Property Management Business Overview

Property management businesses oversee and maintain residential and commercial properties on behalf of property owners. These businesses remove the day-to-day burden from property owners by collecting rent, addressing maintenance issues, managing tenant relationships, and ensuring properties remain well-maintained and profitable.

The range of services can vary significantly based on client needs and property types, from basic rent collection to full-service management solutions.

Related: Checklist To Start A Business

How Do Property Managers Make Money?

Property management companies operate on a fee-based business structure, creating multiple revenue streams from both property owners and tenants. The primary source of income comes from monthly management fees, typically ranging from 8-12% of collected rent for residential properties and 4-12% for commercial properties.

Industry Statistics

Property management companies operate under NAICS code 53131 – Real Estate Property Managers. These businesses provide management services for residential and commercial real estate owners. Here are some statistics about the property management industry.

Property Management Industry Size & Growth: Property management businesses generated $128.3 billion in revenue last year. The industry experienced steady growth, with an annual growth rate of 2.0% over the past five years. Growth is expected to continue as rising property prices and changing lifestyle preferences among younger populations have increased demand for rental properties, which in turn drives the need for property management services. (IBISWorld)

Number of Property Management Businesses: There are 312,000 property management businesses operating across the country. The industry remains largely fragmented, with small independent operators managing local properties making up most businesses. Large companies like Prologis Inc. (7.2 billion in revenue), Boston Properties Inc. ($3.3 billion in revenue), and Cushman & Wakefield Plc ($2.6 billion in revenue) control significant portions of commercial property management but represent a small percentage of total industry revenue. (IBISWorld)

Property Management Profit Margin: The average property management business operates at around 6% profit margin. This relatively slim margin means property management companies need to carefully manage their expenses and maintain a healthy portfolio of properties to achieve sustainable profits. Larger companies tend to have higher margins through economies of scale and diversified service offerings, while mid-sized operators typically see margins between 6.9% and 10.3%. (National Association of Residential Property Managers)

Costs To Start a Property Management Business

Starting a property management business can cost between $2,000 and $10,000. This range reflects starting a small operation, possibly from home, with just a few properties under management. There are several expenses to consider when starting a property management company.

Property Management Software: Professional software platforms help track rent payments, maintenance requests, tenant communications, and financial reporting. Many platforms offer starter plans for small portfolios ranging from $30 to $100 monthly, with minimal setup fees.

Licensing and Training: Property managers need proper licensing, which includes real estate broker licensing in many areas. Basic licensing, exam fees, and initial training typically cost between $500 and $2,000.

Insurance Coverage: Professional liability insurance and general business insurance protect against potential claims. Annual premiums typically start around $500 to $1,500 for a small portfolio based on coverage levels.

Website and Communication Systems: A professional website and phone system help manage client and tenant communications effectively. Initial setup costs range from $500 to $1,500, with ongoing monthly fees for hosting and phone service.

These figures represent general estimates, and actual costs will vary based on location, business size, and services offered.