Did you know you could make up to 30% profits by managing other people’s properties?

We’ll show you how to start a property management company based on input from Sid Bahadur and Eva Xia, who earn up to $400K per month managing their own and others’ Airbnb projects.

We’ll provide information on what a property manager does, analyze the market, and give a case study on Sid and Eva’s company. Then, we’ll show you how to become a property manager and start a property management business.

What Is a Property Manager?

According to Investopedia, a property manager manages the daily operations of a property for a real estate investor in exchange for a fee. The property management company will normally handle tasks including:

• Rent: A property manager may both set and collect rent.
• Maintenance: They handle routine maintenance, like landscaping, snow removal, and appliance repairs.
• Tenant management: A property management company helps property owners find and screen tenants. It also manages interactions with tenants.
• Budgeting: In addition to daily management, property managers might set the budget for the property.
• Legal: Property managers manage legal interactions like lawsuits and evictions.
• Marketing: A property management company markets properties they manage to help keep them filled.

Property managers might focus on managing long-term rentals, Airbnb rental properties, multi-family housing units, or commercial buildings.

You need a high school education, a real estate license, and a property management license to become a property manager, but different locations might have additional requirements.

Property Management Case Study: NICASA

Sid Bahadur and Eva Xia started their Airbnb rental and property management business NICASA in 2009. Now, their company manages more than 20 rental properties and makes over $3M per year.

Sid listed three different ways you can start:

1. Buying a home and renting out rooms
2. Buying a home and renting the whole property out
3. Rental arbitrage, which refers to renting a property long-term and subleasing it for short-term rentals. This method requires subleasing to be allowed in the lease agreement.

Eva explained that:

And Sid explained:

They save a lot of money by running their properties like hotels. They use the same products and furniture in all the homes to keep their inventory levels low. These strategies help them make 30% profit margins.

Check out our interview with them below:

Is Starting a Property Management Company Worth It?

Yes, creating a property management company can be highly profitable. According to IBISWorld, the property management industry made $117.3B in 2023 across nearly 300K businesses. That’s nearly $400K per business!

The three largest property management companies make over $1B in revenue each and have profit margins between 6.7% and 46.7%. This depends on how much property they own compared to the property they manage. Building property management is far more profitable if you don’t own the physical property.

How Much Does a Property Manager Make?

A property manager can make between $43,400 and $111,352 when working for someone else, according to ZipRecruiter, but running a property management company can be much more lucrative. Based on the $3M revenue and 30% profit, Sid and Eva make approximately $900K annually.

How Much Does It Cost to Start a Property Management Company?

Property management startup costs depend on whether you’re starting a franchise or a company from scratch.

One of the most transparent property management company franchisors, All County Property Management, states that the startup costs are between $27,450 and $59,400.

When you start your own property management business, you can bring it down to about $8,500. You just might experience more hurdles than you would with the franchise model.

Property management startup costs include:

• Licenses
• Insurance
• Software
• Marketing
• Overhead
• Equipment
• Payroll and vendor fees
• Association membership fees
• Subcontractors

What Skills Do I Need to Start a Property Management Company?

Starting your own property management company requires skills in:

1. Real estate
2. Sales
3. Business
4. Project management
5. People management

Real Estate Skills

Real estate skills are the first thing you need. You need to know how to identify properties that will perform well and those that won’t.

Sid and Eva look for the following characteristics when looking at rental properties:

• Location
• Profitability
• No HOA
• Homes with desirable qualities
• Not close to airports or noisy areas
• Population density

They recommend operating in your own state. Out-of-state property management comes with more risk.

Sales Skills

You’ll also need some sales skills as you learn how to start a rental management company. Sid suggested:

Start with a classic: Read the book How to Win Friends and Influence People to improve your sales skills.

Business Skills

When you open a property management company, you need to understand business. You’ll need to understand concepts like margins and customer acquisition costs.

Sid recommends reading Zero To One by Peter Thiel to improve your business skills.

Project Management Skills

Project management is another skill you’ll need as you learn how to get started in property management. Each property is effectively a project with smaller projects inside it. Some of the projects you’ll work on include:

• Marketing a property
• Leasing to tenants
• Collecting payments
• Maintaining properties
• Booking new property owners as clients

Condo and Airbnb property management companies will deal with these much more frequently than those that focus on long-term rentals.

People Management Skills

Sid said that people management skills are normally the hardest to learn and master. He explained:

Those are just some of the things you can do to help build a good team. The Coaching Habit is one of Amazon’s best-selling people management books.

