Calendar icon February 13, 2024

How to Start a Resident-focused Property Management Company in 13 Steps [Startup Checklist]

From the Second Nature perspective, focusing on a high-quality resident experience is the secret sauce to standing out in a crowded property management industry. That’s because happy residents lead to higher retention rates, more on-time payments, better care for the property, and shorter vacancies. Our property management checklist can help ensure you build that strategy into the DNA of your company from the beginning.

This property management startup checklist is intended to help you orient your company toward a resident focus from the get-go. In the absence of a checklist, it’s all too easy to get caught up in real estate and rental property considerations that do not reflect long-term winning conditions for all stakeholders.

 

 

Happier residents

 

1. Write a Property Management Business Plan

In some ways, a property management business plan is a document intended for potential clients and investors. And certainly, it can help you concretize start-up costs and get funding for the business (learn more on what’s needed to get SBA financing).

But in many more important respects, it’s a structured foundation for you to gain insights into what residents are looking for, which in turn will help crystalize the type of clients you want, what types of property you’ll manage, and what kind of property management company you are. 

You’ll find a property management business plan template here, but in broad terms, here is a framework of the distinct components:

  • Executive Summary
  • Company Overview
  • Market Analysis (Industry, Customer, and Competitive Analysis)
  • Services
  • Marketing Plan & Sales Strategy
  • Operations Management 
  • Management Team
  • Financial Plan 
  • Growth Opportunities 

Each component will lay the foundation for your future resident-focused success.

2. File Your Property Management Business

In order to correctly file and pay your business taxes, you’ll need to register your property management business and choose a type of legal entity. This step is important, as it can also impact the protection/exposure of any personal assets, associated paperwork, or even the way in which you raise funds for your business.

Note that it is certainly possible to change your business structure once it's established, but this can be a convoluted and high-stakes process.

For property management businesses, different legal entity options are possible.

Common legal structures include Limited Liability Company (LLC), S-Corporation (S-Corp), and C-Corporation (C-Corp). An LLC offers personal asset protection, while S-Corps and C-Corps provide additional legal safeguards. The choice involves considerations such as pass-through taxation for LLCs (where business income passes directly to the business owner's personal tax return) or potential double taxation for C-Corps, which can be mitigated via accounting measures. 

Other options include sole proprietorships as well as partnerships, where taxes and business liabilities are the responsibilities of the individual owners. Once you’ve identified your new business for tax purposes, you can get a free Employer Identification Number from the IRS.

Which type of legal entity you select ultimately depends on your appetite for control, flexibility, and complexity.

Learn more about how to structure your property management company.

3. Setup Bank Account for Your Property Management Business

Opening a business bank account will help you build credit for your own property management company, maintain separation between your personal and business finances, and streamline tax accounting. It may also be required by law, depending on state laws applicable to your business structure.

Some banks offer account features, flat fee or zero fee structures, and services that are particularly beneficial for new businesses and small businesses, so it is worth taking the time to shop around rather than defaulting to the same bank you use for your personal accounts.

4. Setup Accounting for Your Property Management Business

With the help of OnSightPROS, we've developed a rental inspection checklist template for single-family rental property management companies. Use this template to build out your checklist. 

Not all accounting is equal. Property management accounting deals specifically with the financial management of rental properties. It helps property managers track rental income, manage expenses, handle tenant deposits, and produce financial reports.

Essentially, property management accounting helps you maintain accurate and comprehensive financial records for each property you manage.

Property management accounting consists of two components. The first is corporate accounting, which is similar to the kind of accounting done at any company. The second is trust accounting, which is specific to property management. This kind of accounting relates to the client funds that you hold, including security deposits, rent, and funds intended for property upkeep and repairs.

Managing rental properties can be daunting when it comes to accounting and finance management, but that certainly doesn’t make it a show-stopper. Learn more about property management accounting, as well as accounting software and property management software that can make it significantly easier.

