What You Need to Start Your Own Property Management Company in California
Even in a down economy, people need to live somewhere. Consequently, property management tends to provide a relatively steady income stream. It may be somewhat more difficult to start a property management business in California than in some less regulated states. Licensing requirements are firm. On the other hand, the rigors of regulation limit competition and promote businesses that are run in a professional manner.
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Licensing
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California state law requires a property management company to be operated under a real estate broker's license. There are two exceptions to this rule: one is for property owners who manage their own property and the other is for managers who are direct employees of the property owner. Additionally, unless they fall under one of the exceptions, employees of the broker must be licensed as real estate salespersons if they engage in any activities requiring a license, such as advertising a rental or negotiating or explaining a lease or some other term of tenancy. A local business license will also be required.
Certification
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The real estate license exam in California covers basic information about property management, contracts and tenant law. Additionally, a variety of national and state certification programs are available through professional organizations. For example, the California Apartment Association offers the California Certified Residential Manager (CCRM) designation, the International Real Estate Management (IREM) offers the Certified Property Manager (CPM) designation, and the National Property Management Association (NPMA) offers the Certified Property Professional Specialist (CPPS) designation. Certification generally requires the successful completion of coursework and an exam, verified experience, and recommendation by references. Certification is not required but is very useful in marketing your services to clients and keeping updated on the latest legislated requirements in the field.
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Insurance
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The property management field is heavily regulated. Laws concerning fair housing, disclosure, safety, eviction, and contracts affect day-to-day operation of a property management business. For this reason, it is prudent to obtain both liability and errors and omission insurance for your business. Clients may require you to maintain this coverage as well. Additionally, contracts between the owner and property management company often require the property owner to add the manager as "other insured" on his own rental insurance policy. In rent-control cities which have strict controls on eviction, a property manager would additionally want to make sure the owner has wrongful eviction coverage.
Software
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Both because there are legal requirements directed toward how rents are handled and because the tracking of rents, deposits, maintenance and other expenses can be complex, many property management businesses invest in property management software. Yardi Professional, Tenant Pro, and Timberline are three examples of property management software programs.
Marketing Strategy
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A marketing strategy is key to starting a property management business. Many property managers have a presence on the Internet through a website, both for advertising to prospective clients and to list available units to prospective tenants. Direct mail campaigns to new owners of rental property can be useful. Forging a relationship with real estate agents who sell rental properties can be an important part in marketing property management services.
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References
- Photo Credit high-rise apartment building image by Yali Shi from Fotolia.com
