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Property Management Franchise: Should You Invest in 2024?

821 views March 4, 2024 Karina Jugo 3

The property management industry in the US is substantial, with estimates indicating over $100 billion in annual revenue. As of 2023, there are more than 300,000 property management companies registered in the United States, a segment of which operate through a franchise.

Even though a property management franchise won’t give you complete autonomy compared to running a management outfit of your own, it’s something worth looking into. This guide will examine the pros and cons of property management franchising including expected costs, profit margins, and key factors in deciding if it’s the right fit for your goals.

What’s covered in this guide:

What is a franchise in the real estate property management industry?

Property management franchising allows entrepreneurs to get into the real estate industry without needing large amounts of startup capital or previous experience. Management franchises provide you with everything you need to get started without going through the daunting set-up process yourself.

With a property management franchise, you receive expert training, a tried and tested business model, an existing brand name, customized software, plus expert support and advice from the franchisor. All you need is to put in an initial investment.

Pros of a Property Management Franchise

Branding

One of the significant advantages of investing in a property management franchise is the immediate brand recognition. A reputable franchise brand already has an established reputation in the market, which can attract potential clients more easily than starting a new, unknown business from scratch.

Companies like McDonald’s are still around, making huge profits because they assure customers they’ll always get a consistent experience wherever they are. So a burger at a restaurant in Georgia will taste the same as one in Washington.

Having a strong brand isn’t always necessary, but it certainly doesn’t hurt. This is especially true if you’re targeting to manage commercial real estate, condos, and apartment complexes rather than just a few residential properties.

Proven Business Model

Property management franchises typically come with a proven business model that has been tested and refined over time. This can save the franchisee from the trial-and-error phase and provide a blueprint for success.

As part of a franchise network, owners also gain access to shared resources and technologies that might have been difficult to afford independently. This can include software, marketing materials, and even preferential deals with suppliers.

property management franchise

Training

Franchisors often provide comprehensive training programs and ongoing support to their franchisees. This assistance can cover various aspects, including operations, marketing, and customer service, enhancing the chances of success for franchise owners.

Even if you have some experience as a property manager, a little extra training will always be good in case you have plans for future expansion. In addition, buying into a property management company franchise will give you access to some of the best training resources in the industry (assuming it’s a good company!).

Business Support and Systems

Entrepreneurs have to wear all kinds of hats. This is especially true in the property management industry, as one can quickly go from the mundane task of helping a tenant with issues around the home to researching more critical matters such as local rental laws and policies.

Running your property management operations under a franchise not only helps with your day-to-day operations but also with financial and legal concerns and other industry-related matters of which you may need to be made aware. And even if the franchisor isn’t able to offer the exact answers you’re looking for, they will always help you work through management issues that will occasionally arise.

Marketing

When you’re first starting out, the most important thing to focus on is marketing. If potential customers don’t know you exist, how are you ever going to succeed? Getting the word out isn’t easy though, especially if you’re relatively new to the industry and don’t have an extensive network yet.

That’s where the franchise can come in. Carrying a respected brand itself already does half the work. Besides just instantly giving you access to a large network, they will also show you how and where to market your services. In other words, they take out a lot of the guesswork and will sometimes even do the marketing for you.

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property management franchise

Cons of a Property Management Franchise

Initial Investment & Ongoing Fees

The biggest hurdle for most potential franchise owners is the upfront cost. Regardless of which company you choose to work with, you can expect to pay at least $100,000 in initial fees and costs. That doesn’t even include franchise fees which range from a low of $25,ooo to a high of $55,000.

Investing in a property management franchise requires a substantial upfront investment, including franchise fees, training costs, and other expenses. Additionally, franchisees typically pay ongoing royalties or fees based on their revenue, which can impact profitability.

Royalties

Franchise costs don’t just stop with the upfront fees. You also need to be prepared for the regular royalty fees charged for being able to use their name, training, software, etc.

What kind of numbers can you expect? Seven percent is currently the market rate in the industry. So when you include that 7% fee on top of various other business expenses, you can see that “fat wallet” starting to look a little slimmer.

Limited Flexibility

This depends on the company, but in general you can count on having a limited number of ways to run your business. Your franchiser wants to look good and maintain a certain reputation, and they can only do that if they control what their franchisees do.

Of course this was also referenced in the “pros” category, as some entrepreneurs like the idea of not having to worry about how they’ll go about their operations. Franchisors already have their best practices laid out. But if you want to have the freedom to make your own rules  or if your local market needs don’t align with the franchisor’s procedures, a franchise won’t give you that much flexibility.

While the support of a franchise can be advantageous, it also means that franchisees have limited autonomy. Franchise owners must adhere to the franchisor’s rules and guidelines, leaving little room for creativity or individual decision-making.

False Expectations

You’ll often hear that it’s much less risky to open up a franchise vs. starting your own business from scratch. But while that may be true, it can lead to a false sense of security. While an established brand can attract clients, it can also work against the franchisee if the franchisor’s reputation suffers due to factors beyond their control.

