How to Start a Property Management Company

Property management companies play an integral role in the real estate industry by providing property maintenance, tenant screening, and rent payment services for property owners. With the current real estate market, perhaps you’re thinking about starting a business that offers these services. 

To create a thriving company, you first need to know where to start. Before you take this next step in your career, get an in-depth look at how to start a property management company, from researching the market and choosing the right insurance to selecting a business structure.

Is now the time to start a property management business?

With around 300,000 property management companies registered in the United States, you might think that now isn’t the time to start a property management business. But this doesn’t necessarily mean the market is saturated in your neck of the woods.

In fact, according to Pew Research Center, most residential landlords are individuals who own only a small number of units. This means that there may be untapped opportunities for new property managers to motivate individual landlords to use their services, such as tenant screening, rent collection, property maintenance, lease management, eviction services, and handling legal matters related to rental properties​. 

Additionally, with the market size and industry revenue projected to grow over the next several years, the financial outlook for the property management industry is strong. Despite the loss of commercial tenants during COVID-19, many companies are now mandating that employees return to the office.

On the residential side, home buying is still out of reach for many Americans (and it’s actually cheaper to rent than to buy in the top 50 metro areas), meaning that there is still a need for rental property managers. Plus, the vacation rental market in the United States is also projected to grow year over year through 2028, and rental property owners often hire management services for their vacation homes.

So, what does this all mean for individuals interested in starting a property management company? Now might be the right time to start this new venture, as the outlook for the industry shows a lot of promise.

Starting a property management company in 10 steps

The following steps outline how to start a property management company, with details, resources, and need-to-know information for each.

Step 1: Research your market

As with any business startup process, conducting market research is key. There are several areas of analysis that you should focus on.

• Location. When starting out, it may be a good idea to manage properties in one location, particularly an area that you’re familiar with. Research specific regulations in your chosen city, county, and state, and check with your local housing authority to understand if there are any upcoming housing projects, regulation changes, and so on.
• Competitors. To stand out in the crowd, take a close look at your competitors in the industry. Research other companies that provide the same services in your chosen location. How many properties do they manage? What kinds of services do they provide? What fees do they charge? How are they marketing themselves, and who is their target demographic? Check online reviews of these companies (e.g., Yelp, Google, openigloo, social media comments, etc.) to discover any gaps that your company can fill.
• Market demand. Research the financial outlook and future trends for rental growth and demand on a local scale. After all, while national statistics are key indicators, not all geographic locations have similar demand for rental properties. Your research will depend on the niche, like commercial vs. residential vs. short-term rentals. Get information on occupancy rates, projected population growth, how fast properties are rented and in which seasons, and the state of the local commercial or residential real estate market.
• Pricing. Determining how much to charge for service can be challenging, but you’ll have a better idea of how to set prices by doing some competitor research in your area. Check these businesses’ websites to determine how they set their rates and what services they provide. 
• Target audience. Understand your target audience: both renters and property owners. For residential properties, what are the demographics of renters in your target market? What types of properties do they typically prefer (single-family homes, apartment buildings, condos, etc.)? For commercial, what types of businesses rent particular buildings and in what areas? 

Step 2: Choose your niche

Next up on your project management startup checklist is identifying your niche. It is highly suggested to choose a specific area of real estate to focus your services on, rather than casting a wide net across all types, like residential, commercial, and short-term or vacation rentals. 

For one, the landlords, property locations, types of services, and renter needs will vary. Additionally, depending on the state and jurisdiction in which your company is located, each niche may require navigating different licenses, regulations, and types of leases. For example, crafting a commercial lease won’t be the same as putting together a residential lease. 

Choosing a niche for your property management company will help you develop expertise in that specific area.

Step 3: Choose a business model

When registering your property management business, you’ll need to choose an entity structure, typically a corporation or limited liability company (we’ll dive into more specifics about each structure later). It’s important to choose the right one for your situation, as each business structure has different tax implications and levels of liability protection. 

You’ll also need to decide whether to become part of a franchise or operate your company independently. Franchisees typically need to be structured as LLCs.

Step 4: Write a business plan

Business plans are the foundation and guiding force of a company. Plus, they can help to secure funding, whether from investors or future partners. So, the next key step in how to start a property management company is developing a business plan.

Here are the elements that should be included when writing a property management business plan: 

• Executive summary. Briefly describe the purpose and mission of your business, the services you’ll provide, any financial information (for securing funding), and basic information, like location, the number of employees, and business owners.
• Company description. Include your chosen business name, and go into more detail about why you have started the property management company, how it will meet a need, the niche you’ve chosen, and other details that will help your business shine. 
• Services. List all of the services that your property management business will provide, from collecting rent to conducting property maintenance.
• Target audience. Note the types of property owners you will pursue as clients.
• Market analysis. You’ve already done the local market analysis in Step 1, so all you need to do here is clearly describe your findings.
• Competitive analysis. Share insights gleaned from your property management competitor research in Step 1.
• Operations and management. List the owners of your property management company, who will run day-to-day operations, and how the business is structured.
• Marketing strategy. Outline your marketing strategy (refer to Step 9). Through what channels will you market your company? How will you attract clients and retain existing ones? 
• Financial plan. Detail how you’ll fund your business—and if you need extra funding to get started—and explain financial projections for the future.

