Hi guys,

Long time lurker here. First, I want to tell you guys thanks for all the information you've provided throughout the years.

A large property management company has recently contacted me about potentially acquiring my property management company, namely to acquire the contracts that I currently have. However, I am not sure what would be a fair sale/asking price, and I was wondering if I can get some help or input regarding this matter :)

I own a small property management company that look after ~50-60 properties throughout various suburbs of a large metropolitan city. The properties are all single, family styled houses (for the lack of a better term), and the average rent is ~$1200-$1500/month for each property. That said, after all related expenses paid, my net income is roughly 60-70k/year depending on the vacancy of the properties.

The talk between the larger company and myself has been preliminary so far, so we haven't talked about a sales price yet. However, I would like to have a figure in mind when we get into the nitty gritty details.

I have done some research regarding sales of small business, and people people tend to advocate that a good sales price would be 2x-3x of the business' yearly, net income. Therefore, I think $120k would be a fair asking price? Or am I aiming too high or perhaps too low?

I want to thank you guys in advance for any tips, help, or advices :)

Another way to price that kind of management business is to total your leasing fee, renewal fee, and management fee income for the accounts for a year. On the high end a buyer would pay a full year's worth (well run business with no problems). On the low end a buyer might pay 3 months worth of income (broker died or other urgent/serious issues). If you are in GA, let me know because I would make you an offer too.

I think that you are looking at it the correct way. The one thing that you are not factoring in is your personal services and relationships with your landlords. The purchasing company may want you to stay on as an employee for a period of time or they might want to work in a reduction for the expected fall off in clients once you are gone.

10% of the tenants cause 90% of the problems.

My previous broker routinely sold her "bottom 10%" management contracts to other brokers in order to thin her workload and reduce her headaches. Not sure for what she amount she sold each contract though.