5. Obtain Required Licenses and Permits for Your Property Management Business

The licenses and permits required for property management businesses vary depending on your location, but common requirements can include a real estate broker license (which often involves an exam-based accreditation as well as potential background checks), a property management license, a leasing agent license, and a business license, as well as any other locally required permits.

6. Secure Liability Insurance

Liability insurance is important to keep your business running on solid foundations. In fact, it’s essential, as it protects not just you but your investor’s assets and your resident’s safety. At Second Nature, insurance is so important to us that we incorporate an insurance product into our resident benefits package

General liability insurance for property managers safeguards against potential financial liabilities arising from physical risks. It typically covers expenses related to repairs, replacements, legal fees, and medical bills, and is applicable to both residential and commercial properties.

Coverage can include bodily injury, medical payments, physical damage, reputational harm, and even copyright infringement in relation to marketing efforts.

Note that Second Nature's renter insurance program ensures 100% compliance and liability coverage protecting you, your property investors, and your residents. 

7. Hire Your Team

Hiring the right team has a huge impact on your ability to achieve the business targets you’ve established in your business plan. 

Note that “right” doesn’t simply mean “qualified.” That’s because who your employees are is fundamentally more important than what they’ve achieved. After all, you’re setting the stage for them to deliver the best work they’ve ever done in their careers to date.

The hiring process begins by understanding what characteristics you’re looking for. For any given candidate, how do they build the new skills required to address new situations? How do they handle challenges when things get tough? And perhaps most importantly, what is their response to failure?

Insights into these questions will help galvanize a people-focused approach that is truly a value-driven team. After all, at Second Nature, we want to generate value for ourselves, our investors, and our residents—and we want people who buy into that approach.

Get more Second Nature hiring tips on building a people-focused team.

8. Create Solid Pricing Structure and Property Management Contracts

Once you hire a team. establishing a good pricing structure for your business and creating all the legal documents required to run the business should be the priority. That's because the right approach can generate value beyond management fees for property managers, their investors, and their residents, which reflects Second Nature’s “triple win” focus.

General rental property management fees include collecting the month’s rent, following up on arrears, organizing property maintenance and repairs, and keeping up-to-date on legal issues.

Much of the profit in property management comes from driving better value for investors and residents, and pricing for that value. After all, people are willing to pay for better quality experiences in their homes.

Additional fees, which will help drive company growth, should be communicated during the onboarding process and lease agreement. In other words, they are never about hidden markups. They’re about charging for value and driving great habits.

Fees can be applied on the resident side (for instance, paper lease setup fees, lease renewal fees, late fees, or special programs fee) as well as on the investor side for a number of property management services (inspection fees, vendor screening fees, rent protection or eviction fees).

Again, fees help you drive value for both your investors and your residents, and support your business at the same time. 

Note that because regulations vary across regions, it may not always be possible to charge fees for certain types of services. That's why it's important to discuss any fee and contract proposals with an attorney before implementing them.

9. Execute the Marketing Plan Set Out in Your Business Plan

While it’s true that businesses thrive on referrals and word of mouth, it’s executing on your marketing plan that will help drive more consistent revenue — and help you capitalize on the market research you conducted to assemble your business plan.

As with so many other things, the marketing landscape has changed enormously in just a short time. We’re now living in an era when an active, well managed online presence is critical. 

This means that a robust marketing strategy is more than simply managing a social media account (although this too is important). It also includes investing in search engine optimization for your website, executing on content creation and distribution strategies, conducting networking events, and advertising online.

For optimal property management marketing, where work often stays within specific regional areas, it’s also important to maintain a presence in local business listings.

10. Network with Fellow Property Managers and Owners to Expand Your Business

We touched on networking in the context of a marketing plan, but for new business owners in particular, networking can be a valuable source for those first few clients. 

There’s certainly no shortage of opportunities for establishing your business name, ranging from local vendor fairs to national property management conferences and events with thousands of attendees.

