Are you currently looking after a few short stay or Airbnb properties and would like to create a business?
It takes hard work, long hours and an overriding belief that it can be done. 16 January 2014 is a day I will never forget. It is the day that the corporation licence for my company was granted by the Office of Fair Trading, and the day my long-held desire to see the change I wanted to see in my local real estate market became a reality.
For far too long, property management has played second fiddle in agencies throughout the country; agencies that are typically run by sales-oriented principals. Sure, sales is exciting, quick, transactional – but the long-term relationships forged with your clients in a property management setting far outweighs the short-term thrill of hunting the next sale.
What’s the difference between Real Estate Agents and Property Managers?
When starting a property management company, the abundance of terminology in the industry may seem daunting. One thing to note straight off the bat is the difference between a real estate agent and a property manager. A real estate agent conducts property transactions, and are involved in the purchase, lease, and sale of properties. Furthermore, their role mainly concerns collecting bonds, deposits, rent, fees and other charges for leases over a property.
Property managers, on the other hand, are contractually obliged to perform tasks related to the maintenance, repair and other tenancy related issues over the leases or licences of residential properties. Property managers deal with the property and tenants after it is leased and are available to assist tenants and owners if there are any issues. Therefore, they act as a conduit between renters and owners. However, before you start your agency, you should do these things first:
Create a Business Website
Just like any service business, you need a place for running a property management company. So, once you’ve got the cash, find a quiet place to work where you can meet with clients and handle uninterrupted phone conversations. To cut down their expenses, many new owners of property management companies start out working from a home office and then rent out commercial office space when the business starts growing and staff is hired. Either way, you need to have equipment and stationary dedicated to organizing your work like a laptop, cell phone, scanner, fax machine, copier, and more.
Real estate investors and landlords can be found in the most volume at local real estate investment clubs. Join as many as you can, and be aggressive in networking, as this base is your bread and butter. A directory of real estate investing clubs in all 50 states can be found at EZ Landlord Forms, to help you find investing clubs in your area. Here are some useful business networking tips to get you started.
You should also network with people who are likely to refer business your way. One great source of referrals is real estate agents who specialize in investment properties, because many of their clients are new to the business and will ask for recommendations for various services. Another great source for referrals, and for direct business, is local hard money lenders. Hard money lenders sometimes find themselves stuck with rental properties, and are not in the business of property management, so they tend to outsource it. Also check out these non-traditional places and events for networking opportunities.
How much can you charge customers?
Property management companies that provide full-service management, which means the management company has full responsibility for the property, usually earn 10% to 15% of the rental income collected, with the balance paid to the property owners. This is the most common metric used in this business.
For example, a property management company has the contract to manage a multi-tenant complex with 100 units that rent for an average of $500 per month each. If they maintain an annual occupancy rate of 90%, which is really good, the annual earnings for the property management would be calculated as follows:
- 100 units at 90% occupancy equal 90 units rented on average over one year.
- The rental income would be 90 units times $500 per month times 12 months. This equals (90 x $500 x 12) $540,000 for a year.
- The fee earned by the property management company would be either 10% or 15% of this amount, which is $54,000 or $81,000 from this single contract.
Becoming Successful in AirBnb Management
Make sure you don’t have all your eggs in one basket, Airbnb Management Companies have quickly taken the most profit in the short stay property market.