Step 5: Obtain necessary permits and licenses

To perform the full suite of services—from collecting rent to listing property or negotiating leases—most property managers will need to obtain a real estate broker’s license in their state. Some states only require property managers to get a special property management license, and a handful of states don’t require any licensing. 

You may also need to get a general business license to operate your company in a city or county. Be sure to check state and local regulations to understand if you need a license or permit, or use an online service like LegalZoom.

Step 6: Set up financial systems

Now it’s time to set up your finances. You may decide to open one business checking account per property, then link all accounts to your banking profile (you’ll need an EIN to set up a business bank account).

This is one of the best ways to ensure that rent, security deposits, and operating expenses for each property are accurately accounted for. In fact, some states require property owners to keep funds separate for every rental property or to put security deposits into special interest-bearing accounts. Check your state’s requirements to ensure that your property management business stays compliant.

Once you have your financial structure in place, implement accounting tools for tracking income and expenses. There are several options available for accounting-specific property management software, so make sure to research which ones will suit your business needs. For example, some property management software comes with an online payment platform for rent collection, accounting capabilities, marketing tools, tenant screening, and more.

Finally, set your rates. According to RentSpree, most property management companies charge flat management fees or 8%-10% of the monthly rental income, along with a one-time account setup fee and other service-specific costs. Use your competitor research and pricing analysis from Step 1 as your guide when determining your ongoing management fee for clients.

Step 7: Hire and train employees

When starting a property management company, you may choose to operate solo, only hiring employees as your business grows and you take on more clients and services. Full- or part-time employees for a property management company might include leasing agents, maintenance staff, administrative personnel, sales and marketing employees, and individuals who can manage accounting and payroll.

While many of these employees will have specific skill sets outside of the property management industry, you’ll want to set aside time at the beginning to train them in the general operations of your company. Leasing agents or additional property managers that you bring on may benefit from taking property management courses through the National Association of Residential Property Managers (NARPM).

The following are some necessities for any business that hires employees: 

• Workers’ compensation insurance, for financially protecting your workers in case of a work-related injury or illness and legally protecting your business
• General liability insurance, for protecting against property damage, customer injury on the premises, or even some legal claims
• Errors and omissions (E&O) insurance, for covering any lawsuit-related costs due to professional errors, like negligence
• Cyber insurance, for financial and legal assistance with mitigating any data breaches of sensitive customer information
• Payroll tax, which is due to state and federal tax agencies (not applicable to independent contractors)

Regardless of if you hire employees or not, it’s a good idea to seek out reputable, licensed vendors and contractors, like real estate lawyers and contractors (for performing upkeep on properties), and develop good working relationships with them.

Step 8: Network and build relationships

While developing a network of trusted contractors is important for property managers, joining a professional association can also boost your business—and your credibility. The NARPM provides education, professional development opportunities, and local chapters comprising other property managers and real estate professionals who can share insights, challenges, and referrals. Building relationships with individuals in the industry can empower you as a new business owner and provide you with a community of like-minded, growth-oriented people.

Step 9: Market your business

In the beginning stages of your property management business, you might not have a full roster of clients yet—and this is where an effective marketing strategy is key. Once you have developed your brand identity, company mission, and logo design, start marketing your business through the following channels:

• Website. Build your website on a website hosting service, like Squarespace, Wix, or Bluehost. Ensure that the domain name matches your business name. On your website, include all of the necessary information about what your business offers, specific pricing, and a few ways to get in touch.
• SEO. Get more traffic to your website by leveraging search engine optimization (SEO) strategies, like content marketing to capture keyword searches, claiming your business profile on Google, and setting up listings on review sites. You may also choose to incorporate paid search strategies for online ads.
• Social media. Continue your strong online presence by posting relevant content on your social media channels and engaging with followers.
• Local real estate events. Attend in-person real estate networking events and conferences to market your business. You’ll not only be able to share business cards and increase word of mouth, but you can also garner text or email subscribers for sending newsletters, marketing messages, and more.

Step 10: Launch and manage your company

The final step in the property management startup checklist is launching and managing your company, which includes budgeting, creating contracts for new clients, and tracking performance. 

First, make sure that you have a robust property management software with budgeting and reporting features to ensure that your finances are on track. Your property management software should also include performance tracking features for each property, such as occupancy rates and turnover, revenue, and net operating income.

Additionally, client and resident surveys can also provide you with data on the levels of satisfaction regarding your business services and properties. Insights from this data will help you determine areas of improvement to focus on.

Managing your company also means creating the right contracts for clients, vendors, and residents (or lessees). You can download free property management templates from LegalZoom.

How much does it cost to start a property management company?

From registering your business to investing in software, there are many costs involved in starting a property management company. The total estimated startup cost can range anywhere from $1,500 to several thousand dollars, depending on if you hire employees, if you consult an attorney, how much you budget for marketing, and more.

