Due Diligence When Acquiring Property Management Companies: Learning from Chrysztyna Rowek’s Mistakes

Chrysztyna Rowek is the owner of Lighthouse Cove Property Management in Washington State and an active member of NARPM. She has gone from cleaning houses to buying/acquiring property management companies, and she joined us on The Property Management Show to share her experiences and the lessons she has learned along the way. Background: Buying Lighthouse Cove Property Management Chrysztyna likes to tell clients that she’s supposed to teach their kids how to speak Spanish. That’s what she went to school for, and it was her planned career when she moved from Canada to Greece to the U.S. But, her Canadian degree wasn’t enough to get the job she wanted, and instead of spending more money in pursuit of a master’s degree as an international graduate student, she got married, had a child, and began cleaning houses for extra money. Soon, a property management company hired her to clean their rental properties. Then, she started working in the office, and then she got her real estate license in 2007. Then, she bought the company. Chrysztyna admits she had no idea how to buy a company or how to run one. But, she dove right in. After considering a loan from the Small Business Administration, she borrowed the money from her father instead and bought Lighthouse Cove Property Management. On July 17, 2007, after having a license for two months, she owned the company. It had 190 doors which were mostly single-family homes and multi-plexes. When Sellers are Difficult Perhaps the seller didn’t think Chrysztyna would actually buy. Perhaps she had second thoughts about selling. Whatever the issues, there were difficulties almost immediately. She wasn’t much help, even though Chrysztyna was very new to this. There was no advice on how to run the business or how to run this particular business. There was a lot of pushback, and two days after the non-compete agreement expired, the seller opened up a new property management company in the same market and went after many of Lighthouse Cove’s clients. It was disappointing. The Importance of Transition Plans The plan was for the seller to stay on as managing broker at least until Chrysztyna earned her managing broker’s license. In Washington, a broker has to be licensed for two years before taking the managing broker exam. The seller was unresponsive and unavailable, so Chrysztyna had to find another managing broker and completely cut all ties with the seller. In an ideal situation, the buyer will have access to the seller for at least 90 days. That’s a minimum – 120 days would be better. Put that paperwork in place when you buy or sell. Then, build relationships with the clients right away. The clients you’re buying trust the person who is selling. So, the seller has to help ease the transition so that the clients trust you too. If the seller trusts the buyer, the clients will trust the buyer. People are loyal, and it’s a shock when companies are sold. Make sure that as a buyer you have access to your seller for at least three months. Building and Preserving a Team When Chrysztyna bought Lighthouse Cove, there were only three employees; the owner, the accounting manager, and another staff member who did everything involved in property management. She kept the staff on and then eventually moved to a new office and hired some new people. During this time, Chrysztyna also kept cleaning. But she learned she had to take better care of herself and be more protective of her time. If you’re leading a company, you have to take care of yourself. If you’re not feeling 100 percent, how can you give top-notice service and provide high quality work to your clients? Losing Properties and Acquiring another Company When Lighthouse Cove’s seller opened up a new company,