In addition, there are numerous property management associations that provide opportunities for networking, education, and advocacy for property management professionals.

The business and personal development opportunities available through such options present great avenues to expand and optimize your property management business.

11. Write a Resident Retention Strategy - and How You Can Improve the Resident Experience

You should be thinking about the resident experience from the very start. After all, in an industry where churn is the norm, an effective retention strategy pays its own way. To be truly effective, however, it’s key to recognize that “resident retention” is not simply a one-dimensional number at the bottom of a spreadsheet.

The “triple win” approach to resident retention asks the question: “How do we create experiences so good that residents never want to leave?”

Answering that question maximizes residential property owner ROI and boosts property manager success. In other words: A win for residents is a win for investors is a win for property managers.

In the same vein, we often hear from professional property managers that a Resident Benefits Package (RBP) is a powerful way to retain residents over the long term. RBPs can help with resident satisfaction and resident retention rates. After all, a proactive, differentiating approach to resident retention means building experiences that people will pay and stay for. 

This is a useful lens with which to examine the full property manager/resident journey, from move-in to collecting rent payments to move-out, for opportunities to generate resident retention ideas—and deliver those wins.

 

Happier residents

12. Create SOPs to Handle Complaints, Disputes, and Requests  

Once you have the first few properties under your management, it’ll be important to ensure processes and procedures are in place to handle complaints, disputes, excessive maintenance requests, rent collection issues, and tenant problems

In such cases, rather than automatically assuming the resident is the problem, some property managers approach resident issues as behaviors that can be changed. That’s because the root cause is often addressable and the behavior changeable.

This emphasis on the people element pays off — and lets you focus on how to adjust “bad” behavior through benefits and rewards, rather than just being transactional.

This reframing aside, one of the best ways to deal with complaints and disputes is to avoid them in the first place, which often comes down to non-discriminatory tenant screening processes and background checks.

Other standard operating processes include documenting all incidents and updates thoroughly, calling law enforcement in the case of illegal activity, implementing eviction processes if necessary, and staying current and compliant with local laws and regulations.

13. Create and Execute a Strategy to Improve the Resident Experience

Once again, improving the resident experience goes a long way in retaining the residents and creating ancillary revenue streams. 

From the get-go, you can actively ensure great first impressions with services such as move-in concierges or coordinators. After all, a resident who's had a positive move-in experience is a happier one. Happier residents stay longer, pay on time, take care of the property, and make positive recommendations.

Throughout the residential journey, other strategies for improving the resident experience include on-demand pest control, credit reporting, and resident rewards.

Above all, one of the cornerstones of a great resident experience is responsiveness. This responsiveness is a two-way street! It covers improved maintenance service and response times, as well as opportunities for residents to provide feedback through resident surveys.

By setting up this kind of feedback loop, you demonstrate to your residents that their voices matter, which instills a sense of ownership and care that often lead to better property care and longer tenancies.

Property Management Startup Checklist

It’s famously said that property managers are in the business of helping many different people with many different things. And sometimes, this can feel like a lot to tackle, especially at the startup phase. That’s why we’ve assembled this property management startup checklist to help you begin:

  1. Write a Property Management Business Plan 
  2. File Your Property Management Business 
  3. Set Up a Bank Account for Your Property Management Business
  4. Set Up Accounting for Your Property Management Business
  5. Obtain Required Licenses and Permits for Your Property Management Business 
  6. Secure Liability Insurance 
  7. Obtain Required Licenses and Permits for Your Property Management Business 
  8. Hire Your Team  
  9. Create Solid Pricing Structure and Property Management Contracts
  10. Execute the Marketing Plan Set Out in Your Business Plan
  11. Network with Fellow Property Managers and Owners to Expand Your Business
  12. Write a Resident Retention Strategy — and How You Can Improve the Resident Experience
  13. Create SOPs to Handle Complaints, Disputes, and Requests
  14. Create and Execute a Strategy to Improve the Resident Experience   

How Second Nature Helps Run a Property Management Company Profitably 

At Second Nature, we focus on creating “triple win” experiences for residents, property managers, and investors. This helps property management companies go beyond transactional basics and create new, professional, and holistic experiences that generate growth all around.

