Business Loans for Property Management
Business Loans for a Property Management Company
Property management companies manage rental buildings for owners. Sometimes, they are owned by the same company as owns the building but formed as a separate legal entity for liability purposes. Managing a rental property can include advertising and showing vacant units, screening tenants, handling maintenance and arranging for repairs, and processing evictions.
A property manager must both be a people person, to deal with both tenants and owners, and good with numbers. Keeping accurate records for an owner is extremely important. Many people enjoy this industry because no two days are the same.
With more people choosing to rent, particularly younger generations, and delaying homeownership, the market appears ripe for new entrants and growth. Shield Funding understands that opportunities require immediate action which is why we make applying and getting approved for a business loan easy. Get started in just a few clicks.
What Do I Need to Qualify?
Below is a list of the requirements to get approved for business funding with our most basic program. There may be additional factors that are considered, meeting these three requirements though gives you a very high chance of having your application approved.
How Do I Apply?
Applying has never been easier. You can either call our toll free number 24 hours 7 days a week at
Submit your online application by clicking apply below and entering a few basic details about your business.
Types of Business Loans Available
To grow, you will need capital. Whether it is buying new software before you bring on new units or hiring office staff, the old adage “you have to spend money, to make money” holds true. Even launching a simple, one-person business takes upfront capital for items like business cards and a cell phone. Below are some of the easiest ways for newcomers or established companies looking to grow to access capital.
1. Working Capital Loans
Working capital is the term used to refer to the capital used to run your business. It is the cash flow that funds day-to-day operations such as rent, salaries, and copier charges. Working capital loans help business owners cover these expenses during periods of slow cash flow or growth.
Property management companies need human capital to grow. If you add more units or significantly jump in management size, you will need an individual to show empty units, conduct move-in and lease renewal inspections, and manage maintenance. To prepare for growth, it might be necessary to hire this person before you have generated the new business.
Shield Funding offers working capital loans to business owners with credit scores as low as 650. Rates range from 9 to 45%, and terms last from one to three years.
2. Bad Business Credit Loans
Banks prefer to lend to borrowers with good to excellent credit scores, and will rarely work with a business owner whose score falls below 650. To hedge their risk, they also require that you have been in business for two years and show a pattern of increasing revenues and consistent returns. But it is during the first few months and years of launching a business that many owners need capital the most.
Failing to qualify for a bank loan is a common problem for new business owners, and their failure to qualify sometimes does not relate to their credit score at all. If you do not meet a bank’s stringent lending requirements, consider taking out a business loan with bad credit with an alternative lender.
Alternative lenders grant loans based on your business’ cash flows. They may want to see a minimum of $8,000 a month in revenue and will lend down to a credit score of 500. Rates will be higher than a bank, between 12 to 45%, but lower than a credit card.
Because they require less documentation to apply, you can receive approval for a bad credit business loan in as little as 24 hours. Funds can be disbursed in days.
3. Private Business Loan
Sometimes, the open market does not serve an investor or a borrower’s needs. Someone with significant funds to invest may not like their rate of return in the stock market and be looking for opportunities elsewhere. A borrower may want more flexibility in their loan than a bank offers. Private business loans serve to meet both loan participants’ needs.
Private business loans are legal loans, with enforceable contracts and guarantees, but they can be written to whichever terms the lender and borrower wish. A broker, such as Shield, may serve as intermediary to help a borrower find these loans.
Shield’s private business loans have rates of 9 to 42%, which will depend upon your credit score. Borrowers must have a credit score above 650 and have been in business for a year. This is because the amount of capital available starts at $25,000 and goes up to $1 million.
4. Unsecured Business Loans
Lenders want to make money when they lend money and reduce their risk. They accomplish both by both the interest rate they charge and taking collateral. For a property management company, collateral could take the form of your maintenance truck or a building that you own. But pledging collateral increases your risk.
While you should never take out a loan unless you are sure you can repay it, there are risks and uncertainties to running a business. If you default on a loan for which you have pledged collateral, the lender can seize that collateral. This, in turn, could further impair your business’s continued operations. If a lender is asking for collateral, and you have reservations, consider taking out an unsecured business loan.
As their name implies, unsecured business loans do not require collateral. Because the lender has more risk with these loans, you can expect to pay a higher interest rate. You will have to decide for yourself if the higher rate is worth avoiding pledging collateral.