Business registration and licenses

According to the U.S. Small Business Administration, the total cost to register a business is less than $300. However, the initial registration fees depend on the state in which you’re registering and the business structure (e.g., LLC vs. corporation).

As mentioned earlier, property managers in most states need to obtain a real estate license. The fees involved vary depending on the state, but costs typically range from $400 and $1,000 for the coursework, exam fee, background check, and license application fee. 

Insurance

Business insurance costs for property management businesses vary depending on your location, the type of policy, and the deductible. According to Insureon, average prices for general liability, E&O, workers’ comp, and cyber insurance range from $40 to $145 per month.

Software and supplies

Property management software monthly costs can range from $10 to more than $250 per month, depending on the number of units, the features provided, the level of customization, and more. 

You’ll also need to budget for office setup, like renting a physical space, and general office supplies. The price for renting an office space depends on the local market. If you’re working from home, you could choose to set up a virtual business address with LegalZoom, which costs up to $79 per month.

Legal fees

For any property management business, there will likely be legal fees involved in general operations for things such as drafting contracts, reviewing leases, setting up the necessary business documents, and maintaining compliance with local, state, and federal regulations for the rental and real estate industry.

You may choose to hire a local attorney (for which costs will depend on local rates) or opt for comprehensive legal services through LegalZoom, which may cost anywhere from $300 to $1,399 depending on what you need, like a commercial lease agreement or an employee agreement.

Staffing

If and when you decide to take on employees, be prepared for the costs to hire. 

• Job advertisement, recruiting, and hiring: $4,129 per employee on average
• Salaries: Cost varies depending on the type of role and location
• Employee benefits: $11.42/hour on average
• Payroll taxes: Cost varies. Federal payroll taxes, currently 15.3%, are typically shared between the employer and employee, meaning that employers will be responsible for 7.65% per payroll cycle. State payroll tax rates vary. 
• Workers’ comp: $45/month on average

Marketing

Costs involved with your business’s marketing strategy will vary, but according to Statista, companies in the real estate industry spend about 10% of their total budgets on marketing expenses, like SEO and content marketing, paid advertising, and email marketing. Many companies determine their marketing budget as a percentage of their revenue, so this number will be unique to your business. For example, in 2024, 9.1% of companies’ revenues in North America and Europe were dedicated to marketing.

How to decide which business structure is right for you

The common types of business structures for property management companies are corporations and limited liability companies (LLCs). While some property managers may initially want to form their business as a sole proprietorship, this structure isn’t recommended, as it doesn’t provide legal protection or allow for hiring employees. 

Corporation

There are two types of corporation business structures: C corp and S corp, both of which can be beneficial for property managers that want investors or eventually want their companies to become publicly traded.

• Liability. Both structures separate personal and professional liability, meaning that your personal assets are safe from any professional lawsuits. 
• Taxes. A C corp is taxed twice, both at the corporate and shareholder levels. An S corp is taxed once based on profits.
• Management. A C corp can have unlimited owners (shareholders), while an S corp can have up to 100. Both structures must have a board of directors.
• Cost/complexity. With both structures, recordkeeping and reporting is more complex and state filing fees are typically more expensive than other legal entities. 

LLC

An LLC is a popular business structure for small business owners.

• Liability. Personal and professional liability for LLC owners (members) are separate. 
• Taxes. LLCs can choose to be taxed as a sole proprietor or partnership or as a corporation. Many business owners appreciate this flexibility. 
• Management. You can have an unlimited number of members.
• Cost/complexity. LLCs are generally cheaper than corporations, and they are less complex in terms of recordkeeping and reporting requirements.

Once you have decided which legal entity works best for your needs, kickstart your new company with LegalZoom’s business formation services, which can assist you with creating and filing the necessary paperwork, getting an EIN, establishing your online presence, and more. Then, you’ll be on your way to becoming a successful property manager.

FAQs

What are the risks of starting a property management business?

Starting a property management business can bring some risks, such as choosing the wrong time to enter the market, not being able to afford the initial costs, hiring employees too soon (or not soon enough), or not keeping up with licensing or regulations. More specifically, property managers deal with many different parties, from a property owner to renters to contractors, which can increase the risk of legal disputes or financial issues.

How long does it take to open a property management company?

The time it takes to start a property management company may range from one to six months, depending on if you need to get your real broker’s estate license, rent a physical office space, or hire employees.

What type of insurance do I need?

At a minimum, property management companies should have general liability, E&O, and cyber insurance. If you have employees, you’ll need workers’ compensation insurance, and if you have a physical office space outside of your home, you’ll need commercial property insurance.

How do I set my pricing structure for a property management company?

Generally speaking, property managers charge either flat fees for their services or a percentage of the property owners’ monthly rental income. In addition to the fee structure you choose, you may also charge for specific services, like a lease renewal fee or vacancy fees. 

Can I run a property management company from home?

Yes, you can run a property management company from home, as a lot of the day-to-day work is done on-site or online. But it’s a good idea to rent a physical space if you decide to take on employees.