Manage 55+ rentals, how do I start selling pieces of it off?

Question

So it has taken me a few years but I now have 55 annual rentals and a few seasonal rentals that I manage, here and there I will also rent a unit for someone and let them manager it thereafter. I truly like managing rentals because it is passive income as long as you can pick up the phone and have a good handyman on staff. My system is very old school as I use google docs to track everything and my tenants all pay directly through my companies bank account and I just track it. I do not use quick-books or quicken because I honestly dont have the time to figure it out. This brings me to my problem if I were to sell say 25 houses as a management business how do I pass on everything? Is this limiting how much I can sell for because I dont have an updated process I use?

How does this work for the owners, do they need to sign a contract that I am allowed to sell their rentals as part of a business?

I a currently building up a portfolio of high end seasonal rentals I will most deff sell off once I have them built up and booked.

I am good at selling homes, I am clearly confused on how to sell a business! Please help!

How does this work for the owners, do they need to sign a contract that I am allowed to sell their rentals as part of a business?

I a currently building up a portfolio of high end seasonal rentals I will most deff sell off once I have them built up and booked.

I am good at selling homes, I am clearly confused on how to sell a business! Please help!

David Dachtera · Answer

@Ilona Davidovich,

What folks are saying is that if you can show that the business produces profit and runs "hands-off" it should sell easily.

If the business needs you to continue, then yes - it's a "job", not a business. You'll need to "hire" and train a replacement as opposed to selling a business.

In terms of "The Cashflow Quadrant" (E - S - B - I), you're in the bottom-left corner: you're self-employed.

You would need to move to the top-right corner and become a business owner: the business needs to run even when you're out sick, on vacation, "on family leave", etc.

If you're new to the concept, "The Cashflow Quadrant" looks like this:

E | B-----S | I

"E" is you're an employee in someone else's business. "S" is where you are now: self-employed. Anyone who self-manages is also in the "S" corner. "B" is a business owner who runs the business and is not run by it; the business should run without you, otherwise you're still self-employed. "I" is an investor - you have only your money at stake, not your time or efforts.

Patrick L. · Answer

You don't have a business, you have a job.   If you wanted to sell it you would need to build a business with employees and systems in place to handle all of the day to day tasks for there to be any value to a buyer.   The lack of reasonable books and tracking is also a huge issue for anyone looking to take that over.   All you have to sell is a book of business and that value is pretty questionable.

If the business is just you and you leave there is no business and there is little reason for your current clients to stay.  With your lack of modern tracking and reporting I'm guessing the main reason the owners stay with you is because they like you and feel comfortable with you.  Many management companies will provide online portals for owners where they can track tenants, revenue, expenses, etc.

Ilona Davidovich · Answer

@David Dachtera Thank you for the advice! I will start moving all the houses into that direction so I can sell "the business"within the year! @Patrick L. Thank you I will look into those management software and set them up before trying to sell anything.

Ilona Davidovich · Answer

@steve Kontos

You are right I could just have a lawyer draft something up but Patrick is correct in that I dont have a portal with proper documentation.

I do flip a lot in Florida, that is what I spend all my time doing( I am currently working on 6, sold 1 last week, have 1 under contract and have 2 on the market), these rentals I have acquired through the years and they are steady income I know I will receive in between selling the flips, hence why I want to sell some of them and have a little less on my plate. We can talk about flips, if you want message me!

Patrick L. · Answer

For it to have value as a business you will have to scale it to the point where you are not doing all of the day to day tasks.   You are selling a job not a business and that has a big impact on the value.   If you have scale to the point where you have enough units that can hire a leasing agent to do all the showings and an office person to handle all of the inbound phone calls, repair scheduling, billing, etc then you have a business.   As for management software I would look at something like  Appfolio or Buildium.

Patrick L. · Answer

From my understanding of the post she doesn't own any of them, she is a property manager.

Steve Kontos · Answer

@Ilona Davidovich

Why don't you sell the units with the condition that you manage them as well?  This does pretty much sound like something you can involve a lawyer who can draft up such terms & conditions.  Do you flip a lot in Florida?  I would like to dip into that market as some point.

Manage 55+ rentals, how do I start selling pieces of it off?

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