The interactive property management firm dashboard allows you to see your financial modifications in real-time! Please see our videos!
1.0 Executive Summary
The field of property management is an ever-expanding market. The demand among real estate investors, of all sizes, to have comprehensive management of their properties will continue to grow as more individual investors are acquiring properties. Property Management Firm, LLC (“the Company”) was founded by Julian Davis. The Company will specialize in the management of residential units including single-family properties, small apartment complexes, and multi-family units. At this time, the Company is seeking a $125,000 line of credit in order to commence operations. The business is located in Philadelphia, Pennsylvania.
1.1 The Services
The Company will provide a complete end-to-end solution among residential real estate investors that want to enjoy passive income from rental fees coupled with capital appreciation of their properties. The business, in exchange for these services, will receive 10% of all rental income.
In order to develop an expansive client base, the Company will work with a number of regional real estate brokerages that do not maintain their own internal property management operations. These referrals will drive the early clients of the business as the Company establishes its operations in the greater Philadelphia area market.
Chapter three of this business plan will further showcase the expansive property management services offered by the Company.
1.2 Financing
A $125,000 line of credit is needed in order to develop the operations of Property Management Firm, LLC. The business is acquiring a line of credit in order to finance the early operating costs of the business while retaining additional capital as needed for expansion purposes. Management anticipates that the revolving line of credit (RLOC) will carry an 8.5% interest rate on any principal used. To a more modest extent, this financing will be used for furniture, fixtures, and equipment purposes.
Julian Davis will contribute $25,000 towards the venture as well as the transfer of a vehicle worth $15,000.
1.3 Mission Statement
Property Management Firm’s mission is to provide its clients with the ability to take a completely hands off approach to their income producing real estate assets.
1.4 Management Team
Julian Davis is a highly qualified and licensed property manager that has been involved with the management of real estate assets over the past 17 years. Mr. Davis will take a holistic approach when working with each client in order to maximize their returns on investment.
1.5 Revenue Forecasts
1.6 Expansion Plan
Property management enterprises are highly scalable. During the course of the next three years, the Company will continually expand its marketing campaigns in order to have an ever-growing number of real estate investors use the business’ services. The Company may also establish additional operating offices throughout suburban markets in the greater Philadelphia metropolitan area.
2.0 Company and Financing Summary
2.1 Registered Name and Corporate Structure
Property Management Firm, LLC. The business is based in the Commonwealth of Pennsylvania.
2.2 Required Funds
A $125,000 RLOC is being sought by Julian Davis to establish the Company’s offices in Philadelphia. Initially, the funds from the line of credit and the Founder’s equity injection will be allocated as follows:
2.3 Investor Equity
As the business expands its operations, the Company may take on an equity partner to develop additional offices within Philadelphia, surrounding suburban markets, or markets within New Jersey.
2.4 Management Equity
Julan Davis will remain as the 100% owner and sole member of Property Management Firm, LLC. This structure may change if highly motivated employees are provided with an equity participation for their work in furthering the goals of the business.
2.5 Exit Strategy
As property management firms produce highly recurring income from their operations, these businesses remain in immense demand. Most likely, the Company would be sold (as an asset sale) to a larger firm that is seeking to expand their book of business in the Philadelphia area market. The Company may also be sold to a real estate brokerage that is seeking to enter the field of property management to complement their brokering operations.
3.0 Property Management Operations
Property Management Firm’s mission is to take a holistic approach when managing residential units throughout Philadelphia. The services will encompass:
- Eviction Management
- General Property Remains
- Property Tax Management
- Rent Collection
- Tax Remittance
- Tenant Relations
- Vacancy Marketing
As discussed earlier, the Company will generally receive 10% of the aggregate income collected for each property. These fees may be negotiated in stances when a real estate investor owns several properties that will be under the management of the business. The Company will charge separately for any repairs that may need to be completed through the course of management.
When vacancies occur, the Company will directly market the unit for rent through a number of online channels. These operations will be conducted in tandem with a retained real estate brokerage. At all times, the business will ensure that all placed tenants will be able to meet their monthly rental obligations. This will be completed through credit checks, background checks, and income verification.
As the Company expands, Management may integrate commercial property services into its operations.
4.0 Strategic and Market Analysis
4.1 Economic Outlook
Property management firms generate recurring income from their operations as they receive a portion of all collected rents on a monthly basis. Although not fully immune during challenging economic climates, these entities are able to almost always remain profitable – especially among firms that operate in population dense markets where housing is in substantial demand.
The internet has allowed many more individuals to invest in passive real estate investments. Properties can now be sourced on a local, regional, state-based, and nationally based level. Real estate produces not only passive rental income but also substantial capital appreciation. Given the tax benefits afforded to real estate investors, this asset class has become highly sought after among investors of all sizes. Property Management Firm, LLC is in a strong position to expand once it commences operations.
