How to Start a Property Management Business

Property management is a business that is regulated and requires a real estate license in many states. This first step requirement means that the potential buyer of an existing business would need to be qualified to run the business. They would also need to meet the same requirements to start one from the ground up.

One way to get experience in the business is go to work for a large management company and learn the ropes. At the same time you could be completing any educational requirements and prepare for taking the license required to professionally manage properties. Starting a company of your own will take some strong detective work to find a property that is looking for management or looking to replace the current management firm. This will entail a great deal of cold calling and phone work to come up with possible clients.

At the same time you could get a web site built so you will have something to point people to when you are speaking with them on the phone. You would also mention the website in all communications or advertisements. All of this would come after you have decided on a company name and have a phone number and address for your business.

Knowledge and preparation are requirements for success. Whether you buy an existing business or start one up, you will need to gain experience and first hand knowledge of the business from some source. The best way to gain real experience is to work in the business for a year or so for a management company. The requirements in your state should be checked also to see what licenses are needed. There could also be educational requirements that you would have to obtain. A smart person would make sure they have all of these ducks out of the way while working for someone else. The real estate department of your state will be able to give you the information you need to know. There also could be an association of property managers in your area. Both of these sources are a place to start to find the information you need.

Finding property management companies that are for sale The Internet will quickly give you and idea of what is for sale and where they are located. Business brokers are another solid place to find listings of businesses that are currently on the market. You can also get questions answered about the way to buy one of these businesses. One important facet of the businesses for sale is the asking prices. This may be eye opening for you. You might also check out local newspapers and the local real estate association. Lawyers that specialize in real estate transactions may also know of management companies that are looking for a partner or are for sale. Once you have an idea of the capital needed to pursue a purchase you can begin to figure if you can make a deal. If you are going to need help with the money you will have to resolve that common problem also. The business brokers will have a good idea if the listed business is cash only or the current owner would consider terms. This type of information will speed up the process of finding a deal that you may be able to pull off.

Another aspect of property management is the properties handled. Are you going to only deal with large apartment complexes or single-family residences? The type of properties you wish to handle could determine the price of a management company.

Money makes the deal

Money talks when buying a business. The seller is usually anxious to sell and if a real money offer is made, they may bite even if it requires terms to complete. The point here is make an offer and see what the seller responds with. You never know what kind of help you may get from a motivated seller. Other ways to make up a short fall is a loan from the bank, a business lender found on the Internet, a partner and family or friends. Some deals take a great deal of creative financing to pull off. If the existing business has long-term contracts with their clients it may be easier to get a loan from a disinterested third party. The most common way to handle the short fall is to get the seller to take back paper to be paid in full by a set date in the future. Maybe they would remain a silent partner for a short length of time. The answer to this problem is how much you can put down and how long you would need to pay off the balance.

The only way you will ever know if a deal is possible is to make an offer and see what the counter offer looks like. The business broker in a deal can help in the negotiations and in many cases make it happen through their deal making skills.

If you come to a point in any deal that the final terms are too difficult for you to live with, then it is time to take a walk. Knowing when to walk a way in also part of good deal making. The wrong terms could make the deal a failure from the beginning. The last thing any buyer wants is to put a large down payment into a business and then watch it fail. The loss of this money could be the end of any possibility to own your own business. The thought process should go like this, this deal is not possible and there will be another chance down the road. Some times in the heat of negotiation the making the sale happen becomes the end in itself. This should never be the reason to make a bad purchase. This is a serious situation that needs to be well thought out.

Conclusions

Once you have the experience, education and licenses, the ownership of a property management company is possible. You can either start one up or buy an existing firm. The expense of buying one will be much higher than starting one from the ground up. Finding one you can buy will take effort and the willingness to commit a sizeable amount of money. The obvious way to start is through a business broker, as they will have a current list of business for sale. They should have a very good idea of what you will need to pay to buy a property management company Coming up with the money may be a problem for some buyers as the price of an existing successful firm will be higher than a startup. An existing management company's current customers will be a large asset, as they will supply immediate cash flow to the company. So the higher price is offset by the constant cash flow from contracted customers.

If you start a company from scratch, you will need to plan on a significant amount of cold calling, phoning and face-to-face meetings to find customers that need your help. This is a slow start but can be a reasonable way to get into the business

Small Business Tax Tip - Turn Personal Expenses Into Business Deductions

Most small business owners have heard that they're supposed to get special tax breaks. The problem is, they don't know what they are or how to go about claiming them. Not surprisingly, the IRS doesn't go out of its way to spell it out for you when you go to file your income taxes!

