Life is good, isn’t it, especially when you have money? Even though my wife and I have our financial act together, we are always on the hunt for ways to add additional income streams to our portfolio.
I just finished a book on opening a business in the physical world called “How to Start a Microbrewery.” Opening a physical business requires a lot of work, time, and money. Therefore, I still prefer companies that I can start and run from home.
Before my brewery book, I completed a book titled “The Book on Managing Rental Properties.” This book is the ultimate guide on starting and running a property management firm from your home. It is genuinely a standard operating procedures manual that you can use to form 75-85% of your property management business.
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But is running a property management business right for you? Some personality traits will not perform well inside this field. Outside of those, I think that anyone who can manage themselves, stay organized, and deal with tenants can start an excellent property management business. Let’s get into the article.
Two traits that can fail. Let’s start with the two kinds of personality traits that I believe will have a hard time coping with being a property manager—unorganized and timid. Property management is paperwork intensive, so you will have a hard time if you can’t organize yourself and others. Tenants can be ruthless, especially if you are timid, so you have to be firm and fair at all times. You have to be able to enforce the rules no matter the scenario.
If you can overcome those two traits or do not have an issue with them, you can be a great property manager. The business is truly about having detailed forms, procedures, and enforcement. Those who have served in the military will find this business right up their alley.
Getting started in property management. You need to get started two things: to know what you are doing and property to manage. Before you do anything about property management, read the book I mentioned earlier—it will overwhelm you with information. The book also has many starter forms, management ideas, and resources.
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Now you need to find a property. You can start your business by renting out rooms or spaces on your property. I wouldn’t incorporate a business, but this could be an excellent way to begin dealing with tenants and getting practice with paperwork.
Also, this will allow you to tell prospective clients that you manage properties because you now have properties and tenants that you manage. My wife and I have been renting rooms for over two years, and you will learn a lot about people while you do this. Renting spaces on your property is a great way to find out if you will be a good landlord.
I think the best way to find clients is to keep your ears to the ground around your neighborhood or work. Someone is always looking to rent a property or knows someone who is trying to rent. Also, listen to people who are looking to sell. Many times they wouldn’t mind renting if they knew a good property manager. Of course, this is where you conveniently pop into the picture.
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You can also publish and release some business flyers and walk around your neighborhood. For me, I am not trying to become a huge business owner. I would attempt to keep all my properties near the home where I reside.
Before you start issuing flyers, please read the book “The Non-Designer’s Design Book.” Yes, you could pay someone to do the work for you, but the idea of starting a small business is to get involved in your own business. Not only will you get a sense of pride, but people will begin to recognize your designs around town. You will be designing many flyers during your time as a property manager, so you may as well start creating now.
Getting started with your first property. The most important thing is understanding the laws of the land. You have fair housing laws at the federal and state levels, and even local groups—understand these.
Next, you will need to have all of your procedures and forms in place. The book does a great job of getting you going in a straight line when it comes to all the documents. You will want to have everything set up before you start advertising and dealing with prospective tenants.
There is a lot to do here, but nothing is complicated about the process. The hardest part is staying organized and filing your paperwork. Nothing about being a property manager is difficult; if you can manage yourself, all you have to do is manage others.
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I don’t want to get into too much of the day-to-day grind of getting started or managing properties. I want to do a ten-part series covering all of this if there is an appetite from my audience. Since most people with the proper motivation can succeed as property managers, I want to look at some of the other essential parts of the business: required time and possible income.
Time. You can streamline your time requirements as a property manager, especially if you remain small. If you stay under ten doors (10 places), you can have an abundance of time and still bring some good passive income.
The book gives a fantastic tip on managing your time when explaining that you can set your business hours within your tenants’ inbrief. For example, I can set my business hours from Monday to Friday 0830-1400. If calling during these times, I give them my Google Voice number. I can put my Google Voice to provide an out of office outside these hours.
I then define what an emergency situation is during the tenant’s inbrief. I set up another Google Voice number and give them this number for emergencies only. The book said in all of their years; they very rarely had people call with emergencies, if ever.
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So for the people who think that they will be receiving calls all the time, this is a way to mitigate this madness. This scenario was an eye-opener for me and a great reminder of why I read so much.
Other than phone calls, your job is mostly upfront in finding, screening, and managing tenants. When they have a maintenance request, they can fill out a form online. This way, you can track the maintenance and the tenants, all in one place.
There are many ways to collect rent, but mostly everything is moving to online payments. There is also a way for tenants to pay their rent through a system at stores like Walmart. When they pay, the system instantly deposits the money into your account. This system is for tenants without online banking.
Your income. Ah, to my favorite part, the revenue. Once you get set up and run a reputable property management business, the income can be very passive. If you are handling ten doors, you may have tenant turnover once a month, but probably a lot less than that.
Property managers charge somewhere between 8-12% per door. Plus, they have an initial advertising/ finders fee per new tenant. There are also more ways to monetize other business areas such as late fees, coin laundry, etc. It can be a very lucrative business, especially looking at your time requirements.
Let’s run an example using our ten doors scenario. We have ten single-family residences for our example, and they each rent for $2,000/month. Doing the math, you will be earning $2,000/month in passive income from your ten homes.
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Yes, they will require some work, but they should each be on one-year leases. The tenants should not be giving you too many headaches if you perform your screening correctly. So what are you doing throughout each day? Maybe doing some drive-bys and managing your paperwork is all you consistently have to do daily.
Property management can be a good business for stay-at-home parents and other employees that work from home. The hardest part is during the changeover of tenants; however, most things can be handled online and pre-screen many prospective tenants through phone calls.
Conclusion. I give property management my stamp of certified passive income. Once you are up and running, the hardest part is screening good tenants. Once you have that down, your day-to-day job is relatively passive.
If you are good at handling paperwork AND good at managing people, this could be a very passive and lucrative business for you to start from home. Being able to control the phone calls is a godsend and something I would have never thought of on my own.
Give “The Book on Managing Rental Properties” a good, long read if you are interested. I would recommend any homeowner to read this book as well. You may find yourself in a situation where you may need to rent out your home. Knowing how property management works will be great for everyone to know. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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