Author Topic: Starting Side Gig: Property Management  (Read 9150 times)

jenstill

  • 5 O'Clock Shadow
  • *
  • Posts: 68
  • Location: Vermont
Starting Side Gig: Property Management
« on: March 18, 2013, 05:54:37 AM »
I've worked in the multi-family housing industry for 19 years, including having been a property manager for numerous apartment complexes. My father owned several single family homes as rentals, and I helped him from time to time, but I have never personally owned/managed a SFH or duplex/triplex. While there are obviously some differences between SFHs and a 300-apartment complex, I'm thinking the rules and processes are very similar, if just on a smaller scale.

I am not in a position to quit my full-time job yet, but have been thinking of what I'd like to do as a side job/self-employment. Managing properties keeps coming up: I'm really good at it, there is a very large rental market here in my area, I'm certified in numerous regulatory programs, including being a Fair Housing trainer, and I enjoy it. I read the For Rent sections of the local papers and Craigslist for fun (letting my geek shine, I guess!). Because of all of this, I'm thinking of trying to pick up some property management contracts for SFHs in the area. This would be my first time doing a business on my own and I'm hoping you folks can help me with some questions.

1) Should I create an LLC first, before beginning, or wait until I've actually got some business? Or not do an LLC at all and just track my income/expenses on a spreadsheet and include them with my personal taxes? Or something else?
2) I've noticed that in my area, there are many businesses with "Property Management" in their names, but they are physical property managers, like landscaping, lawn mowing, snow-plowing, tree removal, etc. How do I differentiate myself from these types of businesses in small ads?
3) Where should I advertise? What is important information for you, as a rental owner, to know when trying to choose a manager?
4) 10% of the rent per month seems to be the going rate for an owner's agent. Does that seem right to you? Do you still pay that on months when there's a vacancy? Meaning, is it 10% of the rent charge, or 10% of the rent collected?
5) What is your contract with your manager like?
6) Should I always provide applications, leases, etc. or do most owners have their own that they'd want me to use?
7) Do you as the owner appear in court for your own evictions, or do you trust your manager to do it for you from start to finish?

And anything else you think of on the subject would be greatly helpful.

Left

  • Handlebar Stache
  • *****
  • Posts: 1159
Re: Starting Side Gig: Property Management
« Reply #1 on: March 18, 2013, 06:36:44 AM »
cant help about rental but do a llc to protect your assets from business liability/losses

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28127
  • Age: -999
  • Location: Seattle, WA
Re: Starting Side Gig: Property Management
« Reply #2 on: March 18, 2013, 06:59:37 AM »
There's a mix of questions in there, some of which you need legal counsel for (i.e. what the above poster tried to answer - please don't listen to someone random on the internet something as important as legal structure of your company), some of which show you probably haven't researched into starting a PM company at all (very basic ideas, such as what PMs charge), and some of which are going to be personal choice based on what you offer clients (contracts, evictions, etc.).

First, before I answer all those: have you looked into licensing?

In many states (including my own) you need something specific to manage other people's properties (you can manage one you have ownership in, but to manage someone else's you need a realtor's license, or something similar).

That issue aside, start reading on BiggerPockets: there have been lots of threads on starting property management companies.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Seeking the Brass Ring

  • 5 O'Clock Shadow
  • *
  • Posts: 44
  • Location: Madison, WI
Re: Starting Side Gig: Property Management
« Reply #3 on: March 18, 2013, 07:03:00 AM »
I'm not an attorney but it seems to me that you would want to start the llc before signing with any clients.  It's best to protect your assets from any potential suit and in this type of work you could get hit from both sides.  As far as the rest of your questions go, I'd say it's up to you and the clients.  I manage my own property but if I was to hire a prop. manager I would want them to completely take care of everything.  With respect to the charges and vacancies I'd say that you have to balance what's reasonable with what you're willing to do.  I'd say that most of your work is going to occur when there is a vacancy so I would not want to work for 'free' during that time.  That being said I have no idea what the standard practice is.  I think it's probably worth talking to a realtor in the area that specializes in income properties and bouncing some questions off of them.  They're also a good reference to hand your name out when you are looking for clients.

Cheers!

jenstill

  • 5 O'Clock Shadow
  • *
  • Posts: 68
  • Location: Vermont
Re: Starting Side Gig: Property Management
« Reply #4 on: March 18, 2013, 03:34:59 PM »
Thanks for the replies!  I realize of course that there are legal implications and I have spoken to an attorney. I was surprised by her somewhat blase response of, basically, there are a couple different legal structures which could work and each has its pros and cons, you just need to choose which is most important in your situation. Probably need to talk to a different one. :)

Yes, I have checked into licensing and, in my area, it's not required. In fact, it's somewhat unusual for a Realtor or Realty agency to manage individual rental homes. Several calls to several agencies over the last few weeks yielded responses along the lines of "we only do that for clients with multiple properties/multi-family properties/a certain portfolio size/worth".

