Do you own a Property Management Company in Pierce or King County?
Hello, my name is Donald J. Leske Sr. I am the owner of Business Consultants International LLC and I would like to propose a great deal for the owner of any Property Management Company, who is ready to sell.
First; how do you determine the “net worth” of your company? My PM company has 540 rental doors and in business over 20 years and I can tell you how I calculate the value of my company, both as a cash sale and a planned term buyout.
Second; perhaps you have discovered that no matter what the price is, the government will want around 30% Capitol Gains Tax upon sale. That can be a shock in itself and has held up many an otherwise good deal of going forward. Check with your Tax person to confirm.
Third; the market is notoriously harsh as buyers are few and I am sure you have found out that those who do buy for all cash want the bargain of the century for often less than half of what you want to sell for. (and you still have to pay capital gains tax)
Evaluation of a Property Management Company true value, for an all cash sale.
Here is how I would calculate the basic estimated value of my property management company, if it were for sale. I would take the number of rental doors, and then calculate the average monthly management fee. Let’s say my per door management fee we realize is about $100 on average per month, then let’s say that I have 500 doors on an annual rental contract.
Step 1. $100 gross income x 500 doors equals $50,000 per month gross income, times 12 months equals $600,000 for expected yearly gross profit.
Step 2. Add to that the gross profit from our Maintenance Department, let’s put an arbitrary figure of that income at; $22,000 gross per month. This is $264,000 gross per year.
*Together, these two income sources equal: $864,000.00 per year gross income.
Step 3. *Deduct now the cost of employee wages, office rent, utilities etc. which could easily be estimated at $160,000 per month, or $1,920,000 per year to be deducted from the gross income.
Net income is then $672,000.00 per year. Then times 4.3 years base factor = $2,889,600.00 Cash value.
*Disclaimer: This is where a CPA would be helpful. We would need to go over many facts and figures to establish the true real value. For legal reasons I must state, there is no guarantee that my calculations are accurate or in any way would apply to your business. You should seek legal counsel from a qualified Real Estate Attorney.
OPTION: Planned Term Buyout. What I would propose is similar to a full price offer, but $500,000 more if paid over time, which must be approved by an Attorney written and ratified contract, PLUS this may all but nullify any capital gains tax. I am also the owner of RE*USA, LLC which is another PM company that I bought a couple of years ago. I paid for an Attorney to draw up a mutually agreeable contract. The seller was happy and so we made a deal.
Basically, I will pay a few thousand down like Ernest Money. Then I will take over the entire company, in some cases, this will include all debt as well. The seller has full rights by contract and a lien on the company. Each month, I will fully service all rental accounts including maintenance, insurance, debts and full bookkeeping & accounting. We take 30% off the top of the net income and split the remaining net 50% so the seller will receive a healthy check each and every month for a preset number of years, which can average 10 years or more. Sellers have NO liability, NO debt and receive a monthly settlement with their check.
The contract of sale carries on after we have died, for your estate to enjoy. I would be glad to discuss this process more in depth if you would like to know more.
Donald J. Leske Sr.
BCI PROPERTIES, LLC
9702 South Tacoma Way, Lakewood WA 98499
Office: (253) 531-1010 | Fax: (253) 531-5358 | My Cell: (253) 241-6695
BCIrent.com – Rentals & Sales of fine homes & properties!