Although starting your own single-family property management business is risky – and a bit scary – the market holds plenty of intriguing opportunities today. Here’s why.
According to survey findings released by market research firm OCR International, more than half (59%) of investors polled said they would be interested in adding single-family homes (SFR) to their portfolio – at least half of that majority said they aren’t interested in self-managing their investments.
Current low-yield bond rates and abysmal CD returns have investors looking for long-term growth strategies that offer higher ROI. Many investors are open to the idea of buying remote property – homes located in other towns or states – where they can take advantage of inventory shortages, tax incentives and reliable property management teams to help them manage the day to day details from rehabilitation to rent collection.
Private investors want to capitalize on the returns and long-term security that SFRs offer, but don’t want the midnight calls about leaky toilets and having to dun residents for the monthly rent payments. Partnering with a reputable property management team eliminates the stress associated with assuming the role of landlord.
Choosing Your Market
The decisions to launch a property management firm are as diverse as the leaders that seize the opportunity – investing their cash and time to grow the business. While one business owner may see property management as an avenue to find properties suitable for rehab and resell, another may embrace management income as the long-term goal.
If you live in a destination area – a ski resort, prime vacation spot or a well-known shopping hub – you might want to focus on vacation rentals or short-term leasing contracts. Another niche market is executive rentals in areas where housing is limited, but there is a steady influx of new arrivals due to industry expansion or commercial development.
Deciding whether to diversify your client offerings or specialize in one property type depends on your industry experience, your willingness to invest in professional development, and your long-term growth strategy.
Defining Your Client Base: Building Your Tool Box
If you want to work with any and all property owners, you’ll need to stay current on local and state laws, tax code, fair housing and disability regulations and business statutes governing leasing and management.
The more property types you want to manage, the more skills and training you’ll need. For example, if you decide to work with homeowners who own property within a covenanted community – a homeowner association – you need to understand the community rules and bylaws.
If you want to work with corporate housing officers, you need exceptional communication skills and contract negotiation knowledge. You’ll probably need a good attorney who specializes in both real estate and contract law, too.
Managing 50 SFRs is more challenging than managing a fifty-unit apartment complex because you’re covering a larger geographical area. Each homeowner expects personal service and rapid response times. Using property management software with customization options that allow you to screen residents, capture rents and disburse funds electronically, and create templates for new property types gives you flexibility to tailor each management agreement to individual clients.
The goal of a good property manager should be to minimize risks for homeowners while building a strong reputation as a reliable investment guardian. Whether you want to focus on attracting long-term residents or you’re more interested in building your own real estate portfolio – define your market, invest in professional development and get the tools you need to grow your business. Single-family home management opportunities are ripe for the taking – are you ready to claim your slice of the proverbial pie?