Home Business How to Launch and Run a Successful Commercial Real Estate Management Business

How to Launch and Run a Successful Commercial Real Estate Management Business

Real estate commercial property

Whether you already own a few properties or you simply want to branch out on your own (from your current real estate company), starting a successful commercial property management business is an exciting prospect. Not just because of the money, but because you get to manage all sorts of people and real estate; including tenants, landlords, contractors, etc. 

However, this job does have a somewhat steep learning curve as well — you have to possess intimate knowledge of the local real estate and landlord-tenant laws to stay fully compliant. If you think you have what it takes, read the full guide down below. 

Legal structure and licenses 

Before you start splashing the cash on various commercial properties, you must first choose an adequate legal structure for your business. At the moment, your company assets and your personal assets are interlinked; the court sees them as a single uniform entity. Meaning, if your company should ever lose a court settlement, your personal assets (home, car, etc.) are in danger of being confiscated to liquidate the debt. 

Let’s take a closer look at your options; there are a few of them, including:

  • Sole Proprietorship
  • Partnership
  • A Limited Liability Company (LLC)
  • S-Corporation
  • C-Corporation

Notice how they are scaled according to their liability with sole proprietorships and partnerships offering no legal protection, S- and C-corporations offering sufficient legal cover, and LLC being somewhere in the middle. Additionally, apart from consulting with your attorney, you should also consult with your accountant as the type of business structure will also determine how you pay taxes. If done correctly, you can reduce both your personal and your business taxes; for instance, registering your business as an S-corporation — your profits are taxed as personal income rather than business income — to avoid the double taxation problem of a C-corporation, and so on. 

Also, don’t forget to acquire the appropriate business or real estate licenses if your state/country requires one; possibly a broker’s license as well. Make sure you understand and comply with all the different rules and regulations; ignorance of the law is no defence.

Formulate a formal business plan

Now, with the legal shenanigans out of the way, you can begin formulating a proper business plan; the reasons are twofold. 

First of all, you want to attract some external funding — if possible — in the form of investors and venture capitalists. Again, your business structure will play a huge role in this as well; for example, an S-corporation can have a maximum of 100 shareholders, whereas a C-corporation has an unlimited amount; all the more reason for you to create a decent ‘treasure map’ for your investors. Secondly, you want to create one for your own personal use as a sort of a roadmap for your business; to give you a sense of direction and drive you forward.

So, sit down and lay out a detailed business plan for the next five years; how will you use your investment money, what are your projected profits, your staffing needs, etc. 

Determine the most optimal pricing

This is probably one of the most important decisions that you’ll have to make as a property management business; as such, it will determine how well you attract, or deter, prospective clients. In essence, the general rule of thumb is to always check what your competitors are charging in the area first, before making an informed decision. That way you can find that sweet middle ground where you’re neither the lowest nor the most expensive player on the market. 

Simply call them up and pretend that you require their services; they will serve every last bit of information on a silver platter for you. Also, take a sneak peek at their brochures and management agreements; this will give you a good idea on how to make your own. 

Manage your cash flow

Keeping a constant stream of cash is absolutely vital for the success of your commercial business. To do this, you need to keep an eye out for any potential holes in your assets (both figurative and otherwise) and plug them accordingly. For example, a property that does not pay for itself — not enough rent to cover all the expenses — and a property with a leaky roof are both considered a money drain; with the latter also being a serious liability issue due to the potential legal troubles it can cause if it’s not fixed. 

Additionally, don’t get overzealous with your recruitment at the very beginning; start slowly and scale as you go. A single property manager can handle around 30 units. Once you get over this threshold, hire some additional hands, and so on.  Create a working budget if need be to always keep your bottom line in the green. 

Invest in the real estate management tech

Technology is in a perpetual state of evolution. As a result, brands that don’t keep up with the latest technological trends will be left behind; to stay competitive in the 21st century, you must be in the 21st century. On the other hand, those that do in fact exploit new technological advancements will gain an edge over their competitors. 

For instance, Property Tree is the latest in cutting-edge property management software designed by Rockend, with an unlimited, 24/7 access to the cloud, allowing you to manage properties even when you’re on the go. What’s more, it comes with its own smart invoicing and receipting system that automates the whole payment process for your commercial properties, making rent collection both fast and effortless. All in all, investing in the right technologies will not only make your life a lot easier but you’ll also look more professional in the eyes of your client base.

Market Yourself 

To start bringing in clients, you must first get yourself out there. Begin by establishing your online presence. Choose a few distinctive colours and a matching logo for your brand to grab the attention of your customers; don’t forget to put them on your business cards as well. After that, you can start with some low-cost options such as social media marketing, content marketing, and the like to get the ball rolling. However, to really get the word out, you need to utilize some word-of-mouth marketing. Essentially, the best way of doing that is by conducting referral programs; these are a bit costly but well worth the effort.

 

Finally, top it all off with a business website of your own — that will act as a hub for your commercial property management business — and network with other people and agents within your industry. That way you’ll stay well informed and be on top of any new market trends.

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