Start a Property Management Company in Texas | 2024 Guide

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Texas Property Management Company

Are you considering starting a property management company in Texas? Property management is an excellent business opportunity for individuals with a passion for real estate who are detail-oriented and can effectively manage multiple tasks simultaneously. The demand for property managers continues to grow, making it an attractive and lucrative Limited Liability Company in Texas.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before Starting a Property Management Company in Texas, all the steps in this article must guide you.

How to Start a Property Management Company in Texas

What is a Property Management Company?

A property management company in Texas is a professional firm that handles the administration of residential, commercial, or industrial real estate. Such companies deal with all aspects of managing a property, from finding and vetting tenants to repairing and maintaining the property, collecting rent, and handling tenant issues. These companies are an asset for property owners who may not have the time or expertise to manage their properties effectively and efficiently.

Forming a Limited Liability Company (LLC) can be a strategic decision for those considering starting a property management company in Texas. Starting an LLC provides several benefits, including the protection of personal assets. In an LLC, the owner’s assets are protected in case of any litigation or debt incurred by the company. It also offers greater credibility and potential tax advantages and allows for an easy ownership transfer. Starting an LLC involves filing the necessary paperwork with the Texas Secretary of State and paying an initial filing fee.

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How to Start a Property Management Company in Texas

Starting a property management company in Texas can be a lucrative and rewarding business venture especially if you are in Austin. With the right planning, resources, and dedication, you can create a successful company that caters to the needs of property owners and investors in your area. Here is the step-by-step guide to launching a property management company in Texas.

Step 1: Understand Property Management

Property management oversees and operates real estate properties, including residential, commercial, and industrial properties. The role of a property manager is to manage the day-to-day activities of properties, ensuring that they are well-maintained and that rent is collected on time. Property managers also deal with tenant issues, repairs and maintenance, and marketing vacant properties.

Step 2: Evaluate The Market

Before starting a property management company in Texas, you need to evaluate the local market to determine if there is a demand for your services. Here are some factors to consider:

  • Type of Properties: Determine the properties in Texas, such as single-family homes, multi-family buildings, commercial properties, or vacation rentals.
  • Competition: Identify other property management companies and analyze their services, pricing structures, and market share.
  • Market Trends: Research the local real estate market trends, including rental rates, vacancy rates, and property values.
  • Potential Clientele: Determine the number of property owners and investors in your target area who may require property management services.

Step 3: Create a Business Plan

A solid business plan is crucial for the success of your property management company. Your business plan should include the following elements:

  • Executive Summary: A brief overview of your Texas property management company, including its mission statement, goals, and objectives.
  • Market Analysis: A detailed analysis of the local real estate market, competition, and potential clients.
  • Services: Describe the property management services you plan to offer, such as tenant screening, rent collection, property maintenance, and marketing.
  • Marketing Strategy: Outline your marketing plan, including your target audience, marketing channels, and budget.
  • Financial Projections: Provide financial projections for your property management company, including revenue, expenses, and projected profits.

Step 4: Register Your Business and Obtain Licenses

To start a property management company in Texas, you must register your business and obtain the necessary licenses and permits. Here are the steps to follow:

Choose a Business Structure

For starting a property management company, several business structures are available in Texas. Each structure has its benefits and drawbacks, depending on your business goals, financial situation, and personal preferences. The common business structures you can choose from are:

