How to start a Property Preservation Company
Updated: Feb 3
Being part of the Property Preservation Industry from 2014, where I have been helping out with processing services, has prompted me to write a few things. I have often come across people in different forums who have asked advise on how to start their own REO or a Property Preservation Company. Over the years, I have read a lot on these topics and working with the preservation companies myself, some of the things that I have learned are:
1) Start by talking with people who are already in the business. There are different companies that provide work in your coverage area and not all of them will pay good or in a timely manner. You need to have a good knowledge about the industry as well as know the regulations that you need to follow. These are all things you need to be advised about before starting work. There are forums like Preservation Talk which you can join and learn a lot as well as get help from others in the community.
2) Being a subcontractor can be a good way of starting the business, the pay maybe less but you get experience in running the business. Very few Nationals will hire contractors with zero experience.
3) Its is much easier to get work from low paying nationals such as Cyprexx and A2Z Field Services than from those that pay higher such as MCS, Servicelink or Safeguard. The latter are also very stringent in their regulation, which means it may cost you if you can't work properly for them.
4) Start with REO work rather than PnP. REO stands for Real Estate Owned and are basically homes that went to foreclosure sale but didn't sell, so now the bank owns the property. The pay is less and follows fixed allowable pricing but there is little to no risk for the contractor. In contrast, PnP work is on Pre-Sale properties. The pay is more, but contractors have a lot of liability risk when working on these properties.
5) Do not go into the business thinking its part time. This is a demanding job and whether you are working as a subcontractor or for a national there are real world business problems that you will have to face such as deadlines and collections. If you are a subcontractor and cannot meet deadlines you will most probably be dropped. Worst case scenario: they will report you in the community preventing you from getting further work.
6) Jobs should in fact be completed ahead of deadlines, because there is always a chance that the nationals finds a mistake and ask you to go back for additional information. If the rejection are not submitted within the original deadline, deductions in payment may occur.
7) General Liability and E&O Insurance are a must have as well as having the needed license for work. From the last year or so, back ground checks have started to become mandatory as well and most contractors now need an Aspen Grove number to work with the nationals.
8) You need a truck and a trailer if you are starting out as a one or two man crew. Tools such as chainsaw, lawnmower, drills, generator, etc are also necessary. You will also need laptop, camera with power backup and mobile broadband connection.
9) A good cash flow is also needed, most nationals have a 30 to 45 day pay cycle and thus you need to be able to bear the everyday expenses to run the business.
10) Make sure you understand what they demand on each work order, once you start getting work. If you get an initial secure work order, and it asks for winterization to be completed if its within the time frame and you do not complete, your work will be rejected and they will ask you to return to complete work. Likewise, if you complete a job that was not asked in the work order instruction, you essentially will have done it for free as you will not get paid for it.
11) If you go on to hire subcontractors, it is essential that you sign a subcontractor agreement as well as a W-9 and pay them checks to their business. Like the above mentioned example many a times, a subcontractor may have ended up completing a work that was not asked and then demand to get paid for it. When you reply with saying you can't pay them for something they weren't asked to do, they can run to the labour board and ask to be paid as an employee.
This covers most of the basics that I got to understand on how to get into the business, you can of course learn much more from those who are running preservation companies themselves. If you need to know how you can apply to become a vendor here is list with links for vendor applications from a property preservation website. On my last blog on property preservation price list I tried compiling a pricing matrix of different nationals as a guide to help people know what each nationals pay, it can help you to know what they will pay you before you apply for being their vendors.
Additionally, once your work increases to a sufficient volume you will want to use a web-based software to manage your work orders. In this regards, one of the best software for Work Order Management system is FieldForward powered by East point Systems (www.fieldforward.com) which has been specifically designed for the mortgage field industry. Lastly, another great business solution for those who are starting their property preservation business is Paradigm RPA, they help you with designing your company website, setup your PPW and Pruvan accounts as well as can develop proprietary software for larger preservation companies who prefer to have their own Data Management System.
Hope this blog helps people who are just getting in to the business make better decisions. Please feel free to comment if you think I have missed anything and share if you think the blog was great!
Zayed Ahmed, Founder and CEO of ASL BPO.