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Starting a Part-Time Property Management Company-RJayTeel Property Management Post 1

RyanJDenman

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Jun 21, 2024
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Hey all,
I'm documenting some progress steps towards launching my part time property management company. Feel free to chime in with suggestions or critiques.

Why
Property management can be done by one person up to ~100 units with the right systems in place.
Revenue comes from:
  • % of monthly rents (8-10%, Denver Metro average rent is 2250/mo)
  • Finding new tenant (50% of one months rent)
  • Lease renewals ($50-$100/yr)
  • Tenant benefit packages ($20-$100/mo)
  • Lates fees, etc. (variable, but I hate late fees, so I would structure my systems to prevent late fees in most situations)
I see a strong market for good property managers based on:
  • Most real estate investors don't want to manage their properties
  • Short term rentals (STR) are converting to long term rentals (LTR) since jurisdictions are becoming tighter on where STRs can be and how many fees/taxes are assessed, as well as running an STR take a lot of time and effort.
  • People holding low interest mortgages don't want to sell if they move, so they rent former houses
  • Wealth is built in real estate by owning properties versus transacting in real estate (wholesaling, flips, sales)
Barriers to Entry
  • Increasing tenant favored legislation across Colorado, especially Denver and Boulder, is making it harder to operate for Average Joe Slumlord (AJS)
  • Knowledge of how to screen for good tenants
  • Knowledge of how to handle situations that arise with tenants (conflicts, repairs, lease violations)
  • How to maintain a home to keep tenants happy, attract good tenants, and avoid preventable capex
What I Bring to the Table
I've managed two rentals that own for the last six years and have done well with it. Since I've always had a time constraint, my systems are built to minimize how much of my time needs to be spent, which differs from the way property management is traditionally run. I increase my knowledge of real estate and property management on a regular basis, so I use that knowledge to continue to operate successfully and add value to others.

Income Potential
Theoretical Part-Time
  • 15 properties are under management
  • 8 have one pet
  • 3 unit turn overs occur per year
  • 12 units renew their leases
  • 8 subscribe to a tenant benefits program
Revenue Sources
  • Denver Metro Average Rent = $2250/mo
  • Pent Rent = $35/mo
  • Lease Renewal = $75
  • Management Fee = 10% of rent ($225.00/mo/door)
  • New Tenant Fee = $1125
Total Yearly Revenue = $46806
Estimated Time (with established systems) = 10 hours per week average

Taking those numbers and scaling to 100 units by multiplying (100/15) and assuming no time savings from operating at scale give:

Total Yearly Revenue = $312040
Estimated Time (with established systems) = 67 hours per week average

Initial Steps
  1. Build an estimate of start up and recurring yearly costs to see how many doors would need to be managed to cover costs
  2. Get a real estate license
    1. Online school
    2. About six weeks of study
    3. Passing test
  3. Hang my license in a brokerage
  4. Implement software needed for 1-50 rental properties
  5. Write down SOPs for most common practices
  6. Gather needed tenant forms
    1. Leases
    2. Notices
    3. FAQs
      1. How to submit maintenance requests
      2. Paying rent
      3. Caring for a property
      4. Other
  7. Gather needed client forms
    1. Management agreement
    2. FAQs
      1. What to expect for a property being managed
      2. When payments will be sent
      3. How the property will be maintained
      4. Other
  8. Build a marketing strategy
    1. Location
    2. Demographic
    3. Property type
  9. Build a simple website
 
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