  • Sole Proprietorship: This is the simplest business structure, which involves a single individual owning and operating the property management company. The owner has complete control over the business and is personally responsible for all debts and liabilities. There is no formal registration process for a sole proprietorship, but you may still need to obtain licenses and permits specific to property management.
  • Partnership: A partnership is a business structure where two or more people share ownership of the property management company. Partnerships can be general, limited, or Texas Limited Liability Partnerships (LLP). Each partner contributes to the business and shares in profits and losses. Partnerships must file a partnership agreement with the Texas Secretary of State and obtain necessary licenses and permits.
  • Limited Liability Company (LLC): An LLC is a hybrid entity that combines a partnership’s flexibility with a corporation’s limited liability protection. Owners, known as members, are not personally responsible for the company’s debts and liabilities. To form an LLC in Texas, you must file the Certificate of Formation with the Texas Secretary of State and comply with any licensing and permitting requirements.
  • Corporation: A corporation is a separate legal entity from its owners, known as shareholders. Corporations offer limited liability protection and can issue stock to raise capital. There are two types of corporations: C Corporations and S Corporations. Forming a corporation in Texas requires filing the Certificate of Formation – For Profit Corporation with the Texas Secretary of State.
  • Professional Corporation (PC): This type of corporation is designed specifically for licensed professionals, such as real estate brokers, who wish to form a corporation for their property management company. Professional Corporation offers limited liability protection and must comply with all state regulations for the specific profession. To form a Professional Corporation in Texas, you must file the Certificate of Formation – For Profit Corporation with the Texas Secretary of State and adhere to any licensing and permitting requirements.

Before choosing a business structure for your property management company in Texas, consult with a Business Attorney in Texas to discuss the best option for your situation. Remember that each structure has its tax implications and requirements, so it is essential to understand your choice’s financial and legal ramifications.

Choose a Business Name

Choosing a business name for your Texas property management company is important to establish your brand identity and attract potential clients. Here are a few suggestions to consider:

  1. Texas Premier Property Management
  2. Texas HomeGuard Property Services
  3. Texas Nexus Property Management
  4. Texas BlueSky Property Solutions
  5. Texas KeyPoint Property Management

Remember to check the availability of your chosen business name with the Texas Comptroller of Public Accounts Taxable Entity Search and ensure it’s not already in use by another company. There is a complete guide on Texas Business Name Search for you to have a property management company name. You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for Texas DBA (doing business as). 

However, before filing a DBA, you should know that you need to renew your DBA every ten years, which costs varies by county.

Once you’ve settled on a unique name, you can hire a Registered Agent and obtain the required licenses and permits.

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Hire a Registered Agent

A Registered Agent is a person or entity designated to receive important legal documents and correspondence for your business. In Texas, every business entity, such as an LLC or a corporation, must have a Registered Agent with a physical address within Texas. The Registered Agent’s primary role is to ensure that your business complies with state regulations and be available to receive any legal notices or official government correspondence.

In Texas, the cost of having a Registered Agent ranges from $50 – $200. However, suppose you are still wondering how to hire a Registered Agent. In that case, you can also serve as your Registered Agent, appoint a friend or family member, or hire the Best Texas Registered Agent Services.

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File For Certificate of Formation or Certificate of Formation – For Profit Corporation

If you form an LLC for your Texas property management company, you must file the Texas Certificate of Formation, which costs $300. However, you must file the Certificate of Formation – For Profit Corporation if you form a Corporation for your Texas property management company. The Certificate of Formation – For Profit Corporation filing fee costs $300 for filing online, by mail, in person filing, or by Fax. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

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Obtain an Employer Identification Number

You must first obtain an Employer identification number (EIN) in Texas from the IRS if you will open a bank account or hire an employee for your Texas property management company. 

The application of an EIN in Texas can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

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Get the Necessary License and Permits

When starting a property management company in Texas, you must obtain legal licenses and permits. Here are some common licenses and permits you may need:

  • Business License: Texas requires businesses to obtain a Business License to operate legally. The business license fee in Texas ranges from $50 – $300.
  • Real Estate Broker License: In many states, property management companies must have a licensed real estate broker or designate a licensed broker to oversee the business operations. Check with your Texas Real Estate Commission or similar governing body for the requirements and application process.
  • Salesperson License (if applicable): If your Texas property management company also engages in leasing or renting properties, you may need to have a licensed salesperson working under the supervision of a licensed broker.
  • State Tax Registration: Register with the Texas Comptroller of Public Accounts to collect and remit sales and use taxes and other applicable state taxes.
  • Local Zoning and Land Use Permits: Depending on the nature of your Texas property management services and the location of your office, you may need to obtain zoning and land use permits. 
  • Workers’ Compensation Insurance: If you have employees, you’ll likely need to obtain workers’ compensation insurance by Texas’s laws.
  • Professional Liability Insurance: Texas property management companies should consider obtaining professional liability insurance (errors and omissions insurance) to protect against potential legal claims related to business operations.

