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How To START A Property Management Company From Scratch That You Won't Hear Anywhere Else! - YouTube
Channel: Derosa Group
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welcome to mentorship monday guys my
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name is matt this is justin
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i'm pointing the wrong way he's over
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here that's awesome smash the subscribe
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button
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today's show is awesome justin what did
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you get from it man what a great way we
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talk about building a property
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management company from
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nothing so what are the things you need
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to think about in terms of staffing
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scaling software all these things you
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have to factor in
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stay tuned you do not want to miss it so
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today's question is an email in question
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from satish and satish uh is
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getting started investing but he's also
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wants to start up a property management
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company and so he wants he has some
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questions around
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building a property management company
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so he's thinking that he's going to
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start
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by the way for your question yeah and
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and grow it
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um first question is if he's gonna start
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a pm company does he need
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a real estate license or any other kind
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of license to do that
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well yes um yes and no
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okay there is no uh there in in most
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areas now there may be like a business
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owner's license and i can't speak for
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every municipality in the
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in the union uh and some states call for
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like just to set up a business to get a
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license uh in that so
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to set up so any company there may be a
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requirement for a license and
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registration for that
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now a pm company does not have its own
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licensure that i know of that i've ever
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experienced in any state that i've ever
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been in but what it does require
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is in any state i've ever been in or
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ever done business in
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there is a requirement to have a real
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estate license associated with that
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property management company meaning
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if justin owns an ad owns a property
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and he hires me matt faircloth of derosa
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group to manage that property for him
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i'm now acting as his agent and so
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that's the same
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way if you think about it agency has to
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deal with what is what is an agent an
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agent is taking
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action on behalf of someone else right
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so if you ask me to go to the store and
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buy you groceries i'm now your agent
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buying you groceries and bringing it
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back to your house for you just like a
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real estate agent is someone that you
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have hired to transact a real
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to offer real estate or to buy real
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estate to sell real estate for you
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the same happens with a management
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contract because when i go
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and collect rent for you i
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am acting on behalf of you per the terms
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of your lease agreement which says the
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tenant has to live at this address and
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pay you around this much money
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so i'm acting as your agent
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in a real estate transaction when i
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collect rent for you when i show the
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property when i offer it up for a
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certain price
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so it is the pricing part and the rent
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collection part of
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property management that require a
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license um
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and the license required there is a real
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estate broker's license
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um and the agents are underneath that
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that license as well so
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yes it requires a license but maybe not
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the license you're thinking of so it's
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not a property management license
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um it is a broker's license that is
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required
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in the state that you are looking to
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operate in getting that license yourself
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is going to be very hard to do because
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most in most places broker's license
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require a lot of time
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the education is not that bad but the
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the time investment is
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meaning like they require that you are
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an active uh owner for
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several years before you can get your
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broker's license
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you're an active um agent and you've
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sold a certain amount of transactions
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and
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it is a tenured type of thing and and
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that so
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uh getting your own broker's license is
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gonna be hard to do satish but you could
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get yourself a broker of record to
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represent your company and hire them
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or lease their license from them
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whatever it may look like so that
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addresses the license your comment
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thank you so so now he's thinking about
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software keeping track of everything so
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what software do you have experience
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with or or if he's going to start small
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and grow
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what are some good softwares that he
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should look into so the software around
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real estate has come a long way
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the last couple years when i first got
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started in real estate everyone was
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using quickbooks
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there were classes you had to take on
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how to make
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quickbooks work for rental properties
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like they were you could go to
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for the local real through sgarea they
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would host
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quickbooks for real estate classes and
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it was literally
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how you would dupe quickbooks into
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managing real estate you know
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and a lot of companies did it and then
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became the advent of other
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softwares as more and more um you know
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just as landlording became more and more
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popular uh
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and as software's become you know more
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customizable
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even quickbooks developed a quickbooks
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for real estate
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they developed a quickbooks for
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landlords but it was kind of too late
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when they came up with that because by
