Many people dream of owning several houses and properties and then turning them into rental homes. This method of making money is called a property management business. Property management businesses can range from two or three rental homes all the way up to managing multiple commercial properties.
This type of business is one where knowledge is king, and you do not want to dive in without it. On the surface a property management business seems like an easy venture. Nothing could be farther from the truth. This business is full of property laws, client problems, and headaches in organization. This is for the established and knowledgeable property manager. One that enters into this without the knowledge has virtually no chance of succeeding.
So how do you get this knowledge?
The first step to being successful in a property management business is to work in the field. One or two years working in the business will teach you more than anything else. The actual work experience can prepare you for the surprises that a property management business can hit you with. It is especially helpful if you can find a mentor within the field to show you the ropes.
Another great way to prepare for the property management business is to take classes and get your real estate licence. This is vital step that has to be accomplished before you can have a property management business anyway. Check with your state’s real estate division to find out the requirements of owning a property management business.
Once you have the knowledge and the requirements are fulfilled, then you can consider the options that are available. Some people build their business from the ground up, while others prefer to purchase an existing property management business. Both have their advantages.
Starting from scratch or buying established?
One of the biggest advantages of starting a new property management business is the fact that you will likely save money. Established companies will normally want a premium price to sell. There are occasional “steals” on the market, but they are rare.
When you purchase an already established group of properties, you do have the advantage of built in clients as well as an infrastructure that is already in place. The problem is, that is sometimes a bad thing as well. If the clients that are currently in place in the properties are not good ones, then you will have a devil of a time getting new ones in there. Additionally, the current infrastructure may not jive with your ideal way of running the business.
The best way to ensure that your business is the way that you want it to be is to build it from the ground up. Go out and use the knowledge of real estate that you gained in your schooling to find the property deals in your area. Many people simply start with purchasing one or two properties in the beginning. These are often properties that need work, and that you can build into something with a reasonable starting capital.
Place renters in the properties when you finish the property clean up, and do a very good job of keeping the property maintained. In the beginning, it is advisable that you do the work yourself so that you can start to make the properties profitable. If you hire maintenance workers and so forth, then that will come off the bottom line. Chances are, the bottom line is already thin if you are just beginning the business.
From these first properties, you will learn the art of property management quickly. Look at them as your graduate schooling. Once you have mastered handling a couple of properties and turning a profit every month, then you are ready to look at expanding the business.
