Real estate business - Value

Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes

Hey guys,

I hope your well.

How much could you sell a real estate business that makes $1million in profits via flipping houses. I know more variables would need to be calculated but I would be happy with your rough estimates. I am interested in getting an approximate value multiplier. So for example 1 x 3 or 1 x 4

($1million profit = $3million value)

Also, please feel free to share if you know of any other similar business that sold and for what price compared to profits.

Thanks for reading an I am looking forward to your replies.

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Brie SchmidtBusiness Member

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Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes

12y

A property management company would be similar. Their value would be determined by the value of their contracts. So with 100 clients - say 25 have contracts through the next 90 days and then need renewal. the other 25 are 6 months and the last 50 expire in a year.

The value would be based on the value of the contract until it's renewal - that would be the main asset for the basis of valuation.

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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Yes, I was speaking more to a small DIY business as most are.

It's common to look at accounts receivables on contracts over the term. bring them to the present value and use a multiplier of 1.5 in valuations. My mortgage servicing contracts sold were similar. Business conducted varies as to repeat business projected, unique to an industry.

Now, if you have a larger company, like a commercial construction company historic income and clients can be valuable as a larger company, like one that specializes in hospital improvements and construction is entirely different than house rehabs. They have crews, staff, blue sky with the reputation and having shown the ability to continue business, this is easily duplicated. And, larger projects may be planned years in advance with expectations of future contracts.

Lots of variables and approaches to be taken, you really need to know what the subject business is and its details before finding the most appropriate approach to value. :)
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Engelo RumoraBusiness Member
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Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
12y
Originally posted by Bill Gulley:
Yes, I was speaking more to a small DIY business as most are.

It's common to look at accounts receivables on contracts over the term. bring them to the present value and use a multiplier of 1.5 in valuations. My mortgage servicing contracts sold were similar. Business conducted varies as to repeat business projected, unique to an industry.

Now, if you have a larger company, like a commercial construction company historic income and clients can be valuable as a larger company, like one that specializes in hospital improvements and construction is entirely different than house rehabs. They have crews, staff, blue sky with the reputation and having shown the ability to continue business, this is easily duplicated. And, larger projects may be planned years in advance with expectations of future contracts.

Lots of variables and approaches to be taken, you really need to know what the subject business is and its details before finding the most appropriate approach to value. :)

Thanks.
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