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the time they came up with that there
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was already
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an appfolio that was already rent
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manager uh
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yardy buildium those and cozy those
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softwares were already out there
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so we when we first got started we
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started using
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we went from quickbooks to rent manager
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um and rent manager was an enormous jump
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uh going to rip manager because it would
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you could put individual tenants in you
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could charge them rent
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you could um handle transactions you
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could print out checks
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you could it was really it was
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quickbooks along with like
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a tenant register slash maintenance
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portal
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all in one thing the one thing where
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manager didn't have
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was an online access like a back door
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that talked to a website
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the tenants could log into this because
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it was rent manager was pre
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you know pre-web web 2.0 is what they
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you know web web 1.0 was just
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information online
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web 2.0 is transact business online like
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pay money for things
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interface with people so web 2.0 comes
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along
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and then that's that's really where
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appfolio build am those guys really took
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off and so now
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there is a plethora of different
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softwares you can use from like
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cozy which is say one through
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15 unit management like you know and
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it's used i hate the word term mom and
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pop because this could be mom and pop it
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could be just
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smallish landlords you want to run it
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small right
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cozy is there for that next step up you
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get into the appfolios buildiums yardy
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um stessa i believe is is a newer entry
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hey spell that that's a s-t-e-s-s-a
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estessa and there's and there is a um so
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yardy voyager
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is what our big property managers use
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right um
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but there's a smaller version of yardy
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that you could look into
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and we love yardy because you can
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customize it one thing i like about
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appfolio is you can't customize it
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their minimum price is pretty high
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meaning like what you have to pay as a
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bare minimum to use their software
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whereas if you've got like 10 units you
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know using appfolio is going to be very
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cost prohibitive
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but if you have like 300 units using
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appfolio is no-brainers
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you only pay three dollars a unit that's
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great yeah but if you have ten units you
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still pay three hundred dollars you know
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um for access that folio and then the
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web 2.0 thing where it works is that
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tenants can now pay their rent online
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they can ach their money to you appfolio
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can reach in their bank and take the
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money
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they can pay their money in cash at like
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a 7-eleven
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they can turn in work orders online it's
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very automated and tenant can like put
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their work order in
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in the work order immediately get
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assigned to the technician and he gets
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up in bed out of bed in the morning and
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his
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phone already has his work for the day
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assigned to him the work order from the
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tenant it's
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very very uh very clean very cool very
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very slick and the way these things are
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set up so those are the softwares you
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can consider
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absolutely and so i think satish as you
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grow
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your property management company you
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should expect that you probably will
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evolve
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through software's maybe starting with
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something smaller and cheaper
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into something a little more expensive
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and then as you get larger and larger
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you know you'll your costs will get
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larger and larger but your reporting
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requirements will as well
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that's one way to do it you can start
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small you can start with like cozy
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or one of the one of the you know
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off-the-shelf small guys
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i would i would propose to you seti she
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could do it a different way too
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not to disagree with my man justin but i
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you could also do it another way
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whereas you're not going to come out of
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the gate and and manage like
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you know 200 units uh or whatever you're
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probably going to start a little smaller
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and work your way into larger deals and
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larger portfolios and
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and bigger management so my suggestion
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to use to teach would be that you act as
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if
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and you go and invest in the bigger
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software
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that bigger clients would be inclined to
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hear that you're using like for me
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if you come at me telling me you're
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using quickbooks just could you imagine
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like hiring a property manager still on
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quickbooks or even a rent manager
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appfolio
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at our at our size we want to see yardy
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that's it if you're not using the rd
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we're probably not as interested because
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yardy is what we can interface with as
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we know how to use
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as owners and that's right i agree with
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what you're saying matt but
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realistically
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the costs i think would probably be
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they're probably gonna be a huge barrier
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for satish so i
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i think that maybe there's one or two
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steps before you already form
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true that true that maybe not yardy
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maybe appfolio maybe rent manager i've
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heard it's gotten a lot better
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manager was kind of behind the times but
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i heard they've caught up on their
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software we've we left them a couple of
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years ago yeah
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um but investigate those those
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middle-of-the-road softwares
