Jesse Sasomsup is the founder and president of Earnest Homes, a Los Angeles-based residential property driven by technology.
Whether you’re already an entrepreneur or are looking to become one, property management is a business venture you should consider.
While property management is stressful in many ways, compared to other industries, from my observations, it is generally recession-proof, pandemic-proof and AI-proof. Regardless of what’s happening in the world, people will need housing, and property owners will likely need someone to oversee their portfolios, especially as housing law becomes more challenging to navigate. Property management also offers various benefits such as residual income, multiple revenue streams and a pathway to building generational wealth.
If you’re interested in entering this industry, these are the foundational steps you should take.
Research Legal Requirements And Get Licensed If Necessary
First, research the legal requirements for property management in your jurisdiction and get licensed if necessary.
Different states have different requirements. Texas, for instance, requires property managers to be licensed if their duties “include showing or leasing the property for the owner for which the manager gets paid” and if they control “the acceptance or deposit of rent from a resident of a single-family residential real 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 steps to adhere to all applicable legal requirements, such as setting up a corporation, getting the right insurance, etc.
Pick A Niche
There are different niches within property management. As a property manager, some of the areas you can focus on include residential, commercial, short-term or vacation rentals and HOA properties.
It’s vital to pick a niche early on because each focus area requires developing different skills. To decide on a niche, consider the type of client you want to work with. 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’ll have to read and understand each association’s covenants, conditions and restrictions (CC&Rs) in order to properly serve the board members.
Some entrepreneurs may pick more than one niche, but I would not recommend it. When I started out, I had more than one niche and was technically running two different businesses at the same time. By focusing on one niche, you can develop deep expertise in that area and scale your business more easily (hiring, for one, will be less challenging because you’ll be looking for candidates who specialize in that one niche).
Decide If You Want To Pursue The Franchise Or Independent Path
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 pay 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 solution, 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. One disadvantage, however, is that running your property management company on your own may feel lonely at times. Another is that you’ll have to be more intentional about seeking learning opportunities. But you can join national and local property management associations such as the 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 lease agreements, property management 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 out of the gate, rotating six credit cards with 0% interest—and 13 months later, I paid off all my debts. However, 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 to pursue your property management business. But you’ll need to know when to leave your job. Avoid staying longer than necessary.
Choose A Geographic Area To Operate In, And Go All-In On Marketing And Sales
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 various marketing strategies for a set time period (I recommend at least six months). After that time period ends, you should have a good idea of which strategies are working. Double down on the ones that generate results.
Of course, to run a successful property management company, you need to be a decent salesperson. In the beginning, I advise that 80% of your work should be in sales versus everything else. If you have no experience in sales, I recommend taking a job in car sales for three to six months. It’s one of the fastest ways to learn how to become an effective salesperson while being paid for training!
Keep Learning
When you are new, you can sell yourself to landlords as being faster and more attentive than big property management companies.
But of course, you also need knowledge. Never stop learning; strive to attend as many seminars and classes about property management as you can. You have to show landlords that you know what you’re talking about.
Be Confident
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.
When I entered this industry without any experience in property management, I was 29 years old. Property owners would frequently ask me how long I’ve been in business or how many properties I managed in an attempt to learn my age. But after six months, those questions pretty much stopped. It wasn’t because I’d suddenly accumulated years of experience or hundreds of new properties—it was because I’d become more confident and prepared.
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