Current State of the Industry
The success of a property management company is inextricably intertwined with the rental housing market. When more people buy homes and vacancy rates grow, and your income nosedives. But if the percent of the population renting increases, your business succeeds. A tighter rental market and rising rents are good news for property managers, and that’s been the situation throughout the United States for the past several years.
Rising home prices have priced many American families out of the housing market, with 43% of non-homeowners unable to afford to buy a home. Of those who rent, 43% live in a single-family home and 57% in an apartment building. In January 2019, the average rent paid nationally rose to $1,471, and have risen steadily for the past three years.
After years of a booming housing market, driven by low interest rates, the market has started to cool. The Fed began raising interest rates in 2018, which impacts the borrowing rate for many homebuyers. Historically, when interest rates rise, buyers are more hesitant to purchase a new home. With less demand, prices begin to drop.
With fewer renters exiting the rental market and buying homes, demand for rental housing grows tighter. In many markets, renters have enjoyed more bargaining power as there was less competition for apartments. But the third quarter of 2019 saw decreases in the vacancy rates for all but one geographic area in the country. Lower vacancy rates combined with higher demand will drive up rents, which will lead to those who can afford to buy a home exiting the rental market, and the cycle begins again.
The rental market is predicted to remain strong for the next several years. The realities of the housing market have contributed to strong growth for property management companies, and there are now 280,000 property management companies in the United States. Many landlords prefer to take a hands-off approach to managing their properties, unwilling to receive phone calls from tenants about clogged pipes at 2 a.m. A strong rental market attracts investors, who, in turn, hire a property manager to supervise their buildings.
Property management companies typically charge either a flat, monthly fee per-unit, or a percentage of rents. If you choose a percentage model, rising rents leads directly to higher revenues. Standard add-on fees include upcharges of 10-15% to a handyman’s bill, postage and filing fees, annual renewal fees, and inspection fees. The industry generated $76 billion in revenue in 2018, and in one survey, 83% of property management companies reported that their revenues had grown in the last two years. Of those who reported past growth, they also expect to grow over the next few years.
Another indicator that right now is an excellent time to enter the property management business, or plan on expansion, includes the shifting landlord pool. More and more, new investors are buying properties outside of the area in which they live. Coastal investors cannot find the returns they want on the coast, so they are moving into markets where they lack experience. They are turning to local property managers to advise them on both buying properties and to manage them.
Many older landlords have begun retiring and selling their buildings to younger investors. Younger investors want access to data and analytics, which is one way that you can distinguish your services from competitors. Still, they are also far more willing to outsource than previous generations.
Whereas your landlord of fifty years ago would perform light maintenance and repair tasks themselves, or only turn to a property manager if a tenant became difficult, younger investors prefer a more hands-off model. They want to partner with a trusted property manager and be relieved from the day-to-day responsibilities of owning buildings.
Costs to Running and Growing a Property Management Company
While you may think that a property management company has low overhead, that is not the case. Before starting or expanding your business, you should be aware of the costs involved. This is particularly important in an industry where scaling up depends so heavily on investments in human capital and having a strong team.
While you can start a business with just yourself screening tenants and showing properties, you will need to build a qualified network of vendors and maintenance workers. If you are out in the field showing properties, you may need an administrative assistant to manage the office. And you will probably want an office unless you want tenants coming to your residence to pay their rent.
According to one estimate, it can cost up to $71,000 to set up a medium-sized property management business. Bigger-ticket expenses include liability insurance, office equipment, and paying employees. With growth, you can expect each of these expenses to rise.
As property management companies grow, one of the biggest concerns that they report is finding qualified people to grow with them. A full 26% of property managers said that growth concerned them, which they directly related to an inability to find maintenance (31%) and vendors (25%) to keep existing and new clients happy with their services.
If you effectively plan for your growth, you can begin screening these people before you reach the point of being in desperate need of their services. Be realistic about your time and ability to show units with an average vacancy rate, sign and review new leases and renewals, and handle evictions. You may need to hire someone full-time to manage maintenance and repairs once you have a large number of units.
The human capital component is one of the largest pieces to running a successful property management company. If you fail to consider it when planning for growth, you risk failure.
Financial Tips to Achieve Growth
Focus on Customer Service
Keeping your current customers, or tenants, happy frees you up to seek growth elsewhere. It also makes growth possible.
It is easier to keep a current tenant than to find a new one. Placing and following up on ads, showing apartments, and keeping them clean all take time. If all of your time is spent filling vacancies at current properties, you will not have the time to seek out new clients or build your business.