There is a general rule in tax law that says all "ordinary and necessary" business expenses are deductible. I'll spare you the details about the arguments over this phrase, but suffice it to say that it basically means that in order to be deductible, an expense must be a legitimate expense that pertains to your business.

So what personal expenses do you have that could legitimately pertain to your business? Well, let's take an easy one: Subscriptions. Do you subscribe to your local newspaper? Can you deduct it? Well, do you need to keep up on your competitors' advertisements in the paper? Do you need to keep abreast of the job market via the classified ads to make you more effective at hiring and compensating employees? Any other reason you might need to read your local paper? If so, you can deduct it. Same with your local business journal, The Wall Street Journal, and various industry and trade publications.

Next is clothing. The IRS says any clothes suitable for wearing outside of work are not deductible as a "uniform." So a pair of blue jeans, or even a business suit is not generally deductible. But if your company name is printed on your shirt, jacket or other clothing, that item becomes deductible.

If you have kids, I don't have to tell you how expensive they are. Well, how would you like to deduct their allowance? The cost of their clothes? Heck, even the cost of their college education? If your kids work in your business, you can pay them reasonable compensation for doing so. So when Johnny needs a new pair of jeans and a leather jacket, put him to work! You give him a paycheck, he buys the clothes, and you've just turned a personal expense into a business deduction. The same can be said for building a college fund. If your children work for you, you can pay them and put the money in the bank for college costs. Note that even if your children are young, you can pay them to appear in an advertisement or brochure promoting your business.

Please note that the IRS will scrutinize payments to family members, so you must make sure you dot your i's and cross your t's. Make sure the kids actually work for you, that their pay is reasonable, and that you keep track of their hours, pay any payroll taxes due and treat them like any other employee.

Even your vacations may be partially deductible. Try arranging a trip around a business seminar in the location of your choice. There are usually plenty to choose from. Only the expenses for the time actually at the seminar will be deductible, but so will the airfare, many of the meals and much of your hotel costs. If your wife and kids work in the business and there is a legitimate reason for them to attend the seminar, their costs may be deductible as well. Keep in mind there are limitations on this technique, so check with a tax advisor before making your plans.

These are a few ideas that could save you hundreds or even thousands of dollars over the life of your business. If you think about other expenses in your life, I'll bet you can come up with even more. Remember to consult a qualified tax advisor before implementing any of these ideas, be reasonable, and always make sure the expenses are legitimate. You have every right to arrange your affairs so as to result in the lowest tax you are legally required to pay. Just don't cross over the line of common sense and reasonableness.

Small Business Risk Management - Three Insider Tips That Can Save You a Lot of Money

I don't know who first said it. But I am often reminded of the illustrious observation: "It isn't what he doesn't know that scares me. It's what he knows for sure that just ain't so." Most of the time, business decision makers are highly skilled at identifying the root of the issue. They know how to recognize the important aspects and throw out the red herrings. Without that skill, they would not last very long in the world of business. But they too can be victims of their own prejudices and misconceptions. With all of the hype about our litigious society and how easy some think it is to sue companies and get huge awards or settlements, it's easy to forget that the business person on the other side almost never wants a law suit any more than you do.

Many wasted opportunities could be leveraged by small business owners if they had a better awareness of the other company's aversion to litigation and willingness to take reasonable measures to avoid it. Entrepreneurs spend a lot of time finding ways to make it easy for their customers to buy. It is amazing how little time some of them spend thinking about ways to make it easy to resolve disputes without resorting to the ugly distractions of mediation, arbitration, or litigation.

With that in mind, here are some facts and common sense ideas that could make a big difference in your business;

1. You don't have to sign everything that is put in front of you

Most services contracts are not written in stone. And many companies will accept minor changes. People are sometimes afraid to make even the slightest change to a contractual document for several (usually imaginary) reasons. They are afraid this will automatically get the lawyers involved making everything more expensive and slowing down the process. But in my experience, that fear is usually unfounded.

Let's say you have read over the contract and found that you will be billed for late payments if your payment is not received within thirty days. Your typical schedule for processing accounts payable does not exactly match the other company's billing cycle. And it is quite possible that your payment could arrive more than thirty calendar days after a given invoice. You take their contract, draw a line through that sentence and write above the strike-though changing thirty days to forty-five days. You then fax or email the modified document along with a phone call explaining why you need this change.