You're absolutely right that some of my questions are going to be personal choice, and may even vary from client to client; I expect some folks to want to stick to their own paperwork/procedures, while others won't care as long as it's done for them, and then folks in between.

I'm sorry, I wasn't clear in why I am asking these questions here and I can definitely see that it appears I haven't done any basic research. That's not the case.  I am pretty new around here, but from what I can tell there's a good concentration of 1) folks who are self-employed and 2)folks who own/rent property. Your own personal experience and opinions setting yourselves up for, often, part-time self-employment is valuable to me.  From other threads, it does seem that most of you manage your properties yourselves and that makes your opinions on what would be valuable to you if you were to look for a manager so important to me. For the most part in my area, SFHs are managed by the owner, who typically only owns one or two rentals. So, given so many of your own experiences are (I think) relevant to both what I'm trying to do and the folks I hope to be serving, I'm very interested in your opinions and thoughts.

I will absolutely check out Bigger Pockets. I wasn't familiar with that site, so thanks for the suggestion!


arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28127
  • Age: -999
  • Location: Seattle, WA
Re: Starting Side Gig: Property Management
« Reply #5 on: March 18, 2013, 03:45:41 PM »
Thanks for the context/extra information.  Helps make things a little more clear.

I will absolutely check out Bigger Pockets. I wasn't familiar with that site, so thanks for the suggestion!

Great. 

One you do the Google Reading and BiggerPockets Reading, post back here if you have any more questions or want input!  :)

But that should give you a ton to start with, I bet.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Nate R

  • Bristles
  • ***
  • Posts: 337
  • Age: 34
  • Location: Milwaukee, WI (Bay View)
Re: Starting Side Gig: Property Management
« Reply #6 on: March 18, 2013, 04:23:04 PM »
This has been a thought I've had as well for a side gig. (Or continuing gig when I ER.) I have the handy/DIY skills to handle most repairs, and some family with experience in rentals which I've also helped with repairs, etc, but no real property management experience myself yet. But I'm thinking that once I've gotten my feet wet with a few units of my own it may not be a bad idea at all. And if I'm going to have real estate of my own in ER, why not manage another bunch of units for others as well?

Is anyone else managing multiple units for others?

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28127
  • Age: -999
  • Location: Seattle, WA
Re: Starting Side Gig: Property Management
« Reply #7 on: March 18, 2013, 04:35:30 PM »
I initially thought I may be interested in doing that as a semi-ER, or transition to ER.  Managing my units, and maybe even other people's.

I like dealing with tenants, but I don't like dealing with vacancies.  YMMV.

Now I'm actually going the other way during ER, and leaning towards less management myself and more outsourcing.

It's worth the complete freedom for me, since I plan to travel a lot, and management from afar is a lot trickier (especially during turnover/vacancies).
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

sedura

  • 5 O'Clock Shadow
  • *
  • Posts: 28
Re: Starting Side Gig: Property Management
« Reply #8 on: March 18, 2013, 09:41:21 PM »
This is what I do for a living.  I am a REALTOR in NC, and I manage four homes for myself and 42 homes for other people. This has allowed me to work from home and not put my twin babies in daycare.

I charge 8% of the rent I collect for management and a 1/2 month's rent to find a tenant. I try to stick to higher end properties that I know will rent easily.

I started mine as an LLC right away. Better to try to set things up correctly in the beginning than to make changes halfway through.

I originally advertised on Craigslist and by sending out postcards to people who had their homes on the market for sale for a long time and people who had their addresses listed differently than the property address in the tax records. I only advertised for a short time before I found out I was pregnant. I stopped trying to find new clients at that time, but I have still grown the business by almost 50% in the last year, just by referral.

I have management agreements with all of the owners and I use lease forms provided by the board of REALTORS. I don't allow the owners to use something different...just too complicated to keep up with multiple kinds of leases.

I go to court for the owner in case of eviction, but I've only had to do that twice.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28127
  • Age: -999
  • Location: Seattle, WA
Re: Starting Side Gig: Property Management
« Reply #9 on: March 18, 2013, 10:05:10 PM »
Awesome to have you here, sedura. Thanks for the valuable input!
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

jenstill

  • 5 O'Clock Shadow
  • *
  • Posts: 68
  • Location: Vermont
Re: Starting Side Gig: Property Management
« Reply #10 on: March 19, 2013, 07:07:00 AM »
Thanks, Sedura. This is excellent feedback!

freelancerNfulltimer

  • Stubble
  • **
  • Posts: 157
Re: Starting Side Gig: Property Management
« Reply #11 on: March 19, 2013, 08:49:17 AM »
You may need a broker's license or work under a broker. I'm not sure if that is across the board or state specific.

http://answers.yahoo.com/question/index?qid=20090722170729AAaYTNt
http://www.trulia.com/voices/How_To_/What_do_I_need_to_start_a_Property_Management_busi-258588

If you don't have a broker's license you can work part time for someone else's property management company. You would most likely work as a contractor and make commission. You can grow your portfolio as large as you can handle. You may have to work at the PM's office on the weekend, but that's how you'll get new clients.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28127
  • Age: -999
  • Location: Seattle, WA
Re: Starting Side Gig: Property Management
« Reply #12 on: March 19, 2013, 09:20:48 AM »
You may need a broker's license or work under a broker. I'm not sure if that is across the board or state specific.

http://answers.yahoo.com/question/index?qid=20090722170729AAaYTNt
http://www.trulia.com/voices/How_To_/What_do_I_need_to_start_a_Property_Management_busi-258588

If you don't have a broker's license you can work part time for someone else's property management company. You would most likely work as a contractor and make commission. You can grow your portfolio as large as you can handle. You may have to work at the PM's office on the weekend, but that's how you'll get new clients.