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um and that i probably wouldn't start
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with cozy because most pm's
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that i know of don't use it p uh cozy's
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really made for owner operators
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that's what it's designed for so yeah
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softwares
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any other advice you got for satish for
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starting a pm company or did he have a
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third leg to his question
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third leg of the question i think is is
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the final part is staffing how does he
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staff maintenance guys you know who's
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going to handle that because
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especially as he grows right let's say
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he's got 10 properties
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that he's managing i'm assuming he's not
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going to be able to pay
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for a full-time maintenance tech and
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leasing agent and all of those other
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people this is how we did it at the
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roaster group
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we got to about 30 units that my wife
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and i managed ourselves
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like i would do showings maintenance
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calls
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you know drop in and figure problems out
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and stuff like that's where i got a lot
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i learned a lot of my landlord
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lessons and a lot of my landlord legs
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and a lot of but got a lot of my gray
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hair
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in that and then doing it myself you
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know probably have to do it yourself
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satish up to about 30 units
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then my first tire was replacing my wife
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who was keeping the books and so i
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started small like part-time bookkeeper
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a couple hundred a couple hundred bucks
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a month
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to keep all of our financial books and
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then i hired that i'd use that person
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more and more and more until i ended up
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hiring them
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the next hire that we did was a tenant
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relations manager
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who did the showings scheduled service
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visits took maintenance calls
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did rent collections chase delinquencies
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that kind of thing
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and then that person and my bookkeeper
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got me to 80 units
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and then once i got to 80 then we hired
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in-house before but an in-house
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technician
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before we got to an in-house technician
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i what i did was this isn't going to
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cost you tons of t-shirts just you go
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from an expense
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to a profit center when you hire
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in-house here's how this works
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when you hire out like you're going to
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hire you know joey's air compressor
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air compressor or jose air conditioning
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house you're going to hire
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abc plumbing company and you're going to
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hire 123 electric company
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and they're going to come in and do your
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maintenance work and most importantly
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above all that you're going to hire
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you know xyz handyman company and
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they're going to come in and fix light
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switches and turn units and do all kinds
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of different stuff
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so you'll have to live with third-party
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vendors and negotiate good deals with
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them
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up until you've got enough workflow that
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you can handle in-house
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once you can handle a house it becomes a
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profit center that works like this
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you've got a higher guy i think we were
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paying 25 bucks an hour for
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you know like a you know guy with a
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truck that knew a lot about the knew how
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to do a lot of different things
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takes a certain personality takes a
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certain skill set takes a certain
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knowledge set
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to become the guy that just rides around
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in a pickup truck and fix
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stuff fix the stuff as they go pay them
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25 bucks an hour give or take
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and then we charge 50 bucks an hour for
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him to the property
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and that became a profit center that
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that handled
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a lot of in-house oversight of of of
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scheduling of maintenance
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was able to able to enable us to scale
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up and put a lot more maintenance
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support behind him
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and coordinating and scheduling and
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resources and stuff like that and that's
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really where
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you want to get the problem is is that
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you're not going to have enough
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work for somebody like that until you
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get to about 80 units under management
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so it doesn't make sense to hire
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somebody like that until you get to 80.
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the biggest thing you do
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i teach is you got to scale fast that if
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you want to be in property management
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you will make no money at all
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until you get north of 100 units and so
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you're going to have to have enough
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bankroll
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to market and scale up and hire
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employees before you need them
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so that you can scale and get yourself
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to over 100 doors as fast as you can
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once you do that then it'll get a little
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bit easier and you're not going to
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become really profitable until you get
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to the 500 or 600 unit range
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makes a lot of sense so much great
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actionable advice and i would just
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end with talk to people that have done
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it
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just like anything right talk to people
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who have built property management
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companies
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go find those guys and network with them
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and if you're if that's
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you're the path you want to go down then
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find the people that have done it and
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they will give you all kinds of great
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advice and tips and that's just a
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general life life lesson
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talk through that on where you want to
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go very actual information
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thank you for asking so teach thank you
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for your question help me head to
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roostergroup.com guys send an email in
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and we'll happily answer your question
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right here on the air thanks for
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watching watching
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and have a great profitable week
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