Property owners who read negative reviews left by unhappy tenants may be reluctant to trust you with their properties. Negative tenant reviews make it harder for you to attract new clients. Take the time to listen to and respond to tenant complaints. Proactively solicit feedback by sending an email survey or asking for input, and make sure that you offer the amenities and services that tenants want in a building. Tanning beds may have been hot in the ‘80’s, but they are not on many current tenants’ lists of must-haves.
If you have been providing excellent customer service to your tenants, they will be willing to refer your building to other potential tenants. Actively seek referrals by letting current tenants know about vacancies. Consider putting in place a referral bonus program. Building positive word-of-mouth reduces tenant churn and minimizes vacancy rates, which in turn helps you bring on new clients.
Market your Buildings and Property Management Services
Marketing both your buildings and services should be a part of your business plan. Prospective tenants need to be able to find your vacant apartments. In addition to posting advertisements on various rental property websites and craigslist, keep your website current.
Feature professional, edited photography of your buildings, which shows them to their best advantage. In larger buildings, include floor plans and layouts. List current and upcoming vacancies, or if you do not have any ask people to leave their email to be informed when places become available. Use this email list to stay top-of-mind for current prospects.
Utilize social media in your marketing plan. Feature photos of people moving in, or of tenants attending building events, along with pictures of your homes or buildings. Include introductions to individuals in your office, with headshots, so that people can put a face with a name.
If you manage multiple buildings or single-family homes for different landlords, you will want a website that features your property management services. Include recommendations and glowing reviews from current and past clients. If you have any numbers that support your skills as a property manager, such as a very low eviction rate or past-due rent roll, post them on your website.
Owners who are looking for a new property manager, particularly absentee owners in other states, will turn to searching on the internet to find you.
Look for Dissatisfied Tenants
Keep an eye on your competition, and watch out for opportunities to capture their business. As a savvy businessperson, you should be aware of your key competitors in the marketplace. This could be both other buildings and other property management companies.
Monitor online reviews, such as on google or yelp, of buildings managed by your competitors. If tenants are leaving dissatisfied and negative reviews, you can be sure that the building’s owner sees it. They may not be happy with their current property management company, which gives you an opening.
Property managers who have been focused on customer service and listening to tenant’s wishes, and have strong reviews, are in the perfect position to reach out to the owner and present their services. Even if they are in a contract that does not expire for a while, they may keep you in mind.
Invest in Technology
If you cannot afford to hire another full or part-time employee, but do want to grow, consider investing in technology. Technological tools that create efficiencies can free up your time for other efforts, such as meeting with and bringing on new clients.
Numerous software solutions exist to help property managers run an efficient business. At a minimum, tenants should be able to access an online portal to pay their rent and submit maintenance requests. This saves you from processing paper checks or taking down maintenance details over the phone. As well, online tools improve customer service.
Host Seminars and Workshops
Reaching new property owners requires establishing yourself as an expert in your field. Newer owners will have many questions, and even experienced landlords may have encountered a new issue.
Consider hosting seminars and workshops for investors in your area. For a small fee, you can rent or reserve a room at a community center or local library. If you form relationships with local hard money real estate investors, they may be happy to funnel investors your way. After all, if their borrowers succeed, they are repaid.
Use these seminars as a chance to establish yourself as a knowledgeable professional, and do not worry about giving out free information. If you can give attendees good, actionable advice on running properties and investing, they will refer others to you and eventually might use your services.
Reach out to For Rent or For Sale by Owner Listings
It is not uncommon for an owner to attempt to do it themselves before realizing they do not have the time to market, show, and manage a building themselves. Or, they may not know how to find a property manager in their area. Regularly search online apartment listings for properties which are rented by the owner, and reach out to them.
Even if they turn you down, plan on touching base with them periodically to see if their needs have changed. You can also try this tactic with for sale by owner houses. Yes, for sale, not for rent. Owners trying to sell their homes when the market slows, typically late fall or early winter may decide to rent for a few months until the spring. They are not professional landlords, but they can help you pick up business during the slow months.
The Final Word on Growth and Starting a Property Management Company
Starting and running a property management company can be rewarding on many levels. You are helping investors make money on their properties and helping tenants find well-run, beautiful homes. There is nothing more personal than where we choose to live.
Property managers make a difference in many people’s lives. If the thought of entering a growing, exciting industry where no two days are the same excites you, reach out today to find out how Shield Funding could make your dream a reality.