California’s housing market is hot. Home prices and rents are rising. As people purchase investment properties, they sometimes need someone else to manage the property, show units, collect rent, handle leasing agreements, oversee inspections, and take care of repairs and maintenance.
It’s no wonder demand for property management companies is rising, too. But knowing how to start a property management company in California has some twists and turns. Let’s get you started with the steps you need to open your own property business in the Golden State.
The barrier to entry for property management companies in California is low. You may be able to set up shop quickly, getting in the game with a high school diploma and a working knowledge of state laws covering fair housing, tenant screening, and rental agreements.
The California housing market ebbs and flows with the economy, but managing properties can be fairly recession-proof. No matter how the economy is doing, rental properties always need managing.
You can also choose two paths:
- A licensed property manager holds a broker’s license from the California Department of Real Estate and may buy and sell real estate.
- An unlicensed property manager can show apartments, provide tenants with information and applications, and accept deposits, but can’t buy or sell real estate.
Checklist for How to Start a Property Management Business in California
- Write a Property Management Business Plan
- Choose a Business Structure
- Determine Your Property Management Business Costs
- Create a Business Name
- Register Your Property Management Business and Open a Bank Account
- Purchase Equipment for Your Property Management Business
- Market Your California Property Management Company
Your first step is to write a business plan. This thorough document explores the business setup and how it could become successful and profitable.
As part of your planning, get familiar with licensing and state compliance codes. The Golden State has health, safety, and building codes that must be followed, and cities and counties may have separate rental ordinances.
Include SMART goals to zero in on what your property management company aims to achieve. Analyze your competitors and your target market, either inside or outside your local area. A robust financial section in your plan will lay out how you’ll charge customers (rent payments, security deposit, etc.), how many rental units you’ll manage, and how you’ll comply with the state’s rent control law.
A sole proprietorship is simple to create. There are typically no state filing fees (though local requirements can vary). There’s usually only one owner, but in California a married couple may form a sole prop.
Keep in mind that sole props don’t protect your personal assets from business liabilities. An LLC provides liability coverage, which can protect your home, car, and bank balances if the business fails, falls into debt, or is sued.
Forming an LLC can balance the risks your property management company might face. You’ll have to register with the California Secretary of State and pay a filing fee. Or, you can use a business formation company to streamline the process.
What one-time fees, startup costs, and ongoing expenses will you need to cover? For example, an unlicensed property manager who doesn’t own, buy, or sell can expect startup costs ranging from $2,000 to $10,000.
Ongoing expenses may include an office and a vehicle (plus travel costs like fuel, parking, maintenance, and insurance). Landlord-specific software like TurboTenant can also help you track payments, tenants, and more. Tools like a business cost calculator can help you estimate your costs.
While you’ll also incur property repair and maintenance costs, you can often bill those expenses to the property owner.
Property managers in California also need various business insurance. Here’s a breakdown of coverage you may want to discuss with an insurance agent.
How do you fund your startup costs?
Government grants may be available, but they can be difficult to come by (and qualify for). Getting a loan from either a bank or family member is also an option, but be prepared with a solid business plan and written repayment terms. Business credit cards can also provide instant cash flow and help with purchasing, but be aware of interest rates.
Cornette Property Management. Sacramento Delta Property Management, Inc. Good Life Property Management. A property management company’s name is a balance between easy to understand and catchy. Many firms include”‘property management services,” “property company,” or something similar in their names.
California doesn’t let two companies have the same name. Before you decide, check the California Secretary of State website to see if your idea is available.
Once you’ve identified a potential business name, also check for a relevant domain name. Ideally, your company website will match the name of your property management company.
To get a property management company up and running in California, start by registering your chosen business structure. To register an LLC, California business owners must file articles of organization and pay a $70 filing fee.
Next, obtain an employer identification number (EIN) from the IRS. This nine-digit number is a must for paying taxes, hiring employees, and opening business bank accounts.
Business bank accounts are a big help in roping off your business finances from personal accounts and assets. If you use accounting software geared toward property management, you may be able to link a bank account to it, too.
California has a series of health, safety, and building codes you must follow. Brush up on these codes and use landlord resources written by the state, like the Guide to Landlords’ Rights and Responsibilities.
If you plan to buy or sell apartment buildings or other residential property in California, you’ll need a real estate broker’s license. If you’ll solely manage the property, the license isn’t necessary.
You won’t need too much equipment to start a property management company. You could lease office space or simply set up a home office. Reliable transportation is essential, and subscribing to a legal website may give access to editable contracts. A computer, smartphone, printer, and a fax machine can also help.
If you plan to in-house your repairs, consider putting together a good set of tools to cover everything from electrical to plumbing problems. But be aware of building codes and licensing requirements.
To comply with state-specific regulations, you’ll likely need to order signs for the properties you manage, or work with a printer who understands property signage. For example, signs may regulate parking, list building rules, or provide contact information. Look into landlord-tenant laws for details.
Here’s a list of equipment for property management company owners to consider.
Many property management companies in California use a combination of online and offline tactics. Social media can be effective, but be strategic about the channels you use based on your target audience. If you’re looking to work with property owners, LinkedIn can help build your network.
Consider creating a monthly or quarterly newsletter to send to property owners. It can include useful articles about the industry and testimonials from satisfied owners. You could also create a real estate agent referral program. For every client referred, you can send the agent a gift or a referral fee.
Attending real estate conferences or local networking events is also a good way to meet potential clients. For more ideas, see this article on effective marketing strategies for property managers.
When you think of property management, you may think of managing apartments. The most common type of property management company deals with residential homes, whether it’s apartments, condos, single-family homes, or multi-generational homes. However, many different kinds of property management companies thrive in California.
A commercial property manager, for example, manages industrial space or office buildings. There are also homeowner’s association (HOA) management companies that manage entire neighborhoods.
Learning how to start a property management company in California can be a low-risk, high-reward venture in a growing market. This career choice can have low startup costs and minimal barriers to entry. All in all, starting a property management company in California can be a rewarding and profitable business for the right entrepreneur.
1 All prices and services presented above were reviewed and verified as of 11/2/19.
2 The Starter plan is $49/year the first year and increases to $119/year after that
3 This chart does not include state fees because those will vary in each state.