Before starting your property management company, consult a Business Attorney in Texas to ensure you obtain all the necessary legal permits and licenses. Failing to do so can result in fines, penalties, and even the closure of your Texas business.

Step 5: Set Up Your Office

While starting a property management company without a physical office is possible, having a dedicated workspace can help establish your credibility and professionalism. Select a location that is convenient for both you and your clients. This may be a home office, a co-working space, or a commercial office space. Also, you will need basic office equipment such as a computer, printer, phone, and filing system.

Step 6: Market Your Property Management Company

Effective marketing is crucial for attracting clients and growing your Texas property management business. Usually, the best way to market your property management company is to advertise in local newspapers, real estate magazines, and direct mail campaigns.

Step 7: Build a Team

As your property management company grows in Texas, you may need additional staff to help manage your workload. Consider hiring property managers, administrative assistants, maintenance technicians, and marketing professionals. Ensure your team is knowledgeable, professional, and committed to providing excellent customer service. However, before hiring an employee for your Texas property management company, you should obtain an EIN and open a bank account.

Benefits of Starting a Property Management Company

There are several benefits of starting a property management company in Texas:

  • Steady Income: Property management is a growing industry in Texas, and there is always a demand for qualified professionals to manage properties. This means starting an LLC property management company can provide a steady income stream.
  • Low Startup Costs: Starting a property management company requires minimal investment, as you do not need to purchase any property. You can start with just a few clients and gradually increase your portfolio.
  • Flexible Work Schedule: Property management companies offer flexible work schedules, allowing you to work around other commitments such as family and other business ventures.
  • Growth Opportunities: With the right marketing strategies, you can rapidly grow your property management company and increase your client base.
  • Diverse Client Base: Property management companies cater to a diverse range of clients, including landlords, tenants, and property owners. This means that there is always a demand for your services.