How to Become a Property Manager

According to Indeed, becoming a property manager requires you to:

1. Get at least a high school diploma or GED
2. Take required real estate courses
3. Applying for your property management license
4. Get any other certifications that you need or want
5. Get a property management job or start your business

Each state, county, and municipality may set their own licensing requirements. For instance, Upkeep Media says those wondering how to start a property management company in Florida will need to:

• Complete a 72-hour pre-licensing real estate broker course
• Pay a $91.75 application fee
• Submit fingerprints
• Score 75%+ on the FREC Broker Examination
• Complete Form DBPR RE 13
• Complete a 60-hour post-licensing course

Meanwhile, according to CA Realty Training, Californians who want to start a property management company need to:

• Enroll in real estate school (three courses for a salesperson who works under a broker; eight courses for a broker, which makes more sense if you want to start a property management company)
• Pass the broker exam
• Get your broker license
• Spend 18-24 months taking 10 property management courses for your property management certificate

You’ll need to check the requirements for a property management company in your location. Once you’ve gotten the proper licensing, you can start your own property management company.

How to Start a Property Management Company

Starting a property management company will require numerous tasks. Consider using the following 15-step process when starting a property management business:

1. Set up your property management company.
2. Write a property management business plan.
3. Get your licenses.
4. Open a business bank account.
5. Get business insurance.
6. Structure your team.
7. Build relationships.
8. Get property management software.
9. Set your fee structure.
10. Create property management contracts.
11. Create operational policies.
12. Market your property management business.
13. Provide leasing services.
14. Maintain properties.
15. Maintain regulatory compliance.

Set Up Your Property Management Company

The first step in starting a property management business is setting up your company. To protect yourself and your clients against personal liability, you’ll want to form either a limited liability company (LLC) or a corporation.

Both of these business structures require registering with your secretary of state and getting an employer identification number (EIN) from the IRS. Our blog about registering a business walks you through the process.

Write a Property Management Business Plan

While you can start a successful property management company without a business plan, a business plan helps you communicate your goals and strategies and keeps you on track. It can also help you secure funding.

Your business plan should include your vision, market research, operational and marketing strategies, and additional information that will help you and the reader understand your company’s operations.

Get Your Licenses

As we discussed in the section about how to become a property manager, you’ll want to get a property manager’s license and a real estate broker’s license.

A property manager’s license allows you to manage subcontractors and enter into rental agreements for owners. Meanwhile, a real estate broker’s license allows you to manage real estate transactions and supervise real estate agents and salespeople to ensure compliance with laws.

This is why many property managers have both. Without the brokerage license, you would have to share a portion of your revenues with a licensed broker.

Open a Business Bank Account

Property managers will need a business bank account. All revenue and expenses will be tied to this account. Then, you’ll send each of the property owners their earnings minus the fees for your property management services.

Property managers can use bank accounts from national banks, local banks and credit unions, or online banks. Property management companies need to thoroughly review the business banking terms because some online banks don’t offer effective ways to cash checks and accept cash payments.

Learn more about opening a business account.

Get Business Insurance

Starting a property management company comes with numerous risks you’ll want to insure against. You’ll want general liability insurance, professional liability insurance, workers’ compensation insurance, and other insurance policies to protect against the various risks property managers face.

Start your insurance hunt at Simply Business. They compare rates from the largest business insurance companies to help property management businesses get the best rates.

Structure Your Team

Most property management companies can’t operate as a one-employee business. You’ll need a team of employees or subcontractors. Some of the common positions you might need include:

• Accountant
• Contractors (including cleaners, HVAC techs, groundskeepers, locksmiths, painters, plumbers, pool cleaners, roofers, and general handymen)
• Real estate lawyers
• Information technology staff
• Customer service and sales reps
• Maintenance staff
• Leasing agents
• Marketing specialists
• Showing and move-out coordinators
• Service coordinators
• Field managers
• Admins or receptionists
• Office managers

Property managers should screen vendors by getting a copy of their license, insurance certificate, and bond certificate. You will also want to negotiate better rates for your company—and in negotiations, remember that you’ll be sending good contractors more business than most customers do.

Build Relationships

You’ll want to build relationships in the property management industry. Networking with property owners, real estate agents, and other business owners in your local market will help you find clients, referral partners, and subcontractors.

You can build these connections through in-person meetups, conferences and conventions, and social media groups.

As a business owner, you should always carry business cards to make it easy to share your information with potential clients.

