Peter Lohmann's Newsletter - Issue #128

FTC Seeks Comment on SFR, Large M&A Deal in PM

Author

Peter Lohmann
February 07, 2025

A no-fluff weekly publication for the property management industry.

Investing Dynamics and Compounding

Invest in a good real estate deal as a limited partner (LP) and you will find:

-Your invested capital is returned to you ASAP.

-Distributions instantly follow.

Invest in a company via the stock market (equities) and you will find:

-Your invested capital is never returned (unless you sell, of course).

-You might get distributions (aka dividends) and you might not.

Invest in your friend’s startup and you will find:

-Your invested capital is never returned and probably not accessible by you unless there is a “liquidity event.”

-You are not entitled to distributions (business profits).

I’ve always found the treatment of invested capital, and your claim on business profits, a fascinating lens through which to think about the cashflow and reinvestment dynamics of various investing opportunities.

Real estate has no ability to compound. When you invest in a RE deal, it instantly starts trying to spit that invested capital, and then profits, back at you. It’s your job to go find another deal with which to put that money to work. You (typically) can’t take that money and reinvest it back into the same property to generate additional returns with it. Kind of annoying actually.

Public equities will happily take your cash and start compounding it for you. But they don’t feel any obligation to send you back your invested capital. Interesting! They will happily sit on your invested capital for 50 years or more! Next time you’re raising money for a real estate deal, try asking your LPs if that’s OK with them. Depending on what type of company you invested in, you may get dividends and you may not. It (ideally) depends on if the business managers believe they have the ability to generate a higher return (ROI) with excess business profits better than shareholders could on their own.

Your friend’s startup with take your cash and give you… nothing. Haha. You don’t get your invested capital back, maybe ever, and you definitely don’t get quarterly or annual distributions/dividends. You’re basically making a bet on a future exit, at which time you may get a massive multiple on your invested capital. Ideally, the business you invested in took the money you gave them and has been compounding it for years and years.

So: why doesn’t your friend’s startup feel obligated to pay you dividends, let alone return your invested capital, but your other friend’s real estate deal definitely does? Left as an exercise to the reader.

-Peter

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Peter Lohmann interviews Housing Economist Jay Parsons

It was great to sit down with PM Trends co-author Jay Parsons and get into the details with him. We talk about:

  • The impact of the shift toward professional property management

  • How do large institutional landlords think about property management vs. single-home owners?

  • Have owners become more involved over time?

  • Section 8 reform

  • Major takeaways from the PM Trends Survey

  • How can Property Managers put themselves in the best light in the eyes of regulators and the general public?

  • What should PMs expect over the next 4 years?

Check out the video above, or listen in my podcast feed.

New Property Management Companies For Sale This Week

  • Here is a property management company for sale in Alameda County, CA (asking $1.9M, 200+ doors)

  • Here is a property management company for sale in Mahoning County, OH (asking $1.1M)

  • Here is an HOA management company for sale in Sacramento County, CA (asking $3.9M)

  • Here is a property management book of business for sale in Polk County, FL (asking $300k, 35 doors)

  • Here is a property management company for sale in Cobb County, GA (asking $1.6M, ~1,000 units across 5 locations)

Note from Peter: If you purchased or sold a PM company in the last 12 months, please submit your data below. I will be publishing an industry M&A report with aggregated (and anonymized) data, so we can bring some transparency and context to property management company sale multiples and other valuable details. If you submit your deal, you’ll get a copy of the final report for free.

Industry News & Events

  • Crane applications to reopen in 55 days. Join the waitlist.

  • I’m hosting another process building workshop next week, where you can watch me create a rent delinquency process in real-time for a volunteer. Details here.

  • A Maine-based Real Property Management franchisee is accused of owing clients thousands of dollars, then “abruptly closing.” Maine is one of the few states that does not have any type of property management licensing requirement.

  • The FTC is seeking public comment on SFR “Mega Investors”, which is pretty funny considering how incredibly fragmented the SFR market is.

  • Bay Property Management, a large operator based in Baltimore, MD has acquired Texas-based Stone Oak Property Management.

  • I’m no longer active on Twitter. Find me on Facebook or LinkedIn.

Closing Thought

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The content of this newsletter is for informational purposes only and does not constitute professional advice. I may have consulting agreements with, or financial interests in, companies mentioned in this newsletter. Additionally, some of the links included in this newsletter are affiliate links, meaning I may earn a commission if you make a purchase through these links. Always perform your own due diligence before making any financial or business decisions.