What makes a property management company a small business? [The Lookout]

The Lookout is a content series focused on getting the word out about the importance of small and mid-sized property management companies in the rental market. But what makes a company a small business in the first place?

In this post, we’ll share 4 of the attributes that define a property management company as a small business, from what’s in their portfolios to the type of owner clients they tend to serve.

#1: $8 Million or Less in Average Annual Receipts

The Small Business Administration puts residential property management companies in the SMB category if their average annual receipts total up to $8 million or less.

#2: A Portfolio with <1,000 Units

We’ve found that small-business property management companies tend to manage less than a thousand rental units, and often less than five hundred, based on our surveys of thousands of industry professionals—though they’re actively growing.

In contrast, mid-sized businesses may manage a thousand or more rental units, especially if they’re focused on community associations.

#3: A Portfolio with Primarily Small Rental Properties

One contributing factor that leads small-business property management companies to have smaller portfolios is their specialization in smaller, standalone rental properties, such as single-family rentals and small multifamily rentals. Larger property management firms are more likely to manage apartment complexes with a greater number of units per property, or built-to-rent single-family rental communities, both of which bulk up their portfolios.

#4: A Client Base with Mainly Small Rental Owners

Though some of the properties that small businesses manage are rentals that their company owns, the bulk of their business comes from properties owned by small rental investors and mom-and-pop landlords.

Small rental owners tend to own between one and four units apiece, which is another reason why small-business property management companies’ portfolios tend to be on the smaller side.

That’s where we’ll leave it for now—but in our next post, we dig into what our research has found small property management teams look like, from their size to their structure, and how spread out they are within a given region.

In the meantime, you can learn about this topic and more in our 2023 Property Management Industry Report. And be sure to follow us on YouTube for updates on our latest research on the rental market and property management industry.