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How to Start a Property Management Company in California

How to Start a Property Management Company - ZenBusiness

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.

Benefits of Opening a Property Management Company in California

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.

Your Checklist to Start a Property Management Company in California

Checklist for How to Start a Property Management Company in California
 

1Create a Business Plan for Your Property Management Company

2

Choose a Business Structure

3
Determine Your Business Costs
 
4
Create a Business Name
 
5
Register Your Property Management Business and Open Financial Accounts
  
6

Purchase Equipment for Your Property Management Company
 
    7Market Your California Property Management Company

1. Create a Business Plan for Your 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.

2. LLC vs Sole Proprietorship: Choosing a Business Structure

A key part of this entire process is choosing how to structure your property management company. Two common options are a sole proprietorship and a limited liability company (LLC).

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.

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3. Determine Your Business Costs

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.

4: Create a Business Name

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.

5. Register Your Property Management Business and Open Financial Accounts

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.

6. Purchase Equipment for Your Property Management Company in California

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.

7. Market Your California Property Management Company

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.

Examples of Property Management Companies in California to Start

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.

Property Management Could Be Your Path to Business Success in California

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.

Do-It-Yourself (DIY) ZenBusiness Pro Plan
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state fee $199 + state fee
Average Filing Time
2-3 weeks 5-8 business days
Registered Agent
+$99/yr Check
Operating Agreement
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State Compliance Help
$119/yr Check
EIN
+$70 Check
DOMAIN NAME
+$25 No
DOMAIN PRIVACY
+$10 No
BUSINESS WEBSITE
+$100 No
BUSINESS EMAIL ADDRESS
+$25 No
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ZenBusiness $199
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excluding State Fees3
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TOTAL TWO YEAR PRICE
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First Year Price
LegalZoom $1017
ZenBusiness $199
SAVE 80%
excluding State Fees3
Second Year Price
LegalZoom $529
ZenBusiness $199
SAVE 62%
TOTAL TWO YEAR PRICE
LegalZoom $1,546
ZenBusiness $398
SAVE $1,148
Do-It-Yourself (DIY) ZenBusiness Pro Plan
Starting Price
state fee $199
Average Filing Time
15 business days 5-10 business days
Registered Agent
+$249/yr Check
Operating Agreement
+$99 Check
State Compliance Help
$280/yr Check
EIN
+$60 Check
DOMAIN NAME
+$25 No
DOMAIN PRIVACY
+$10 No
BUSINESS WEBSITE
+$100 No
BUSINESS EMAIL ADDRESS
+$25 No
SHOW ALL DETAILS
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.
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Starting Price
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Average Filing Time
15 business days 5-10 business days
Registered Agent
+$159/yr Yes
Operating Agreement
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State Compliance
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EIN
+$60 Yes
SHOW ALL DETAILS

FAQs

Where should I incorporate my business?

If you plan to register your property management company as an LLC or corporation in California, you’ll need to file paperwork with the secretary of state and pay a filing fee. A business formation company can handle this for you and help with annual reports.

Is a property management company in California profitable?

It can be. The U.S. Bureau of Labor Statistics shows property managers make an average of $58,760 per year, with some managers and companies earning much more.

What are the biggest challenges to starting a property management business?

The biggest challenge in the property management industry in California is finding clients. Networking and forging relationships with realtors are both effective marketing tools. Also consider joining industry groups like the California Apartment Association to draw inspiration from your peers.

Where can I get money for my business?

If you need financial help for your property management business, there are resources available. Here’s a list of resources that could give you a leg up.

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