If this was a serious concern for you, it has probably come up before with some of their other customers. If so, they already know whether or not they can live with this change and will either approve or deny it right away. Notice that I did not suggest simply calling them without sending a redlined version by fax or email. That is because this makes it too easy for them to say no. It also places the responsibility of making the change on them. In their organization, that may mean passing the document on to another gate keeper who manages contract documents. For them, it has just become much easier to tell you their company never does that than to work with you. On the other hand, if you have already submitted a signed contract with the change already made, it is often easier for them to record the "sale" and process it than to go back and forth over it. If your change has not been requested and clearly resolved before, there is still a good chance that what happens next will not create the additional cost or delay that you fear.

In that case, the next step will probably depend upon the size of the other company. If the other company has less than 500 employees, there is a good chance it does not have an in-house attorney. Those companies usually address these issues by having some manager who thinks he knows the law and makes decisions about contract language all the time, or by outside counsel to whom they send important contracts to review. If they have the internal manager that thinks he or she knows as much as a lawyer, the decision will be made quickly anyway. Otherwise, they may be reluctant to incur the expense of outside counsel to make such a purely business decision and will make the decision immediately. If the company has 500 or more employees, it probably does have an internal legal department. In that case, they usually have the resources in place to deal with minor change requests very quickly.

If your concern is not a purely business issue, such as legal boundaries affecting liability or choice of law and where law suits must be filed, you really should consult with an attorney before you sign the silly thing.

2. You can almost always settle your disputed debts for less than the full amount.

What if you have received invoices with which you disagree and have not been able to resolve your differences? The demands have gotten uglier. And now the other company is threatening or more usually (implying) litigation if not paid in full by a specific date. For them, it is now necessary to weigh the cost of retaining a lawyer and the risk of losing against playing this out against the bird in the hand they could get by settling now. Unless you signed a contract that says the loser pays attorney fees, odds are they will not collect attorney fees even if they do win. So the potential cost of going that route could be significant for them.

The fact of the matter is that with the exception of companies such as the insurance industry whose business structure anticipates a steady stream of law suits, most businesses hate law suits. They view them as an enormous distraction and a waste of their time and resources. Very large corporations with their own legal departments have the luxury of making a pure cost/benefit analysis before deciding whether to engage in an avoidable law suit. But for small businesses, the cost is too unpredictable and just too far removed from the processes and infrastructure upon which their business model is based. Therefore, unless the disputed amount is very large, they will almost always seriously consider any reasonable offer just to get it off their plate. However, they probably will not agree to settle for what you asked. So make your first offer at least two iterations lower than what you expect them to take.

3. You don't always "get what you pay for" when you retain a Big-Gun law firm for legal services.

As in-house counsel for an information technology company, I have worked with several of the largest law firms in St. Louis over the years. I have also worked with some of the best lawyers. But some of the best lawyers do not work for the biggest law firms. In fact, some of the best Missouri lawyers I know are sole practitioners or from small firms. When you consider what you get versus what you pay for, going with the Big-Guns doesn't always make the most sense. Big firms have the advantage of a large pool of experiences and resources to draw from. But they will not always give you the best results for the least dollars.

Most lawyers will tell you that until an attorney has been in practice for at least five years, the level of experience could be a big factor in the results you are likely to see. I am sure there are exceptions, but in general it takes about five years of real world experience for an attorney to develop the skills to do his or her best job for you. When you first bring your case to a big law firm, you will probably speak with a partner (translate that to mean you will pay from $250 per hour to $500 per hour or more for the privilege). There is a good chance that most of your direct consultation will also be with a partner. But much of the work including drafting of legal documents, research, and sometimes even negotiations with legal counsel for the other side, will be performed by associates or paralegals. Associates typically have less than five years of experience and bill at about the same rate (if not more) that you would expect to pay the attorney handling your case at a small firm.

Compare that to the services you get from a small firm. Most small firm lawyers came from the large firms and/or the corporate world. There is a good chance the small firm lawyer that is billing your services at $175 per hour was having his services billed at $275 per hour before he left the big firm. They typically have many years of experience and bill at or below the rates you would pay for the work of an associate at a large firm. If you retain a competent lawyer from a small firm, she knows her own limitations. If a lawyer from a large firm is needed. The small firm lawyer will let you know and with your approval, will not hesitate to bring them in to work on your case. The difference is that you decide when and if this will be worth the cost. And there is no incentive for the small firm lawyer to encourage you to incur the extra expense if it is not necessary. To save money and get more value, it makes sense to consider retaining a small firm attorney.