Opportunity of a lifetime

[Daryl L.]

Just got a call last night for what may be a great (amazing!) opportunity. A family member is looking to retire and offered that I could take over his entire business. We didn't get into the depth of details I'd like but I did talk with him enough to get some basics:

*25-30 properties
Mostly SFH, with a couple commercial and MFH
  One 30+unit complex rented out weekly as efficiencies

*5 employees 
   Most are laborers
   All maintenance is done by owner and employees (Roofs, plumbing, electrical, you name it)
   Bookkeeper recently quit so books are a mess....not sure how bad but I know everything is done in cash with paper receipts. No electronic anything.

*Lots of tools and equipment
   Heavy equipment, trucks, trailers, etc. Lots of assets that need maintenance and insurance (operating costs)

*In a different state
   I'd have to leave my 9-5, move to a different state (TX)....not sure if I'd keep my current 3 rentals or not (LA & GA).


Now my question is, other than cashflow in/cashflow out, asset list with values, annual property taxes.....that should I be looking for to evaluate this deal?  I'm an engineer currently and make damn good money in a very stable industry, I want to evaluate this as best I can before jumping behind the helm of a business like this. It's not often a multi-million dollar estate is dropped in your lap where I come from, so I want to make sure I have my eyes wide open before jumping.

[Lynnette E.]

1.  Are there any lawsuits against the business or properties?  IF so, status, etc. and is that transferring

2.  What is the balance on the unemployment account with the state and also the workman comp?  What is the business rating for WC.  Are the bills paid up to date?  Same for all taxes for the business.

3.  If you are buying the business--look carefully on all the back taxes, employee withholdings-proof they were paid to the government.  How much were the properties depreciated?  How much they were depreciated will cost you when you eventually sell with the depreciation recapture.  You are safer buying the assets and not the business if the books are a mess.  The book keeper may have quit because of issues.  Be grateful, but protect yourself.

4. What skill set does the current owner have? Do any of the other employees also have this skillset?

5. How much does he take as a salary? Likely he will not be giving you a CAPEX account or cash. So what is the condition of the properties? Even if its only material, that will cost you if you have many things at the end of their lives. Five people for 30 properties seems like a lot of employees for maintenance. Check the cash flow, after expenses.

6.  How will the employees take to you as a new manager/owner?  Do you have the supervisory skills to deal with general labor in scattered locations.  Its definitely different that dealing with white color employees that sit at a desk.  You have to give them tasks from moment to moment, and verify that is what they are really doing for some of the jobs, like repairs.