Buying a Property Management Company

[Jim Norton]

Hello all,

Does anyone know how to properly value a property management company? I am considering buying one that has been presented to me. How do I come up with an appropriate offer? What is some of the due diligence that I should do? The company makes roughly 320k in annual management fees, and about 116k in broker/sales commissions from the small brokerage business attached to the management company. Pre-tax income of the two divisions is about 123k, and after tax income is about 84k. If I want a 15 CAP, 84k/.15=560k purchase price. The company has no debt, and manages a portfolio of 250 residential units.

Any thoughts?

Jim