Depending on the location, there might also be a high concentration of property management franchises, leading to increased competition. This saturation can make it challenging to gain a significant market share and achieve desired growth.

At the end of the day, there’s no guarantee that you’ll succeed. Running a franchise is hard work, and there’s a good chance you’ll fail if you don’t market yourself well, take care of your customers and tenants, control costs, etc.

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How much does a property management franchise cost?

Based on some research into major property management franchises available in the United States, an approximate ballpark range for the initial franchise fee to open a property management franchise is between $25,000 to $50,000.

Total investments including operating expenses, office spaces, insurance, fees, working capital etc. range from $100k to nearly $500k.

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How profitable are real property management franchises?

In its benchmark study conducted in 2017, the National Association of Residential Property Managers (NARPM) reports that the adjusted profit margin for the average property management company is 6%. Profitability ranges from a low of -16% to a high of 25%.

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Do franchisees own the property?

No, franchisees in a property management franchise typically do not own the properties they manage. Instead, franchisees operate businesses that provide property management services to property owners who retain ownership of the properties.

The franchisee’s role involves attracting property owners in need of management services, offering services such as tenant screening, rent collection, and property maintenance, while acting as an intermediary between property owners and tenants.

Franchisees generate revenue through management fees, leasing fees, and other services, but they do not have ownership stakes in the properties they manage.

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What are trusted property management franchise opportunities?

Real Property Management (RPM)

Established in 1986 by Kirk McGary and two associates, Real Property Management (RPM) stands as the foremost franchise entity in residential property management.

Pioneering the first property management franchise alongside partner Doug Oler in 2004, RPM has rapidly expanded, boasting 337 units by 2020, a significant increase from 160 units in 2011. With 22 units operating internationally, RPM’s growth trajectory underscores its global influence in the property management sector.

Property Management Inc. (PMI)

In 2008, Steven Hart founded PMI with a vision to establish the nation’s largest franchise network specializing in residential, commercial, and association management. Drawing from extensive real estate experience encompassing construction, development, and sales, Hart envisioned a diverse portfolio of services catering to varying client needs.

Franchisees operating under the Property Management Inc. brand deliver superior management solutions to clients seeking expert oversight for their investments. With a commitment to excellence, franchisees assume responsibility for the daily operations of their clients’ assets, ensuring optimal performance and peace of mind.

All County Property Management

For those focused on residential property management, All County Property Management offers a comprehensive suite of services and extensive training opportunities. Franchisees benefit from multi-day training sessions at the corporate headquarters in St. Petersburg, Florida, supplemented by robust web tools for continuous support.

With a seasoned staff boasting thirty years of industry expertise, the All County Property Management franchise provides a chance for entrepreneurs to align with a reputable firm. Established in 1990, with franchising initiated in 2008, the company has since expanded to approximately 70 locations.

Keyrenter Property Management

Keyrenter, a prominent US brand, specializes in offering residential property management services along with real estate brokerage solutions to investors and landlords. Founded by Utah real estate brokers Aaron Marshall and Nate Tew, the Keyrenter brand was officially registered on June 11, 2009.

Transitioning to a franchise model in 2014, the company was rebranded as Keyrenter Property Management in 2015, and later simplified to Keyrenter in 2017. Committed to delivering results, Keyrenter prioritizes its customers, residents, teams, and communities above all else, recognizing rentals as a premier long-term financial investment.

Eye On Your Home

A real estate management company headquartered in North Carolina, Eye On Your Home was founded by Melissa Rulli with a mission to streamline property ownership while saving owners both time and money.

Specializing in home security, property management, concierge services, home maintenance, and cleaning, the company caters to both occupied and vacant homes, offering a flexible and profitable business model that delivers exceptional value to clients.

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Should you invest in a property management franchise? Our takeaways

Investing in a property management franchise can be a wise and profitable venture, but it also carries risks and requires careful consideration.

The potential benefits include leveraging an established brand, proven business model, and support system. However, the upfront costs of purchasing a franchise can be substantial, and success heavily relies on factors such as market demand, competition, and effective management.

Those with prior experience in real estate, property management, or a related field, will possess the knowledge and skills to operate a franchise successfully. Individuals with strong entrepreneurial drive, business acumen, and the ability to follow an established system and processes could also be well-suited.

However, those with limited financial resources, little to no relevant experience, or an aversion to following a prescribed business model may want to reconsider investing in a property management franchise.

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Authors

  • Karina Jugo

    Karina Jugo is a content administrator at RentPost who works directly with real estate and property management experts to create resources and guides for property managers. She has more than 15 years of experience in content research and writing for various industries.

  • Jacob Thomason

    Jacob Thomason is the CEO and co-founder of RentPost, software platform providing property managers, landlord or owners with the tools necessary for property management. Jacob is a software entrepreneur with with a vast array of expertise ranging from business concept design to software architecture and development. He is running RentPost for more than 14 years and helping property managers and property owners.

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