Starting a property preservation business
The property preservation business can be a rewarding career that pays well if you take a path that suits you. Options include working for asset management companies or running a firm that contracts with HUD, lenders, realtors or investors. Here are details on how to become a property preservation vendor.
Serving the demand for property preservation
You must first research your market to find out the demand level among real estate industry players for cleaning, transforming and maintaining properties in foreclosure. Lenders and investors outsource to experienced firms that specialize in fixing up properties for sale or rent.
Firms that outsource may already have in-house property preservation team. Industry guidelines and regulations are set by government agencies HUD, the Federal Housing Administration (FHA) and Veteran’s Administration (VA). While investors may be interested in purchasing foreclosures for rentals, banks prefer selling rather than managing properties. Some lenders employ their own property preservation managers, while many outsource to experts for repair work involving floors, walls, roofs, kitchen, plumbing and a variety of other specialties.
One of the great things about launching a business in this day and age is that it’s much easier and quicker to learn a vast amount of information about market opportunities, thanks to the internet and other digital resources. It’s easy, for example, to gauge the demand for foreclosures for any city by accessing national and local data from a variety of real estate websites. Collect data on the number of foreclosures in your market vs. the number of foreclosures that are available to purchase. Then find out which companies lead the market to analyze the competitive landscape.
Establish your property preservation company
In order to gain the attention of large banks that are interested in selling foreclosure properties but must first prepare them for sale, you must usually establish a company with a formal structure such as an LLC or corporation. You should at least have basic liability insurance and a license to conduct business in the geographic area where you do business.
Here are additional steps you can take to expand your opportunities:
- Seek certification by taking courses or programs with learning institutions.
- For property inspections, you can start with VRM University’s Property Preservation and Maintenance Certification.
- Inform yourself about government guidelines
- Approach major banks and apply with the REO department
- Develop a preservation contract
Then develop a website that showcases your skills and experience. The more you can provide search engines with evidence that you are a thought leader in your industry, the better chance your site will have of ranking higher in relevant searches. One of the secrets on how to become a property preservation vendor with a successful website is to specialize in services that give you a competitive advantage. If you are new in the business, you should apply to join our network of property preservation companies to help you with visibility.
That all sounds great… But what is the step by step process to creating a property preservation business?
Here’s an overview of a plan to start a preservation company:
1. Check the state and local license requirements in your area.
Not all states require licenses. Property preservation in itself doesn’t require a license, but the jobs you do might: general contractor licenses, plumbing licenses, roofing licenses, electrical licenses, etc. Some counties and cities will require local licenses like a local contractor license instead of a general contractor license. Some states require specific certifications also, like mold certifications. So be sure to do your due dilligence before deciding to jump into the industry.
2. Check out the competition.
There are a lot of preservation companies around, and you don’t want to be covering an area that’s over saturated with contractors who just get a handful of work orders a month. Be sure that there is a competitive opportunity for you in your area.
3. Apply for property preservation contractor positions
Pro tip: you can get job alerts from your area by signing up to our preservation vendor directory. Most preservation businesses who are just starting out won’t go directly to a national directory or job board due to the large amounts of paperwork and the required investment to execute jobs that might be out of their league. When first starting out, find out who the regional preservation companies are in the areas you serve, or consider smaller property preservation companies and inquire about open positions or opportunities.
4. Go through the hiring interviews.
It’s highly likely that there will be an interview process that you need to go through before you actually sign a contract. Hiring companies will require that you hold certain types of insurance (including work compensation insurance if you have any employees or people helping you part-time) and apply for certain licenses, but most of them won’t require these things before interviewing you, so you don’t necessarily need to purchase anything before the interviews.
5. Apply for all relevant licenses, insurance types and certifications.
Now it’s time to take action on step 1! Do your research into licenses, insurance, and relevant certifications. Figure out how much each will cost you and the best way to go about attaining everything you need.
6. Purchase some property preservation supplies. Especially Personal Protective Equipment (PPE).
As a property preservation, professional, you’ll be exposed to abandoned properties, run down houses, hazardous trash, and you need to take care of your team. Even simple things like mowing the lawn can be dangerous, and you need to be covered. Your insurance company will certainly appreciate it, let alone people who are working with you. This is an important point, and ignoring it might expose you to legal liability.
7. Go through training.
The good news is that many hiring companies, especially larger regional, state-wide or national preservation companies have very standardized training programs and detailed onboarding processes for vendors where you’ll be taught how to proceed with different field services and what’s expected from you. Most of them use their own software or computer systems where they manage work orders and you’ll be required to submit proof of your work through these. So training also involves getting to know and operate these systems.
Okay, but what if I have no experience in the property preservation industry?
If you don’t have any experience, starting your business right away might not be the best idea. Your main priority is to develop some experience and learn how things are expected to be done.
Start out by searching for your local property preservation companies. Do a Google or Bing search and investigate what type of companies are already established in your area. Your goal should be to work with a company and crew that is already in business and actually goes out to do property preservation work. This means avoiding -at first, at least- big regional or national property preservation companies who simple outsource or sub-contract the work.
Ask about employment opportunities. If companies aren’t hiring, consider volunteering. The primary goal when starting out is to gain experience, and it’s okay to let companies know that. It is imperative that you sell yourself. In order to go out there and work for yourself, you need experience. Also, mentioning you have your own equipment and transportation, and letting providers know they wouldn’t need to pay for anything might help you stand out against the competition. Once you’re onsite, ask questions. Learn the industry jargon, the methodology, and specifics of effectively completing property preservation work orders.
In summary, if you lack experience, start in your area. Use VRMCO.com, Use Google. Find small companies in your area and look at their job opportunities. If there are none, ask to volunteer of anything they might need help with.
You don’t need a college education or any formal education beyond a high school diploma to become a property preservation contractor that fixes and maintains REO assets and other properties. It does require some research and reaching out to people that are in the business and to property preservation companies that are actively hiring vendors. VRM Mortgage Services can hopefully help you get your business off the ground by finding local and national vendors and job opportunities.