We didn’t invent this stuff, and we’re certainly not rowing against the tide! Companies like Google, Uber, and Amazon have already changed how consumers think. A convenient experience is no longer a luxury—it’s an expectation. Accordingly, for property management profitability and growth, experience is the winning strategy.

That’s the insight that led us to create the Second Nature resident benefits package (RBP). It’s a foundational tool to create unforgettable resident experiences and keep your property management company on a growth path. Learn more now.

 

Keep learning

How to Optimize Operational Frequency with Processes and Software

Property management software is currently helping property managers establish efficient and reliable processes at a higher rate than ever before in the PM industry. With that development in the proptech industry has come the development of tech for self-managers that has changed the capacity of the accidental landlord. Thus, the demand for efficiency at scale has risen in order to separate the professional from the amateur, and the establishment of processes that allow such a thing has become a critical topic for professional property managers. Optimizing property management processes Carter Fleck of Triton Property Management, a growth-oriented firm out of northern Virginia that is approaching 300 units with larger goals for 2024, joins us to share his expertise on process definition. Fleck is the General Manager responsible for operations and strategic growth, and he has been developing effective processes to ensure efficiency at Scale at Triton, and in the process, he has garnered an understanding of how to do so. “A lot of failing,” says Fleck. “In the early days, we were getting a lot of good and bad feedback, but typically the bad feedback is what you adjust off of.” Fleck believes that assumptions are the enemy when it comes to defining procedures and sourcing software for your PMC. “The image that we use is if you're going to build a sidewalk before people even start walking on a field, it's kind of dumb. You have to see where people will walk first, and then you'll build a gravel path. So number one, you see where they walk, see where their intentions are in the grass, then you build a gravel path. And then eventually, once that walkway is established, that's where you build your processes and procedures.” The analogy is a visualization of the concept that you have to see how people operate before you can establish processes to make how they operate more efficient. Fleck encourages the negative experiences of process breakdown and cites them as the only way to really nail down what your processes should look like. “Over time, between the tenants giving feedback and owners giving feedback, we adjusted our processes. It's a mix between figuring out where the owners walk and where the tenants walk, and then building paths that align.” Fleck details an example of how Triton adjusted its process after an assumption it made got challenged: "We had an assumption that payment plans were helpful for residents," says Fleck. "And so the way we handled delinquency is we would reach out to them and would be like, ‘you need to pay this. Do you have a payment plan option?’ And they would always say yes. Our process was we'll put you on a payment plan, we'll invite you to a payment plan, you'll accept the payment plan, and then we'll monitor the payment plan. That in itself was a lot of work, but we thought it was doing well. But some of the owners that we had managed for mentioned that another property manager doesn't allow any payment plans. And if you're not fully paid up by the end of the month, then the eviction process starts if you’re over $500 due. So we're like 'alright, well, we'll serve you in that we'll change our processes.' And we did, and our delinquency percentage shrunk significantly. So, consistently, by the end of every month, we're around 5% APR. Whereas with payment plans we're like 5 to 10%.” Fleck obviously credits seeing the assumptions in motion as what prompted the need for process iteration, and he firmly believes that making too many of these assumptions is one of the biggest mistakes growing property management companies make. Like any business experiencing growth, process definition is critical to achieve efficiency at larger volumes. What Fleck is essentially advocating for is processes based on what you know, not what you think, and there is a big distinction. Managing property management software Fleck has installed both general and tech-based processes, and cites that understanding of how people interact with processes as the key in both areas. "They don't focus on user experience. That's really important. Number one, how the tenants like the tech, but specifically how the people who are using the tech are gonna adopt it. So when we were choosing a rent inspection software, we had so many people recommend one, software and I, we almost pulled the trigger on it. But then I was like, let's do a trial run on both these two. And we chose the other one because it was way better user experience for property managers. So user experience, both for us and for residents." Tech is a tool that is ultimately as good as its users, and if it's not used correctly or at all, its potential is wasted. An over-reliance on technology can actually go hand-in-hand with an under-reliance, as both often spring up from a lack of understanding of how to choose, implement, and manage it. In this vein, Fleck can't recall many property managers who operate with too much tech. As long as you're not purchasing redundant software and you've done and continue to do your due diligence, tech-based process can make your business more efficient. "I more often find myself having that conversation," says Fleck. "When I'm talking to property managers in my sub-market, who aren't connected with like a NARPM, who aren't connected with like a Crane group, or who aren't connected with a Second Nature, aren't connected to the tune of what the property management industry is doing and the cutting edge of it, I'm just like, 'you could save so much of your time and you could scale this so much more if you only even if you just had tenant Turner, or if you had LeadSimple.'" No matter what your story is a property manager, if growth is in the cards, so is process and technology refinement. Hopefully, Fleck's experience in these areas can help you stay efficient and organized as door counts grow.

