more than one niche, you might want to choose to narrow your focus down the line, as I did. I now only manage residential properties, as over time, I realized that is the area I'm most passionate about. It is also the best route if you are planning to scale as quickly as possible.

Property managers can choose to join a franchise or go the independent route. There are pros and cons to each approach.

If you decide to operate your property management business under a franchise, you get the benefits of tapping into the franchisor's existing systems, network, brand name, marketing, and overall business model. But the disadvantages are that the starting costs are high, and there's usually a minimum monthly fee to maintain as a franchisee. There's also less leeway to experiment, meaning you might not be able to grow your business as you prefer because most franchisors only allow the franchisees to operate within the territory assigned and use a certain software they are affiliated with, for example.

Alternatively, there's the independent route. The start-up costs aren't as high, you can operate and expand your business on your terms. Running your property management independently may feel lonely and lost at times but you can join national and local property management associations such as NARPM (National Association of Residential Property Managers) for mentorship, learning opportunities, and vendor partnerships. You should also consider joining a local Realtor or Apartment Association because they can usually provide all the necessary documents such as property management agreements, lease agreements, legal notices, etc. If you have the capital, you can even hire a property manager who has more experience than you and shadow that person to shorten your learning curve.

As for me, I did not have the funds but I hired a property manager right from the start, rotating 6 credit cards with 0% interest, 13 months later, I paid off all my debts. I would not recommend this route if you are not good at sales. Regardless of which route you pursue, you can secure financial security through your day job, as opposed to quitting immediately but you need to know when to go all-in. I don't recommend staying on your job for more than 1 year as your business may lose momentum or be trapped in what I call a slow death stage.

In the beginning, it's best to focus on either smaller towns or cities or geographic locations you're familiar with. I recommend doing business in the area you live in.

After choosing a geographic area, try all marketing sources available to you such as pay-per-lead, SEO, postcards, online ads, etc. I recommend keeping it on for at least 6 months. At this time, you should already know which marketing channels are working, double down on the ones that are working to get a good number of properties in your portfolio as fast as possible to get the momentum going. Of course, to run a successful property management company, you need to be a decent salesperson. In the beginning, 80% of your work should be in sales versus everything else. If you have no experience in sales, I advise you to take a job in car sales for three to six months—from experience, I think it's even more important than working for a property management company. It's one of the fastest ways to learn how to become an effective salesperson while being paid for training! If that's not an option for you, absorb as much information from books and online content on sales strategies as possible. All prospects should be contacted within 5 minutes or no more than 1 hour, if you can follow this rule, you are already halfway there! A sense of urgency is a must in sales.

As a new property manager, you must convince landlords you're cut out for the job. Landlords can sniff a rookie from a mile away. You need to research comparables on nearby listings and prepare marketing materials before meeting with a prospective client.

When I entered this industry without any experience in property management, property owners would frequently ask me how long I'd been in business or how many properties I managed. But after six months, those questions pretty much disappeared. It was because I'd become more confident and prepared. When you are new, sell on the fact that you are more available and more attentive than bigger companies. Confidence is key and it comes from education so attend as many property manager certification classes, legal updates, and seminars as you can. Never stop learning.

Conclusion

Property management business provides a consistent income even during a recession and it's hard for the tech companies of the world to compete with local companies as it requires a lot of emotional intelligence, personal touch, and understanding of the ever-changing state and city laws. Also, not to mention you can even start a maintenance company and potentially sell the properties within your existing portfolio. The industry will be here for the foreseeable future which you can pass down to your children. And if you want to sell one day, there will be many larger or even smaller companies lined up to buy it from you at a great multiples. The valuation of the business will be determined by the system you build and how dependent the business depends on the owner of the company.

Last but not least you will be proud as a housing provider providing a professional service to your community and neighborhood. The landlords need a good property manager to protect them from legal liability and caring for their properties, the tenants need a landlord who is quick to repair broken items where they live, which they work so hard to pay rent for a place called home. We all deserve each other.