Buying a property management company in Florida

A property management company runs real estate for owners who don't want to do it themselves. In Florida that usually means one or more of three businesses. Rental management handles single-family homes, condos and small apartment buildings for investors: finding and screening tenants, collecting rent, arranging repairs and paying the owners. It earns a monthly fee, usually a percentage of rent collected, plus leasing and renewal fees. Community association management serves condo and homeowner associations, handling budgets, assessments, vendors, meetings and records for a monthly fee per community. Vacation rental management runs short-term rentals for a share of booking revenue, with cleaning and guest service.

Revenue is recurring, but clients can usually end their management agreements with notice, so the business keeps clients only as long as its service is good. A typical company has property or community managers, a leasing agent, a maintenance coordinator, a bookkeeper who handles the trust accounts (where owners' and tenants' money is held), and a licensed broker or manager at the top.

• Many owners and associations, with no single client making up much of revenue. An investor with dozens of homes can leave in one phone call.
• Clients who stay for years, and few lost doors (the industry's word for units under management).
• Clean, reconciled trust accounts and owner statements that go out on time.
• Managers who have their own client relationships and plan to stay, so clients don't leave with the departing owner.
• Fees that cover the work, including leasing, renewals and maintenance coordination.
• A reliable network of maintenance vendors who respond quickly, since slow repairs are why owners and tenants leave.
• Software that owners, tenants and association members actually use.
• A reputation with associations for smooth board transitions, budgets and annual meetings.

Under Florida law, renting or leasing property for others for pay is real estate brokerage, overseen by the Florida Real Estate Commission at the DBPR. The company registers as a brokerage, every officer and director registers with the commission, and at least one officer must be an active broker. Sales associates can't serve as officers (sections 475.15 and 475.161). If the only broker leaves, the firm has 14 days to replace them, possibly with a temporary broker, and can't take on new brokerage business until it does (rule 61J2-5.018). The broker must reconcile the trust accounts every month, and Florida's landlord and tenant law governs security deposits.

Managing an association with more than 10 units or a budget over $100,000 requires a community association manager license. The firm also needs its own license with a designated licensed manager, and the firm's license lapses whenever no licensed manager is active (section 468.432). Vacation rentals need a license from the DBPR's Division of Hotels and Restaurants, which can't be transferred, and the rents carry sales and tourist taxes.

If you aren't licensed, confirm with the DBPR and a real estate attorney how you can own the company and who must fill each role.

• The client list: doors or associations per client, fees, how long each has been a client, and clients lost in the last three years, with the reasons.
• Trust account reconciliations for at least a year, matched to bank statements. A shortfall can become the new owner's problem.
• Management agreements: notice periods, fee schedules, and whether they can be assigned to a buyer.
• Revenue by fee type: management, leasing, renewals, maintenance markups, late fees.
• Complaints to the DBPR and any lawsuits with owners, tenants or associations.
• Who manages each relationship, and whether those managers have signed agreements not to solicit clients.
• Who owns the software accounts and data.
• For associations, contract renewal dates and any boards that have recently asked other managers for proposals.

• How many doors and associations do you manage, and how many did you lose last year?
• Who is the broker of record, and would they stay after a sale? Who holds the association manager licenses?
• Who reconciles your trust accounts, and how?
• What are your main fees, and when did you last change them?
• Can your management agreements be assigned to a new owner?
• Which clients are closest to you personally?
• Do you manage vacation rentals, and how is that business licensed and taxed?