Peter Lohmann shows that if every property his firm manages sold tomorrow, it would generate over $5 million in revenue with a 75% profit margin, more than double the business's current value. He argues property managers should advise owners whether to sell or stay landlords based on what's financially best for them, not what keeps properties under management.
Don't you have this whole thing about like, you gotta like help the owner withstand the pain of being a landlord so they can see the wealth on the far side of that and everything?
Yes, I know this is contrary to some of the things. Look, not everybody's cut out to be a landlord, and the people who are not cut out to be a landlord or need to sell for other reasons— they need the capital for other things in their life, or they've got a better place to put it and get a higher ROI— there's all these factors, right? So we should act like real estate investment advisors. This goes to our asset management discussion. If everyone I manage foreclosed their property tomorrow, we would gross over $5 million in revenue, and it would be a 75% margin to the bottom line. I know this is never going to happen. Guess what? That's more than double what my property management book value, enterprise value of my company is right now. So by illustration, the outcome of selling every single property we manage as soon as possible— if you do a discounted cash flow analysis, net present value, Finance 101, and you're able to get a 70 to 75% margin on that real estate commission like we are able to do— that is the best possible financial outcome for your property management business.
