Tips on starting a small property management company?

Question

A family friend owns a handful of rental properties and has been struggling finding a management company he can trust. Long story short my father presented the idea to me of starting my own small time management company, since I am involved I the multi family management industry. I put research in and couldn't come up with much of an idea of what it's like to start a management company, so if someone out there knows the business and could give me the start up costs associated with the business and Amy other helpful information that'd be great. Also I'm located in TX if that is relevant in any way.

Alex Deacon · Answer

@Jacob Stone One more thing Jacob. If its like it is here in Pennsylvania you will need to have a real estate license and an official office and Broker of record. if this post was helpful please give me a vote and again I wish you all the best.

Alex Deacon · Answer

@Jacob Stone Jacob I own a company and we manage about 600 units. Since 2012. As noted in the chain you should check with the board of realtors on the specific requirements and licensing before you start. Then insurances, software etc... etc... The best advice I can give you is be selective on the clients you choose and the types of properties you take on. In the long run just like buying rental properties. Quality is so much better than quantity. You can reach out to me or my Wife who actually runs the company with a staff of 7 people with any questions in the future.Best of luck to you.

Jay Hinrichs · Answer

@Greg H. spot on Either go big or go home.... that's PM and long with I like the quality statements above.. the folks I know that do the best have monster apartment portfolios.. and work with the very well to do clients.. not mom and pop owners who can drive you friggen insance LOL

Greg H. · Answer

Asking for votes on a message board ?

Greg H. · Answer

In Texas , you are required to be at minimum a licensed agent to provide property mamanagement services. More than likely you will need to be a Broker as many Brokers(An agent has to be sponsored by a Broker) do not want agents underneath them engaging in property management due to the high liability

Michael Laniak · Answer

Correct @Sandy Sawyer . I am a landlord/owner of a few rentals and cannot technically manage them through the brokerage I am under as they don't allow it b/c of the insurance risks. Although, I can manage my own properties through my own property management company, but I cannot manage other 3rd party/client properties under my property management company.Like @Jacob Stone, I am also looking at getting my broker's license to potentially manage other peoples properties to try and generate more income but am still on the fence.I did get E&O insurance quotes to operate as a PM and they started at $1,200/yr.... So factor that yearly cost into the equation as well.....

Greg H. · Answer

You do not even have to be an agent to own a property management or real estate company. You must however, have a sponsoring broker as a broker is the only person allowed to collect a commission. An agent technically does not even collect a commission in Texas as everything is run through the broker

Andrew Johnson · Answer

@Jacob Stone I think you're probably putting the cart before the horse. If you're serious, go apply for jobs at a property management company and work there for a year. See what life is like on the inside. In my youth I managed a HUD grant program working for the City of Long Beach. I dealt with a lot of property managers (and I mean a lot) and I'd say that far less than 10% of them were "sharp". The sharp ones were almost always with bigger PM companies. They didn't own the property management company AND change the locks. I hope that makes sense. But economies of scale do kick in. At some point you can afford you own handymen or do enough business to negotiated vendor discounts. Even on a tiny small scale, look at the per-unit costs of Buildium, the more units the cheaper the cost-per-unit. Until you reach critical mass, you even have to ask yourself, who will take tenant (and owner) calls on the weekend. For what it's worth, "small time" can create disproportionately large problems.

Greg H. · Answer

@Jacob StoneEvery agent in Texas has to be sponsored by a Broker. You must be a agent for 4 years to become a BrokerThe short answer is that yes a Broker was not a split of your profit but a split of your commission/Property management feeMost Brokers are not going to be interested even when they get a split because:-Too much liability. I cannot imagine a Broker would allow a new agent to do property management. The Broker is responsible for the actions of the agent-Very little money in Property Management unless you manage a huge inventory-Big brokerages will already have PM in place and are not going to allow competition within the office

Brandon Simmons · Answer

1. Yes, unless you get licensed yourself. Most big brokers already have in house management departments though.2. Because you're still procuring real estate deals, collecting rents/leases, etc... Every state is different but most require a broker license for property management. In the very least, a real estate licensee sponsored by a broker.