Should We Sell Management Portfolio

Question

We have technically two management companies for two separate county's in the area. They're both ran out of the same office. County 1 portfolio is about 3x the size and owners call us to get management since there isn't much competition in the area making new properties usually easy to get. A majority of the properties are SFH in this portfolio too. For county 2 portfolio getting owner leads is a lot more time consuming since there's way more competition there, usually we're the ones making follow up calls and being a sales person to try and get more properties, making it difficult to grow the portfolio. A majority of the rentals are shared housing for students and condos which ends up being alot more work than SFH. County 2 also is now requiring rental permits and certain "energy efficient requirements" for rentals.

Our idea would be to sell the county 2 portfolio off to another management company or individual and solely focus on county 1 portfolio to grow even more. Both are profitable at the moment. Or even ideas to keep both but make it worth the time.  Any thoughts or ideas would be helpful.

Chris Seveney · Answer

Some things to consider if you sell:

1. Will it allow the team working on that portfolio more opporunities in your current area?

2. Would you be more profitable by focusing on one area?

3. Would the lack of diversification in another area be a detriment?

4. Are you the #1 PM firm in either area, if not in area 1 could you?

5. If you opened an office in area 2 would that help or hurt the situation?

Sometimes less is more, but I wanted to throw some questions out there, and remember to look long term big picture.

Bob S. · Answer

How are we supposed to answer this? No idea of any of the numbers,,,,,,,,

Chris G. · Answer

@Chris Seveney thanks for the reply and questions to think about. Here are the answers I do have.

1. Since we work out of the same office and are a small team it wouldn't change much, currently there is one person who solely focuses on the county 2 side for management.

2. If we we're to sell county 2 we would be bringing in less money until we caught back up and grew county 1 more. However the growth on county 2 is way less compared to county 1. So over time we believe we would be more profitable focusing on just one area.

3. The area that we are at is quite large and lots of new construction and people are moving here I don't believe that would affect much.

4. For county 1 I would say we are in the top 3 but there is only around 10 management companies for this area. For county 2 we aren't even in the top 10-15. That is mainly because there is around 50 management companies in that area and many are large franchises and well known reality companies that have more employees.

5. We've thought about this option, it might bring more customers since there would be a physical location but it would require hiring more employees to run that office. So at this time we don't see it making financial sense.