Wise to buy from a Property Management Company?

5 Replies

Hey all,

I am a new investor who has yet to close on my first deal.  I found a 6 unit property that should generate enough cashflow to satisfy my goals.  I am wondering if it is unwise to purchase a property from the property management company that I want to manage the property when I own it.  If anyone has done this before, can you please tell me what I should look out for?  Anyone please feel free to chime in, I want to catch every angle - every pro and con.  Thanks in advance guys!  :)

- Franco

By "buying from the property management company" I assume you mean using the PM company as your realtor for the transaction.

I'll admit a bias on this because I have a property management service. I would say go for it.  Residential property management is not particularly profitable on a per unit basis. You need a lot of doors to make any real money. If you give your PM company the opportunity to earn a nice commission check on the transaction, they'll be kissing your you know what for a long time to come.

I was recently approached by someone who wants me to help him get into a couple of commercial properties, and then manage them for him once the deal closes. The commission will be worth years of management fees. So guess who's my new best friend?

This business is all about relationship building. And that runs both ways. I can't think of a better way to build a solid relationship with your PM company than using them as your agent when buying and selling properties.

Thanks Fred, I appreciate the feedback!  What I actually meant was that the Property Management Company actually owns the property I wish to buy.  And they are also the management company I'd like to manage the property if I do purchase it.  Not sure if this is a conflict of interest or something that shouldn't make too much of a difference.  But I definitely see your point!  Def want to build a solid relationship with the PM company - what better way to do that than buy a property they want to sell.  

@Franco Urbaez I would love to buy from a PM that is managing the property, because their current owner might not be funding the deal properly. I do like to contact property managers and see what properties might need some love and see if I can buy it. If they are selling and still want to manage it, I would just want to dig deeper and find out why they are selling. During diligence just dig deep and make sure the numbers work out. 

@Franco Urbaez Oh I see. To answer your question, no there is not a conflict of interest. It wouldn't be any different than buying a property from any other seller.

So is the PM company actively marketing this property? Or is it just something you would be interested in buying? If the former is true I would want to know why they are selling. If the property is profitable, why do they want to sell? If the latter is true then you're probably going to have to offer a very sweet price to get their interest.

In either case, I would definitely have someone represent you in the transaction. You'll want to have someone looking out for your interests.

Hey thanks a lot guys, I appreciate the help!  :)

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