FAQs

What is the process of starting a property management company in Texas?
To start operating a property management company in Texas, you must obtain a Texas real estate broker’s license and meet other state and local legal requirements.
Are there any educational requirements to become a property manager in Texas?
Yes, to obtain a Texas real estate broker’s license and start a property management business, you must complete specific educational requirements that include pre-licensing coursework and passing a licensing exam.
Do I need a license to operate a property management company in Texas?
Yes, Texas law requires property managers and management companies to hold a real estate broker’s license.
How long does it take to become a licensed property manager in Texas?
The time it takes to become a licensed property manager in Texas varies, depending on the level of education required and how long it takes you to pass the licensing exam.
What legal entity should I select to start my property management company in Texas?
You can set up a property management company in Texas as a sole proprietorship, limited liability company (LLC), or corporation. The legal entity you choose will determine your legal and financial responsibilities.
How should I go about setting up my business as a legal entity in Texas?
You’ll need to register your property management business with the Texas Secretary of State and obtain the appropriate forms from the Texas Comptroller and state agencies.
Will there be any annual license renewal fees involved in Texas?
Yes, like other real estate professionals in Texas, property managers must renew their broker licenses every two years and pay a renewal fee.
Can an out-of-state property management company manage properties in Texas?
An out-of-state property management company can manage properties in Texas but must do so through a licensed Texas real estate broker and comply with state and local laws.
Do I have to disclose ownership details of my company during registration in Texas?
Yes, your Texas property management company must provide the names and addresses of all managing members, which will be publicly available through the Texas Secretary of State’s website.
How do I obtain liability insurance for my business in Texas?
To protect your business and assets, it’s recommended that you obtain liability insurance coverage, which can be purchased from numerous insurance carriers in Texas.
What other insurance policies do I need to protect my business in Texas?
You may also want to explore Employee Practices Liability Insurance (EPLI), which protects your business against lawsuits by employees.
How much does it cost to start a property management company in Texas?
The cost to start a property management company in Texas depends on various factors, including business entity choice, administrative costs, insurance premiums, and rental property marketing expenses.
Do I need to have an office to operate a property management company in Texas?
You must have an office in Texas accessible to municipalities, tenants, and clients to operate a property management company in Texas.
How do I find prospective clients for my Texas property management company?
Prospective clients can be found through various marketing efforts, including search engine optimization (SEO), referrals from satisfied clients, advertising, and online listings.
Are property management companies required to disclose their fees in Texas?
Yes, Texas law requires property managers to provide written fee documentation that establishes management fees, other fees, and lease information to clients.
What is the average management fee charged by property management companies in Texas?
The typical management fee charged by property management companies in Texas varies, depending on the size and location of the property but can range from 7% to 12% of rent collected.
What type of lease agreement is commonly used by property management companies operating in Texas?
Texas property management companies typically use a Texas Residential Lease Agreement to lease properties to tenants.
Can I fill out a Texas Residential Lease Agreement without a property management company or real estate agent?
Yes, a landlord and tenant can agree on their lease terms and sign a Texas Residential Lease Agreement without having to employ a third-party property manager or real estate agent.
What is the security deposit limit for a rental property in Texas?
Texas law limits the maximum security deposit equal to one month’s rent for unfurnished units and up to two months’ rent for furnished properties.
Are tenant screening services available in Texas for prospective tenants?
Yes, tenant screening companies are available in Texas.
Can property management companies in Texas participate in the Texas Property Code?
Property management companies in Texas are accountable under the Texas Property Code for various duties and responsibilities as they relate to rental properties, tenants’ rights, and security deposits.
Can I charge late fees to tenants who pay rent late in Texas?
Yes, Texas landlords and property management companies can charge late fees in accordance with the lease’s provisions.
Can a tenant withdraw a security deposit partly or wholly in Texas?
Texas property management companies must commonly account for security deposits and may withhold a portion of the deposit to cover damages, unpaid rent, cleaning fees, and case tenant’s breaches of the rental agreement.
Are there environmental laws in Texas concerning rental properties?
Yes, Texas law requires property management companies to disclose information regarding potential environmental hazards in rental units, including lead.
What standards apply to renting properties for Texas property management companies?
Texas Property Code establishes various standards for the rental units that Texas-based property management companies lease to tenants, such as complying location, living quality, and condition provisions.
Can I terminate a lease if tenants fail to fulfill payment obligations in Texas?
Texas law permits property management companies to evict tenants who have persistently failed to pay rent or otherwise violate lease provisions.
Are Texas tenants allowed to have recourse against Texas property management companies?
Yes, Texas tenants can be entitled to legal remedies and compensation if Texas property management companies breach lease agreements.
Can a property management company charge a transfer fee for early termination of a lease?
Yes, Texas property management companies may charge early termination fees outlined in lease agreements to allow tenants to break lease agreements earlier than contracted.
What kind of license do I need to start a property management company in Texas?
To start a property management company in Texas, you need a real estate broker’s license.
Do I need to be a Texas resident to start a property management company in Texas?