Calendar icon April 19, 2024

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Why offer a tenant benefits package?

In the residential real estate sector, like everywhere else, residents and property investors alike are getting younger – and with this generational shift comes expectations for a certain level of convenience and support. To put it bluntly, today’s residents want their needs proactively anticipated. It’s something they're willing to pay (and stay) for. That’s where a tenant benefits package comes in. In this article, we’ll explore what a tenant benefit package is, how it improves the experience for both property managers and tenants, and crucial mistakes to avoid. Before we get into the details, we want to give a shoutout to our very own “Resident Benefits Package” – which is how we refer to the benefits comprised in the “tenant benefits package.” “Tenant” is not yet a legacy term, but we here at Second Nature are trying to evolve it. That’s because, in our experience, property managers work hard to make renters feel like they’re not just parties to a contract – they’re residents. On one hand, this is just humans being humans, but on the other hand, it also encourages them to invest in care for their new home and add value to the property. Ready to get started now? Build your Resident Benefits Package today. What is a tenant benefits package? A tenant benefits package is typically a bundle of services, conveniences, and provisions offered by a property manager on top of the basic lease agreement. They represent a triple-win situation for property managers, residents, and property owners, as they enhance the overall rental experience, generate additional income, and protect the real estate investment. It might include conveniences such as online monthly rent payment options, or portals for submitting maintenance requests and tracking their status. It could also include various financial perks, such as credit rating improvements that are contingent on on-time rental payments, or discounts on nearby services such as fitness centers. It might also include amenities ranging from move-in concierge or utility set-up services, to identity protection services, to HVAC filter delivery. The cost for resident benefits packages is typically included in the lease and added as a monthly fee, with the fee being dependent on the specific benefits. Indeed, the benefits contained in a tenant benefits package will vary depending on the property manager and the type of rental property. The overall goal is to provide tenants with an enhanced quality of life while simplifying the experience of renting. At Second Nature, we pioneered the only fully managed resident benefits package, in response to PMs who wanted to make their business stand out. Our RBP includes an array of services and supports for residents, from filter delivery to credit building to maintenance. Why should property managers offer a tenant benefits package? Beyond the triple-win considerations mentioned just above, there are compelling and concrete reasons why property managers should offer tenant benefit packages. We'll turn to these now. Ancillary revenue Some tenant benefit packages include optional services or add-ons that can generate additional revenue streams for the property manager. This might include things like renter insurance or HVAC filter delivery. Resident experience Tenant benefit packages deliver numerous savings and value to tenants, beyond the value they would get if they were obtaining the same benefits "à la carte." Additionally, by offering additional services and conveniences, benefit packages can make tenants feel valued and more satisfied with their living experience. For instance, maintenance hotline requests, tenant portals, and air filter replacements all make life easier. Add-on services like identity theft protection can offer a sense of security. And discounted renters insurance coverage, utility concierge services, or other perks can save tenants money. Decrease tenant turnover and vacancy rates In a competitive rental market, tenant benefit packages can be a major differentiator toward boosting retention rates and reducing vacancy rates. Properties that offer these packages can also attract a wider pool of qualified tenants, and potentially command higher rents. Note that certain benefits in the package, like online rent payments and maintenance requests, can automate tasks and free up the property manager's time. This allows them to focus on more value-added initiatives. How does the tenant benefits package improve the tenant experience? Tenant