Thinking of starting a Property Management Company- Thoughts??

Question

Hello Everyone,

I'm in the service now but will be getting out by the end of the year and looking to get a new job lined up. I love dealing with my tenants here in Hawaii (only 2 properties) and am considering doing this type of thing full time in Colorado. Please advise, is starting a small property management company a sane thing to do or should i get a square job? I have some family in CO but no business contacts. I'm thinking i can bootstrap my way into getting a small portfolio of properties with a company philosophy of treating every clients house with the care and discernment I would treat my own homes with. Thanks in advance.

Brad Larsen · Answer

@Jeremy Blackowl  Jeremy - Focus is the key and it sounds like you have it.  I was in your shoes years ago leaving the Army from S. Korea.

Nine top reasons why PM is a great business!

1. It's commission driven not hours based

2. Property management is easily monitored and recordable

3. You can build an asset that can easily be purchased or sold

4. Banks will lend against rent rolls (60%)

5. Property management provides a constant income stream

6. There are no debtors in property management

7. Virtually recession proof

8. The business is a necessity because people need shelter

9. There is room for major improvement in this industry

Recommendations:

1) Join NARPM  www.NARPM.org.  Join NOW - attend a conference.  Tell EVERYONE there you are newbie and you will find 100 mentors.

2) Consider working in Property Management for a year or two under another broker.  Do it in stealth mode.  If you tell them you want to learn everything from them and then start your own company to steal food off their plate, no one will hire you.  I would not.

3) DO NOT BUY A FRANCHISE!!!

4) Maybe look into a Joint Venture with a company / person that you can do management for them while they handle all of the sales.

5) Bootstrap it.  You can live lean and set up a great looking business without a lot of cash up front.

How do I know any of this?  I did it all right and wrong with the list above.  But, we have a great business and thankful for it.

Should you want to connect with me off-line - hit me up via PM.  Take care!

Jeff B. · Answer

Be sure to verify State requirements for PM.  Usually, there must be a RE Broker (not just an agent) associated.  For a startup, consider getting agent, then broker status for your self to reduce employee costs.

Marketing a PM as "We care as much as you do" should go a L O N G way for you.

May I suggest, clients HATE nickle & dime fees that strip their profits unknowingly.  Create a tiered service plan with rates for each that make sense.

• A basic PM service is Filling vacancies (advertise, show, signings, move-in/out, collecting rents).  Pick a flat rate for this basic service all inclusive - - OMG should that ever payoff for you when compared to your competition.
• Maintenance is always touchy.  Create a scheme for Petty Cash level, no questions asked stuff vs Purchase Order authorization at some level of estimated costs.  Be sure to always used licensed contractors and highlight that in your marketing too.
• Legal services.  Evictions will be necessary so get familiar.  Sign rental agreements As Agent For (owner's name).  You can then handle these cases for the owner.  First trip down  the isle, hire it all out to a legal services and get copies of all docs to teach you the ropes - - it's not difficult, but must be precise.
• Financial service.  Offer to pay property taxes and mortgages for the owner, thus creating a truly handsoff passive investment.

Very best wishes to you Sir.

David Faulkner · Answer

PM is a very tough business to make an honest living on IMO. It could work if you have the right personality: honest, hard working, calm, detail oriented, no-nonsense set the rules and systems and 100% stick to them. However, it is a thankless job in that the only time you will ever hear from anyone is when there is a problem and they will likely be mad.

Personally, the only way I would consider being a PM for others was as an add on business that I was already running for my own portfolio. In this case, you could also have a RE license and acting as an add on business as a realtor. This way, you have multiple streams of income and multiple ways to make money doing essentially the same sort of thing you would be doing by yourself anyhow. Even if you didn't start out this way, this is the end game I'd shoot for.

Lorna Kaaloa · Answer

Awesome to hear there is ethics involved to the fair market offer.

Brad Larsen · Answer

@Lorna Kaaloa  If you were a licensed real estate agent, as you have to be in Texas, you would need to offer any client a Fair Market Value estimate for the property.  It would be unethical to take a property you know is worth $200k - and talk someone into a sale for less without offering them what the property could be worth.  However, we buy homes from our owners all the time and there is no conflict of interest.  In every case, we have been doing them a huge favor and they are just glad to sell.  We ensure they know all the facts to the home and market and disclose everything in writing.

Hope this helps!

Jeremy Blackowl · Answer

Wow Brad, Thats a lot of great info. How has your business grown since you started? I would love to hear your story and get a little inspiration from it.

Lorna Kaaloa · Answer

@Brad Larsen Thanks for sharing your personal feed & insight on PM.  I have an ignorant newbie question for you if you don't mind.  Could there be a conflict of interest or a violation of some conduct of code thing if you were to make an offer to buy a property (that you manage)  that is to be placed on the market to be sold?

Jordan Dupuis · Answer

Thanks for that informative list, @Brad Larsen. I was unaware of some of those reasons why PM is attractive.

W. Alex Benitez · Answer

Great topic and feedback.  I too am in a similar position where am considering starting a PM business.  I am currently managing my own properties and considering getting out of the corporate world.

Thinking of starting a Property Management Company- Thoughts??

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