4.2 Industry Analysis
As real estate investing remains one of the most lucrative asset classes, the field of property management has swelled with numerous service providers. Collectively, there are over 200,000 companies that provide residentially focused property management services. These companies produce over $100 billion of fees each year (including repairs).
As interest rates are returning to more normalized levels, it is expected that real estate investors will enter the market to acquire properties using more affordable capital. The Company will highlight this fact when it begins to market its services to the general public.
One of the newer trends within this industry has been to provide short-term lease management services in addition to traditional one-year lease tenants. Many real estate investors, striving for higher ROIs, will list their properties on vacation rental platforms. Moving forward, Property Management, LLC may seek to engage in short-term rental management as the fees are substantially higher.
4.3 Customer Profile
Among real estate investors that use the Company’s property management services, the following profile will be implemented in tandem with the business’ marketing campaigns:
• Owns two to five properties in the greater Philadelphia metropolitan area
• Generates a monthly rent roll of $2,500 to $12,000
• May want to engage in short-term rentals when vacancies occur
• Desires a completely hands off approach as it relates to their residential property assets
As part of your business planning process, you will need to determine the number of active property investors in your market. This can be determined by examining statistics on the number of owner-occupied housing units in your respective area.
4.4 Competition
Foremost, the Company will create an immense differentiating factor by exclusively focusing on residential real estate. The business, on an as needed basis, will also provide repairs to residential units. This will be a major draw among real estate investors since they will not need to source contractors when normal property issues occur. Most importantly, the Company will align its values with that of its base of real estate investors. The Company will strive to ensure that all enrolled clients generate a substantial ROI not only from passive income but also from the appreciation of the property.
As with all things related to real estate, these businesses have become somewhat of a commodity. The Company will provide a concierge level of service to its clients to set itself apart in this competitive marketplace. In this section, you can indicate why you feel that your respective property management firm will thrive in your chosen area.
5.0 Marketing Plan
Property Management Firm, LLC will develop its marketing operations so that it creates brand name awareness among real estate investors as well as real estate brokerages in the market. The business will use direct marketing, online marketing, and referrals to foster an immense client base within Philadelphia over the next three years.
5.1 Marketing Objectives
• Maintain strong relationships with real estate brokerages and agencies that do not maintain property management operations.
• Develop referral relationships with loan officers, mortgage brokers, and mortgage banks that have ongoing relationships with real estate investors.
• Develop and maintain an online presence that includes the use of targeted search engine and social media advertisements.
5.2 Marketing Strategies
The most important aspect of Property Management Firm’s marketing operations will be to foster ongoing referral relationships with real estate professionals including brokers and agents as well as with financial professionals such as mortgage brokers/bankers that operate within Philadelphia and its surrounding markets. The business is targeting a select group of real estate investors that will be onboarded into the firm’s ecosystem, and as such – it is imperative that the Company take a focused approach to both its marketing and advertising operations.
The Company as well as Mr. Davis will become ongoing members of numerous organizations and trade associations that focus on real estate activities. Over time, these associations will become a strong source of referral business for the Company. The business will also market its services through printed publications that are managed by these entities.
As it relates to online advertising, the business will use sponsored advertising among all major search engines as well as social media platforms. The pay-per-click (PPC) advertisements will be structured so that when a prospective client clicks the link, they will be immediately routed to the sales page of the Company’s website. This sales page will provide a visually stunning overview of how the Company can increase an investor’s ROI while also reducing issues that are normally associated with property management. From there, website visitors will be able to navigate throughout the remainder of the platform in order to learn more about the business.
Management and the Company’s staff will also frequently attend events (including charity galas) that are held by prominent real estate firms. This will be a major opportunity for networking among people that own several properties in this market.
6.0 Organizational Plan and Personnel Summary
6.1 Corporate Organization
6.2 Payroll
6.3 Management Biographies
Julia Davis has been a real estate professional for the past 17 years and has been actively involved with property management, contracting, and construction. Through this experience, he will be able to manage any aspect of a residential unit with a focus on ensuring that vacancies are kept to an absolute minimum. When developing your biography for your business plan, you can indicate your own experience and background in the field of residential/commercial property management.
7.0 Financial Plan
7.1 Underlying Assumptions
• A $125,000 line of credit will be used to finance the early expenses of the business. Management anticipates that about 75% of the line will be drawn down at any given time.
• The business will deduct its fees as soon as rents are paid, and the business will not maintain any accounts receivable outside of when repairs are being completed to a managed property.
7.2 Sensitivity Analysis
Property Management Firm’s revenues may be impacted if the value of real estate falls substantially or if there is a major global recession. However, the Company is operating in the Philadelphia market and the demand for residential space is substantial. The Company will produce recurring income from its operations which will significantly reduce risks.
7.3 Source of Funds
7.4 Profit and Loss Statement
7.5 Cash Flow Analysis
7.6 Balance Sheet
7.7 Breakeven Analysis
7.8 Business Ratios