benefit packages can significantly improve tenant satisfaction in several ways, by making life easier, more convenient, and potentially more affordable. For instance, if an online portal (a baseline feature for most property management software) is included for rent payments and maintenance issues and requests, this eliminates the hassle of writing checks or waiting on hold to speak with someone about a clogged drain. In other words, tenants have the peace of mind of knowing they can manage their tenancy 24/7 from the comfort of their own devices. Some packages might include features like filter delivery services or regularly scheduled HVAC maintenance. This frees tenants from having to remember these tasks – and ensures their apartment is well-maintained. Certain packages might also offer "verified vendor" services – in other words, a vetted vendor network that can help provide a more secure feeling to residents when service providers are on-site. On the financial side of things, a benefits package might offer discounts with local suppliers for various goods and services, or on a renters insurance policy obtained through the property manager (with applicable waivers for residents who have their own insurance). This can save tenants money on a necessary expense. Some packages also help residents with their credit scores via credit reporting and credit building services, so they can transition from renting to home buying when the time is right. The idea is that the credit reporting program reports on-time rent payments automatically to all credit bureaus, helping residents build their credit simply by paying their rent on time. Some benefit packages include resident rewards programs that represent a powerful and positive incentive for on-time rent payments, including gift cards or cash. As far as living perks go, packages sometimes include added benefits such as access to fitness centers or community events. This provides tenants with additional spaces to relax, socialize, or stay healthy. Packages can include security deposit alternatives that serve to provide a means for residents to be financially liable for damages without having to pay a significant lump sum upfront, such as pure insurance, surety bonds, and ACH authorization programs. Ultimately, tenant benefit packages create a more professional and responsive image for the property management company, which helps tenants feel valued and allows them to experience a smoother, more stress-free rental experience. What are the mistakes to avoid when offering tenant benefits packages? Property management companies should take care to avoid certain pitfalls when implementing tenant benefit packages to ensure they are providing true value to tenants as well as delivering profitability to the PM company itself. For instance, it's important to ensure that the services you're offering are actually relevant to your target renters. For example, young professionals might appreciate discounts on gym memberships, while families might prefer pet-sitting services. You should also take care to clearly communicate what's included and not included in the package to new residents. Don't oversell the benefits – focus on how they genuinely improve the living experience. It's also very important to set realistic expectations for response times on standard maintenance requests, emergency maintenance requests, or virtual concierge services. Likewise, be clear on all available payment methods, as well as rent due dates, late fee structures, and any associated payment processing fees. If your package includes services from third-party vendors, ensure that these vendors are reputable and reliable. Research their customer service record and responsiveness to ensure a smooth partnership and a positive experience for tenants. Above all, regularly monitor the usage of different benefits within your benefits package. This can help you refine your offerings and ensure you're not spending where spending is not required. Looking for a Resident Benefits Package? If you’re looking for a “plug and play” resident benefits package, Second Nature’s RBP is the way to go. Designed to be easy to implement and simple to use, all the services it includes are managed by Second Nature – which means there’s no day-to-day upkeep required from the property manager: Second Nature keeps it running. It’s a simple way to grow your business and create great experiences that residents will pay and stay for. Learn more about our fully-managed Resident Benefits Package.

Calendar icon April 2, 2024

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