Get Property Management Company Software

Local property management companies need software to keep track of all the finances, tasks, tenants, and clients. Sid & Eva told us:

Set Your Fee Structure

Property management firms have several ways to charge for services. Most property management firms will charge a property owner using one of three main strategies:

• Flat fee: You can charge a fixed fee for real estate management and then pass all additional costs on to the property owner.
• Commission: NICASA charges 25% of revenues to the property owner and manages everything to make it easy for them. The fee is usually between 3% and 10%, but they offer a wide range of services and don’t add extra fees unless there is a major repair.
• Piecemeal: Some property managers charge per action they perform for the client.

We’ll discuss some of the common service fees that people charge piecemeal below:

• Ongoing management fee: Many property managers charge a 3-10% fee on the property’s monthly rental income for long-term rentals. This fee may go up to 30% for short-term rentals. It covers daily operations, rent collection, tenant management, and emergency response.
• Account setup fee: Property managers may charge for the time it takes to set up new accounts.
• New tenant placement fee: Some property management companies charge a fee when they find a new tenant for a property owner.
• Tenant-occupied unit fee: Some property managers charge a separate fee when a tenant occupies a property. This can be beneficial because the costs of finding and managing a tenant may differ.
• Advertising fee: Marketing costs money, and some property managers charge for the service separately.
• Lease renewal fee: A property manager might want to charge a fee for managing a lease renewal.
• Vacancy fee: A rental property manager may charge a vacancy fee equal to one month.

Other fees a rental manager might charge include a home warranty coordination fee, maintenance coordination fee, routine inspection fee, and termination or cancellation fee.

Create Property Management Contracts

A property management firm will need contracts between the property management team and the property owner, plus other contracts for the tenants.

Property Owner Contracts

Rental property managers should have a contract that covers property management terms between themselves and the property owner. These contracts should be written by a real estate lawyer and include terms about:

• Services
• Management fees
• Insurance
• Maintenance and repair budgets
• Emergency funds
• Off-duty coverage
• Invoicing
• Non-payment terms

Check out this example of a property management contract on the U.S. Securities and Exchange Commission’s website.

Tenant Contracts

The property management business model normally requires landlord-tenant contracts. Owning a property management company means that you will be responsible for managing these.

You can get residential lease agreements for all 50 states from PublicLegal.

An Airbnb management company is allowed to have separate rental agreements, but Airbnb requires:

1. The terms to be prominently displayed in the listing description
2. The terms to be sent in the response email for booking a property
3. No cancellation policy if the renter doesn’t agree to the terms

Once you have these, you’ll want to use them every time you book a new tenant or renew a lease.

Create Management Policies

You’ll need written policies in place for things like:

• Security deposits
• Financial management
• Offering amenities
• Handling complaints
• Responding to requests
• Managing disputes
• Tenant screening
• Emergency plans
• Onboarding new clients
• Complying with legal requirements
• Marketing
• Communicating with real estate investors

Market Your Property Management Business

You’ll need to market both your rental property business and the properties you manage. Lee and Eva suggest using a marketing strategy that includes:

• Website: Your website is one of the main ways that people can learn about your business.
• Google Maps: You’ll want to list both your business property and rentals on Google Maps using a Google Business Profile.
• Yelp: Business directories like Yelp are helpful to spread the word that you are managing rental properties.
• Search Engine Optimization (SEO): SEO aims to create business pages that rank high for relevant internet search terms. Lee and Eva suggest using terms like “(City) Airbnb Management” and “(City) Vacation Rental Management Company” if you’re focusing on short-term rentals.

Provide Leasing Services

Once you’ve found potential tenants, you’ll need to have them fill out an application, submit to a background check, pay a deposit, and sign a contract. Make sure to comply with all landlord-tenant laws.

Maintain Properties

Property management companies are responsible for keeping commercial or residential properties in good condition. This may include hiring subcontractors to handle building maintenance, landscaping, and cleaning.

Many property managers use maintenance bill markups, but Lee and Eva do not.

Maintain Regulatory Compliance

The real estate industry has to comply with a number of laws to continue offering services. You should automate as much of this as possible using a software solution.

You can lose your status as a property manager and real estate brokerage if you fail to comply with the laws.

Go Start a Successful Property Management Company

Starting a property management company presents an enticing opportunity for entrepreneurs seeking lucrative ventures in the real estate industry.

We explained the roles of property managers, the skills you need, how to become a property manager, and how to create a property management company.

You’ll have several decisions to make when starting a property management company, but once you nail them down, you can position yourself for continued growth.

What type of properties do you want to manage?