Buying a property management business

[Paul Wirth]

I need some advise as to how much to pay for a small property management business. The owner charges an average of 7% of gross rent and 50% for lease up. I've been told to buy the accounts and not the business for liability reasons which is fine. However, I am not finding information as to how to value the acquisition of accounts. Any guidance would be appreciated. Thank you.

[Blair Poelman]

Seems to me it makes more sense to just buy out the service contract but would tread lightly with both the owners as well as the tenants.  My experience as an owner, when you change PM's you run a 50/50 risk of losing the tenant. 

Maybe try to position it as a partnership deal with the PM, rather than a sale of the account.  

I would try to have the current PM intro's me to all the owners and tenants saying something like "here's my new partner, over the next 60 days he's going to start doing XYZ.  His phone is XXX and email is XXX.  He will be reaching out to each of you over the next weeks to......"

That is a lot less shocking than "Hello, I'm your new property manager that you've never met and didn't sign up with in the first place, but now I'm going to be handling your asset / coming by to pick up rent"

I can't imagine paying a lot for this - 1 or 2 month's management fees sounds like a good starting point.