Starting a management company offers numerous benefits and opportunities. In a survey conducted by Ascent Multifamily Accounting, three primary motivations were identified for owners establishing their own firms:

1. More Control: Owners sought greater control over the operation of their properties, enabling them to directly implement their vision and strategies.

2. Access to Expertise and Information: They valued access to specialized knowledge and information, which empowered them to make informed decisions and stay ahead in a competitive market.

3. Financial Savings: The potential for financial savings was significant, as managing their operations could reduce costs and increase profitability.

Navigating the Challenges

While starting your own management company can be rewarding, there are also many pitfalls. Getting the first 90 days right is crucial. Many owners underestimate the time and expertiserequired to manage effectively, leading to potential shortcomings. Together, we will look at how to avoid common mistakes that owners and property managers tend to make when building a management company.  

• Choose the Right Management Leader

Recruiting the right management leader who will help assemble a skilled and reliable team is essential for handling all the critical functions of your business, including marketing, IT, finance and property management. A strong team creates a solid foundation, allowing you to navigate the challenges of the initial stages and set the stage for long-term success.

• Manage Operations

Focusing on the people side—getting the property staff on your side and building strong relationships—is vital. Issuing offer letters to employees should be one of your first orders of business. Then, create a comprehensive operations manual to establish clear procedures and expectations. The manual should discuss standard procedures for handling maintenance calls, new resident applications, employee onboarding and even staff health insurance.

Another crucial step is choosing the right management software for your management company. At least six to eight weeks prior to taking over your first property, you will need to contact and start the setup of your chosen software to ensure your management software is live in time. If residents begin moving in, paying rent or requesting maintenance and your software is not up and running, you may fall behind and lose track of operations. Having your software ready to go before anything else will ensure a seamless transition.

• Location, Location, Location

The location of your properties is another important factor. One of our clients had properties spread across eight states, and their VP of Operations was constantly on the road trying to keep up with all their locations. After only four months, the team member quit due to the extensive travel demands. This underscores the importance of considering geographic distribution and travel requirements when planning your management strategy.

• Accurate Financial Reports

Managing financial reports accurately and promptly is essential to long-term success. Frequently late or consistently inaccurate reports can lead to loss of profit. Timely and precise financial reporting can help you make informed decisions and maintain investor confidence. By addressing these financial challenges early on and implementing robust reporting systems, you can avoid significant setbacks and ensure your company’s financial health.  

• Deciding if it is Right for You

Starting your own management firm is not one size fits all. In fact, it is only right for about 30% of owners. There are a few scenarios where it is not the right decision for you to start your own firm, including:

• The owner does not want to or is unable to invest enough time and resources to self-manage their properties. You need to be in it for the long haul and it takes consistent time and resources. This can also pertain to an owner who is too focused on buying new properties and left with no time to focus on management.

• The portfolio of properties does not lend itself well to being self-managed. This scenario comes into play when the portfolio and or the properties are too small, or they are geographically too far apart.

• Either the owner or leader hired is not familiar with the intricacies of property management. You must have at least one person who understands and has experience in property management, someone who can set up and run the operations and communicate with any companies you are outsourcing portions of the management to.

By assembling a skilled and reliable team, ensuring all elements are in place and planning for logistical challenges, you can create a strong foundation for your company, navigate the initial challenges and set the stage for long-term success.

The Rewards of Self-Management

Despite the challenges, starting your own management company can be highly rewarding. Managing your own properties can save thousands of dollars and give you control over upgrades, maintenance and financial decisions. However, meeting these challenges head-on is essential for success.

Ascent offers a comprehensive range of services to help you start a successful management company:

• Expertise in Multifamily Software: We’re experts in major multifamily software platforms like RealPage, Yardi, Entrata, and ResMan. We can show you and your property’s on-site staff how to get the most from these systems.

• Human Resources Support: Our HR team offers great benefits packages due to our large-scale buying power and can provide health insurance for property staff anywhere in the country.

• Comprehensive Accounting Services: Ascent CPAs manage property management accounting, ensuring accurate financial reports, paying bills weekly, assisting with budgets, handling payroll and HR issues, providing technical support on software, preparing monthly financial reports, reconciling bank and mortgage accounts and managing the accounting for resident rentals.

Ascent provides an efficient and cost-effective alternative to in-house accounting, helping owner-managed and third-party management companies streamline their operations and save on personnel, office space and training costs. Deciding which strategy is right for your firm and properties is not a one-size-fits-all process, but with the right approach, self-management can transform your portfolio’s performance and help you sleep better at night.

For more information or strategies about multifamily business transformations, call 702.467.0789 or email mike@ascentmfa.com.

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