No, you do not need to be a Texas resident to start a property management company in Texas.
How much does it cost to get a real estate broker’s license in Texas?
It costs around $550 to get a real estate broker’s license in Texas.
What kind of insurance do I need to start a property management company in Texas?
Workers’ compensation coverage is a requirement for every employer in Texas, and liability insurance is often necessary for property management companies.
Can a property management company operate in multiple Texas cities?
Yes, a property management company can operate in multiple Texas cities with proper management.
Do I need to have a physical office to start a property management company in Texas?
No, you do not need to have a physical office in Texas, but it is recommended.
Does Texas have any laws or regulations specific to property management?
Yes, Texas has specific laws that govern issues such as tenant screening, security deposits, and eviction procedures.
How do you decide on a city to focus on for a property management company in Texas?
The decision to focus on a particular city for a property management company in Texas should depend on both potential demand in that area and on personal preferences.
What kind of fees can property management companies charge in Texas?
Property management companies in Texas can generally charge between 8% and 12% of the monthly rent as their fee.
How can advertising help a property management company succeed in Texas?
Advertising helps a property management company in Texas to attract clients and to stand out from competitors.
How can a property management company handle maintenance and repairs in Texas?
A property management company in Texas can hire contractors or have a staff member handle maintenance and repairs.
What are some common challenges facing property management companies in Texas?
Common challenges faced by property management companies in Texas include attracting new clients and handling tenant disputes.
Can a property management company also operate as a real estate sales agency in Texas?
Yes, a property management company in Texas can similarly operate as a real estate sales agency.
How can a property management company participate in eviction processes for tenants in Texas?
To participate in eviction processes in Texas, a property management company should engage the services of an attorney.
What records will a property management company in Texas need to maintain?
Property management companies in Texas will need to keep records of tenant leases, accounting information, and maintenance requests.
Can property management companies obtain a Texas state license to do business?
Property management companies in Texas can register with the state as an assumed or fictitious name, but they do not obtain a license.
What are the tenant’s rights in dealings with the property management companies?
In Texas, tenants have the right to proper notice of rent increases, withheld deposit notices, and safe, comfortable living situations.
What do I need to do to comply with the Texas state consumer protection laws as a property manager?
As a property manager in Texas, Consumer Protection Compliance requirements include constructing-in compliance guidelines in lease and marketing documentation, provide clear descriptions of maintenance and management policies.
Should I require the occupants of my property to obtain renters’ insurance?
While it is not required by Texas state law, it is considered good practice for property management companies to request the occupants to have renters’ insurance.
What are the Texas Fair Housing Act protections?
The Texas Fair Housing Act or FHA, makes it illegal to refuse to rent, finance, sell or advertise housing based on an individual’s race, gender, religion, or other protected characteristics.
Is screening potential tenants necessary?
Yes, you should have predetermined requirements set out for tenants before they lease your property to avoid risky prospects that may be nuisances.
Is there any need to hire a leasing agency for my property management company?
No, a property manager can and often manages leases themselves. It is generally cheaper to hire an independent leasing agent, as they are not employee burdened.
How do handling rent payments work in Texas?
Rent on Texas leases should include the date payment is expected and the consequences that will arise if late or left unpaid altogether.
As a property management company, how do I handle Security deposits?
Security Deposits should be invested separately from any other funds with easy retrieval; they need to be refunded with elaborate paperwork outlining returns within the terms of remaining maturity.
Do I need to have branded customizable forms designed?
Every property management company requires some particular forms to borrow and lease properties, make reductions, and other engagements. It is recommended to use the assistance of a Texas real estate lawyer to refine and make sure these documents are legitimate.
As a management and solution provider in Texas, how do I typically get customers?
Marketing to Customers to expand your customer base utilizing various tools such as establishing a website and adverts in locality publications, regionalizations.
What benefits are instrumental in renting property?
Rent is a steady form revenue and additional profit through ongoing management. Moreover, unique tax benefits of rental property, including depreciation, deductions that directly profit one’s earnings, and general portfolio security attractive for owners.
Is it important to follow significant guidelines while investing in income-producing activities in Texas?
Yes, in Texas, taxes can be complicated, along with additional governing rules, making the investment even more critical to understand.
Example cases you can deal typically with during occupancy of rented property?
A secure electrical socket breaking, faulty HVAC equipment, lack of hot water supply, clogged drains. Property Management companies help in handling such issues by appointing their designated maintenance staff, which operations under their regulations of quality control.
Can smoking entirely be prohibited on a lease?
Texas Landlords can prohibit smokers. Still, one stipulation while maintaining non-exemption for homes can encourage applicants merely mostly exempted because public smoking exposure laws mainly apply.

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Conclusion

Starting a property management company in Texas can be rewarding and profitable. By following the steps outlined in this guide, you can launch a successful property management business that meets the needs of property owners and investors in your area. Remember to stay up-to-date on industry trends and continually refine your services, marketing strategies, and customer service to ensure the long-term success of your property management company.

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