Purchasing a Property Management Company and Valuation

Buying & Selling Real Estate
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Purchasing a Property Management Company and Valuation

Jason Barker
Member since 2021 · 1 post · 0 votes

The Owner of a small-medium sized property management company has expressed an interest selling and has offered it to me to purchase.  They manage approx 130 doors.  No ancillary fees, only income is from the properties that are rented and Tenants paying.  Annual gross of $185k.  Currently staffs one property manager at $65k/year.  Net is closer to $30k-$35k.  Does this make sense?  If not, what should be done to remedy?  Curious and curiouser!

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Mark AinleyBusiness Member
Property Manager · Roselle, IL (Chicago Suburb) · Member since 2013 · 2k+ posts · 1k+ votes
5y

@Jason Barker check out the podcast “property manager broker” and maybe reach out to the host Brad Larsen. He’s the perfect resource for questions like this. Feel free to message me if you want me to make an email introduction.  


@Drew Sygit you might appreciate the content too. 

[email protected]630-781-6744Podcast Guest on Show #72
GC Realty & Development LLC4.61060 Reviews
WebsiteView Page
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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    5y

    @Jason Barker wait, you're not an investor trying to get a property management company to work for pennies?

    Seriously though, search here on BiggerPockets for all the threads with investors complaint they're paying to much for too little service, BEFORE you move forward with this purchase.

    It's not easy to increase charges to owners. A decent percentage of them will transfer to other PMCs promising lower fees, but they'll usually get screwed with less service.

    [email protected]248-209-6824
    Logical Property Management4.9450 Reviews
    WebsiteView Page
    0Reply
  • Mark AinleyBusiness Member
    Property Manager · Roselle, IL (Chicago Suburb) · Member since 2013 · 2k+ posts · 1k+ votes
    5y

    @Jason Barker check out the podcast “property manager broker” and maybe reach out to the host Brad Larsen. He’s the perfect resource for questions like this. Feel free to message me if you want me to make an email introduction.  


    @Drew Sygit you might appreciate the content too. 

    [email protected]630-781-6744Podcast Guest on Show #72
    GC Realty & Development LLC4.61060 Reviews
    WebsiteView Page
    2Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    5y

    @Mark Ainley no idea what your point is...

    [email protected]248-209-6824
    Logical Property Management4.9450 Reviews
    WebsiteView Page
    0Reply
  • Mark AinleyBusiness Member
    Property Manager · Roselle, IL (Chicago Suburb) · Member since 2013 · 2k+ posts · 1k+ votes
    5y

    @Drew Sygit It is a good podcast that talks all about buying and selling Property Management companies. As PM owner yourself just good info to understand what makes your company more valuable.

    [email protected]630-781-6744Podcast Guest on Show #72
    GC Realty & Development LLC4.61060 Reviews
    WebsiteView Page
    0Reply
  • Steve Maginnis
    Property Manager · Charlotte, NC · Member since 2012 · 135 posts · 156 votes
    5y

    Hello @Jason Barker.  I feel there are a lot of factors to consider.  Primarily, how much they are asking for the business.  $30-35k per year is not very attractive unless the property manager handles just about everything and you are free to make money elsewhere, or have the resources to wait until you build it big enough for a more attractive income.  One quick fix is to not continue to use the PM, but do everything yourself.  I manage about 175 doors by myself.  It's a lot of work, but worth it to me.  You should also consider there will be owners who will consider going somewhere else soon after your takeover, or as soon as their agreement expires, so count on some loss.  Unfortunately for us property management business owners, there is usually not much value in the business unless there is prime real estate owned offices, expensive office equipment, etc. included.  The contracts themselves do not carry a lot of value.  I would not pay more than 3-4 months worth of the management fees collected for just the contracts.  And less if there is six months or less remaining on any contracts.  

    Another thing to consider is how strong their SEO is.  If you do a Google search for "property managers (whatever city)" and the company ranks in the top 10-15, there may be some good value there, considering how much/long it takes to get rankings up near the top of searches.  Consider how strong the current employee is.  If you feel comfortable in their ability and willingness to stay on and can handle most all tasks (I would not let someone like this handle the books) then maybe you can keep your current job and be able to handle keeping the business running for little profit.  If the current owners are happy with the employee, you are less likely to lose their account. I hope this helps.  Best of luck.  

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