property Management Business

[Account Closed]

I am in the beginning phase of purchasing an existing property management company. Would appreciate anyones input or experience as to the pros and cons. Also, how to put a value on the business.

Thanks

Marc

[Corina Eufinger]

I was working for a property management company in my teens when they bought out another one.  Tenants were already accustomed to working with a PM rather than being managed by the LL previously.  It is the best way to expand your own management portfolio by far.  You have to be aware that LL's will be leary of you and possibly very slighted by the PM who got bought out. It is in your best interest call each LL and make an appointment (if possible) to meet in person. We went to a lot of face to face meetings in their homes and local restaurants.  We sent out a letter that said "we are purchasing your property management company effective _____.  We would love to have opportunity to have a member of our staff sit down in person with you to discuss the transition and our company.  Please give us a call to schedule this. Don't worry, if you get too busy we will be sure to reach out to you before the buyout goes into effect."

As far as value of the business.  For the business value there is no set formula. A good place to start is to value it based on the the last 3 years income plus the value of any assets you acquire in the deal (trucks, large equipment and tools, office that is owned, etc).  If the company brings in $145,000 per year in management and maintenance income (gross income not net) the value of the business is worth $426K plus the assets purchased. Chances are they will talk you up for the value of income, which is fine.  They might say its $475,00k. 

Hope that helps.