Over the years, I’ve spoken with many property managers, and the majority of them seem to undervalue the role they fill for their investor clients. Being a property manager is often viewed as a “job” or maybe even as a “Realtor” who manages properties. They don’t think of themselves as business owners, especially those who manage a smaller number of properties. They’ve been earning a good living and working hard. They enjoy the work and may have acquired more and better properties over the years, but the mindset has remained the same as the day they took the first rental property. They’ve figured things out over the course of time, but one thing they haven’t figured out is an exit strategy because they didn’t know this was such a financially beneficial option.
The good news is that no matter how small your portfolio, you probably have an asset that a buyer will be interested in and we can help you find that buyer! Here are some of the factors legitimate buyers consider:
- How many years you’ve been in management and, on average, how long you keep a property under management.
- How many units you have under management (there are buyers for almost any size portfolio)
- The condition and age of the properties
- The average rent you’re collecting for your properties and how your rent roll is trending.
- The ratio of units to owners. There’s a sweet spot with units per owner because single owners with too many properties can make the portfolio volatile)
- Your monthly expenses and how recently they’ve been reviewed. Can you create any savings and reduce overhead?
- Your monthly payroll, including to yourself.
Many owners think that when they’re ready to retire, transition to another kind of business, or just move on, they simply let their management contracts expire or refer them to other companies. They don’t realize that there are many companies looking to expand their business through acquisition. They may be interested in some or all of your properties if they’re presented in the correct manner and financials are in order.
To make sure you aren’t missing out or falling into the “it’s just a job” category, I recommend that you work with an experienced and professional broker who knows the property management industry. You need a partner who has been there before, knows how to value your assets, can provide value to prepare for the sale, and can give you real world advice on how much your company is worth. Resources and connections cannot be undervalued when it comes to marketing your company to the right buyers and seeing it through to a successful closing.
If you’re considering selling, there are some steps you can take to make your assets more marketable, and you need to know what they are. We’ve published an article on how to plan for a sale here, and you can also reach out to us directly to schedule a call.
Today, there are several kinds of buyers interested in property management companies. Some are first-time buyers who want a source of income and wealth building outside their usual career. Some are private equity firms looking for investments, or entrepreneurs who’ve sold a company and are looking for a place to invest their profits. Some are your competitors, looking to expand in the market or compete with one less company once they’ve acquired your portfolio. Knowing the perspective audiences and what makes them tick is just part of what sets us apart from an unspecialized business broker.
Whichever kind of buyer your company attracts, it makes sense to cash out the value of your portfolio rather than letting your contracts expire or go to a competitor with no compensation. If you’d like help assessing the value of your property management company, we have an online tool that will help, or just give us a ring and get a complimentary assessment of value. We’re here for YOU.
About the author: Patrick Hurley
He’s a Tallahassee native with almost 20 years of experience in the property management, real estate, construction, and business brokerage worlds. Having owned, operated, bought, and sold property management companies in the past, Hurley is in a unique position to help others in the industry find their exit. He’s been described as dependable, highly efficient, effective, and hard-working with a no-nonsense attitude. He takes pride in his professionalism and attention to detail and focuses on his client’s desired outcome.
Patrick still meets with every client and passes along as much knowledge as he can. He frequently gives back to the property management community in the form of professional speaking and value-packed article content. When he’s not helping others with a business transition, you can find him adventure-seeking with his young family.