It's state specific.  It's something I mentioned in my first reply, and OP says it's not required for her area, apparently.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

freelancerNfulltimer

  • Stubble
  • **
  • Posts: 157
Re: Starting Side Gig: Property Management
« Reply #13 on: March 19, 2013, 08:00:25 PM »
You may need a broker's license or work under a broker. I'm not sure if that is across the board or state specific.

http://answers.yahoo.com/question/index?qid=20090722170729AAaYTNt
http://www.trulia.com/voices/How_To_/What_do_I_need_to_start_a_Property_Management_busi-258588

If you don't have a broker's license you can work part time for someone else's property management company. You would most likely work as a contractor and make commission. You can grow your portfolio as large as you can handle. You may have to work at the PM's office on the weekend, but that's how you'll get new clients.

It's state specific.  It's something I mentioned in my first reply, and OP says it's not required for her area, apparently.

That's lucky. I just looked it up and it seems there are about six states that don't require a Broker's license.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28127
  • Age: -999
  • Location: Seattle, WA
Re: Starting Side Gig: Property Management
« Reply #14 on: March 19, 2013, 08:08:31 PM »
That's lucky. I just looked it up and it seems there are about six states that don't require a Broker's license.

Yup.  Definitely required in my state to have a broker's license or work under a broker.  It's not uncommon for people starting a property management company hire a broker just for that reason.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

sedura

  • 5 O'Clock Shadow
  • *
  • Posts: 28
Re: Starting Side Gig: Property Management
« Reply #15 on: March 19, 2013, 10:15:27 PM »
Thanks for the warm welcome! I'm happy to add any input I have to the property management/investment property questions. It's been good to me, and I'd love to see others benefit by doing the same things I've seen work in the past.

BTW, I'm loving this site. I'm trying to get my husband on board with being more frugal. Every time he spends money I disapprove of, I wiggle my pointer finger over my upper lip (like a mustache). He gets the point, and I can be funny (not a nag, I hope)

jenstill

  • 5 O'Clock Shadow
  • *
  • Posts: 68
  • Location: Vermont
Re: Starting Side Gig: Property Management
« Reply #16 on: March 20, 2013, 05:22:26 AM »
Quote
That's lucky. I just looked it up and it seems there are about six states that don't require a Broker's license.

Yes. My state is often odd in its rules compared to other states. This is one of the very few that I actually agree with, though I'm sure it's less about conscious thought and consideration and more likely the Realtors just haven't pushed it here yet.

Sedura, that seems a good way to remind your husband: cute and non-naggy, but still gets the point across! Out of curiosity, do you use PM-specific software or Excel or some other form of bookkeeping?

sedura

  • 5 O'Clock Shadow
  • *
  • Posts: 28
Re: Starting Side Gig: Property Management
« Reply #17 on: March 23, 2013, 11:11:26 PM »
I use Excel right now, but I'm slowing transferring all of my files to a program called Buildium. I think it's the most cost effective solution for the number of properties I have. There are some others I've heard good things about, but they seem to be geared toward much larger businesses.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28127
  • Age: -999
  • Location: Seattle, WA
Re: Starting Side Gig: Property Management
« Reply #18 on: March 24, 2013, 07:44:52 AM »
I use Excel right now, but I'm slowing transferring all of my files to a program called Buildium. I think it's the most cost effective solution for the number of properties I have. There are some others I've heard good things about, but they seem to be geared toward much larger businesses.

I just did the opposite in January - disentangled my stuff from Buildium and made my own Excel files!  :D
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

sedura

  • 5 O'Clock Shadow
  • *
  • Posts: 28
Re: Starting Side Gig: Property Management
« Reply #19 on: March 24, 2013, 10:09:32 PM »
Why?  I'm hoping Buildium will streamline and automate some aspects of the business for me.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28127
  • Age: -999
  • Location: Seattle, WA
Re: Starting Side Gig: Property Management
« Reply #20 on: March 25, 2013, 10:10:12 AM »
I wanted to "play" with the data more than it would let me.  Better analysis when I control the cells.

Found the time it takes to update a spreadsheet is about the time it took to update Buildium.  YMMV depending on your real estate holdings, methods, etc. 

Bottom line is it gave me more control, with not much (or none?) extra time spent, aside from the initial setup.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.