Selling Your Property Management Company
If you’re thinking about getting out of the property management business in the next year or two, you’ll need a plan. There are plenty of steps you can take to increase the value of your portfolio and make it more attractive to potential buyers, It’s important that you put things in motion with enough time to make a difference.
The first step to improving your portfolio is assessing your portfolio. Take a realistic look at the properties you have under management to see how attractive they’ll be to the new manager.
- How old are they, and are they in good condition?
- Are they in desirable and marketable locations?
- How long have they been under management, and how many are up for renewal within the next 12 months?
- Are there properties (or owners) you should let go of before you consider selling the portfolio?
- When was the last time rents or fees were evaluated and raised?
- Are management contracts current and how secure are they?
Once you have these (and other) questions answered, you’ll likely have some work to do, so don’t waste time!
Getting rents and fees up to market rate is a critical step in making your company more valuable. The market has changed dramatically over the past two years, and hopefully you were on top of it. Inflation has made everything from equipment and parts to services and labor more expensive. Landlords’ (and potential buyers’) costs have gone up across the board. If you have not increased rents and implemented appropriate fees, you’re not only missing out on revenue, you’re bound to get less money for your portfolio when you’re ready to sell.
It takes time to raise rents and fees, so it may take several months before you’re caught up. But the effort will pay off not only in monthly revenue, but also in the price your company will bring when it’s marketed correctly and exposed to the right buyers. When positioned correctly, many property management companies can sell for multiples in excess of 2X the SDE (the amount a new owner can expect to earn after expenses aka “Seller’s Discretionary Earnings” ), so every additional bottomline dollar can mean $2 or more in your pocket at closing. You’ll be getting a $2+ return on every extra dollar you make, so it’s well worth the effort.
You can also work on diversifying your portfolio. If you have a large unit/owner ratio, your company can be viewed as a higher risk portfolio. Buyers will want to see a diversity of ownership, so one or two owners canceling contracts won’t drastically impact revenues or even put the company at risk. Finding new owners to sign takes time and energy, but again, you’ll see a return on investment when you sell, and put a few extra bucks in your pocket in the meantime
Another point that often gets overlooked is assessing your current service agreements with vendor partners. Are you getting full value from your vendors? Are there other services you could combine with your rent to increase revenues? Sometimes small add-ons help make increases more palatable for owners and tenants alike, so see where you can create savings for customers and income for your company.
If you need help on tuning up your company prior to a sale, that’s just part of the value we bring. PM Broker Group offers no cost initial consulting to help you determine what might be right for you. This is the same professional advice owners would otherwise spend thousands to get. Maximize your biggest asset in the smartest way. To learn more click here.
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.