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For every real estate investor building their portfolio, there is a property manager on board ensuring that everything is running smoothly. This creates an excellent opportunity for entrepreneurs looking to start their own property management company.
Whether you are a real estate investor looking to exercise more control over your portfolio, or a dedicated entrepreneur who is ready to dive headfirst into the world of real estate, starting a property management company is an excellent option.
However, before we get started, if you would like to know how starting your own property management business for your investments can impact your mortgage, click the link below to book a free strategy call with us today.
Before You Begin
At the end of the day, your property management company is a business, and you need to make sure you are properly prepared before you take the plunge into the industry. This includes establishing factors such as initial capital, licensing, and registration.
Additionally, you need to remember that running a property management company is a lot of work, so you and anyone you plan to hire needs to be properly equipped to tackle the job. If you, or the managers you plan to hire run the risk of getting tired and feeling like they can skip over doing the actual work, then you might want to reconsider your plans.
Licensing and Registration
While getting ready to start your business, you need to take a moment to consider licensing and registering your business. In Canada, there are a wide variety of options to license property managers from college programs to courses from the Institute of Housing Management and more. Additionally, you will also need to apply for a business license so that your business is properly recognized under the law.
These steps are not always necessary if the property managers are working directly for the property owner, but once you establish a business for them to be employed under, it becomes absolutely necessary.
Code of Ethics
As the owner of a property management company, it is crucial that you and your employees operate under a strict code of ethics. This will ensure that you and your employees conduct themselves properly and in the best interests of the property owner, the tenants, and the business itself.
For example, this is the code of ethics outlined by the Condominium Management Regulatory Authority of Ontario (CMRAO):
- Managers are expected to treat owners, companies and tenants in a manner that is fair, honest, and discrimination-free.
- Managers should display reasonable knowledge and judgment when providing services and should refrain from unethical practices.
- Managers should maintain all required records including the current documents and forms they use.
- Managers will be held financially accountable for the condo management services they furnish.
- Managers must not misrepresent the conditions of their licenses.
- Managers should not engage in an act of omission which would be considered unbecoming and unprofessional of the licensee.
- Managers should not accept gifts if the gift can be reasonably construed as an influence when delivering management services.
Some regulatory bodies come with their own codes of ethics for managers licensed under them, but either way you should make sure whatever code of conduct you have in place is followed by the entire company.
Before you begin structuring your business, it is important to take a moment to consider the scale of your company and how much business you can expect to be doing at the beginning. This will vary between companies and intentions.
If you are a real estate investor looking to start a property management company for your own investments, you can easily determine the scale you will be starting with by looking at the size of your portfolio. However, if you are a property manager starting a company, your expected scale will be determined by the number of property managers you are starting with and their current clients/capacity.
Structuring Your Property Management Company
Once you have an idea of the scale of your business, it is time to consider the structure.
How many property managers do you plan to employ, is each manager independent or are they leading a team? Do you have specific employees who handle certain tasks such as tenant screening or maintenance concerns? Or does everyone do everything?
You may also want to consider whether your company will require any administrative staff or if you should hire any contractors to work for your property management company.
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Managing Your Finances
After you have built the company, you need to look at the finances to make sure you have everything properly organized and sustainable.
When determining the rates you charge for your property management company services, there are two main structures property managers use. Some managers charge a set percentage for their services – typically between 8%-12% – while others opt for a flat rate service. These can be influenced by the amount of money your property managers wish to make, and how much you want to make as the business owner/how much you are willing to pay if you are building the company to manage your own investment properties.
Taxes, Expenses and Fees
Does your business require you to pay any fees to licensing bodies for renewal? Are there administrative fees you need to pay to cover certain services? If so, you need to set a portion of the company’s profits aside to cover those costs.
As well, you need to decide whether the company is going to be automatically paying the income tax for its employees, or if the property managers will have to pay it themselves. If they are paying it themselves, you need to notify them at the time or hiring so that they can prepare accordingly.
Building a Client Base
Finally, once you have reached this point, it is time to build a client base. If you are an investor starting a company for their own investments, or if your property managers already have clients signed with them, you will have an easier time starting.
Develop a marketing strategy for your business. Look at the local market and which forms of advertisement have the highest rates for converting views into business and build your campaigns around those strategies.
Networking and Referrals
You may also rely on your network or referrals to expand your clientele. If you are connected with multiple investors, you can offer your services to them, as well you may be able to get referrals from property owners and real estate professionals you are already working with.
Stay Connected with Other Real Estate Professionals
Staying connected with real estate professionals is an excellent way to earn referrals and expand your business. At LendCity, we proudly help our clients get connected with the best property managers we can find to help them make the most of their investment properties. Interested in joining our network? Visit us online at LendCity.ca or give us a call at 519-960-0370. Alternatively, if you would like to know how running a residential property management company can help you grow your own portfolio, click the link below for a free strategy call.