PREPARING YOUR INVESTMENT PROPERTY FOR SALE
If you have plans to sell your investment property you can get the best deal by planning ahead. We generally recommend 1 to 2 years to our clients in order to build a great financial picture of the property and to get the property into the best condition possible for sale in order to maximize investor returns. The state of the property needs to be assessed and cleaned-up (that is, make sure the “curb appeal” or the external visual appearance is top notch). Before you think of selling your investment property it is important to determine the work to be done so that we can determine the best-selling price.
For the purpose of this article, we will be looking at what should be done for a house and for a multi-family property.
What should be done for a house?
Assess the state of the house: The first and most important step is the assessment. Full internal and external inspection (not just visual inspection) should be done by a licensed home inspector to give the accurate state of the house. The buyer will ask you to repair or give repair credit for any major repair items. By taking preemptive measures you can address these issues on your own terms and create better leverage in the sales process. A home inspection ascertains that your house is a solid investment and points out the areas that might need to be addressed.
Repairs: After the inspection, you will get an inspection report. Ensure you address every big issue in the report to command a higher selling price.
On the contrary, you can also decide not to make repairs and sell the house “as-is.” This will not command the highest price but you have less work to do on the property.
Clean the house: The interior and exterior of the property need to look great. Clean properties sell faster and for more money than untidy properties.
Coordinate with your tenants: Your tenants need to be on the same page with you if you are selling a rental. It will be more challenging if you have a contentious relationship with them because you might have to wait till their lease expires before you can sell the property.
If you have a good relationship with your tenants, explain to them why you are selling the house and ask them when they will be available so you can show the property to potential buyers.
Look for a great agent: Find a great agent that is professional and experienced at selling the type of property you want to sell. Your property manager can be a great asset in this process and if they are licensed agents as well can be a great option to hire as your sales agent. Many times, they can give you a better rate and even help to cut down on some additional transaction costs.
- Take excellent pictures that convey the true home and highlight the best features
- Gather documents
- Have your agent run a comparative market analysis to determine the best-selling range for your property
Gather every document pertaining to the property (repair receipt, rent records, tenant rental agreements, warranties and security deposits).
What should be done for a multi-family?
The major difference between selling a single home and a multi-family is the complexity of selling the later. One of the major reasons for its complexity is because it involves more people, perhaps commercial lending options and overall larger scope, and the price is based on the market cap rate.
Additionally, certain rules and regulations need to be followed to avoid any issues.
Review occupancy, leases, and tenancy rights: This is the first and most important step to take before listing the multi-family. There are frequently asked questions you will need to answer during the sale. Below are some of the questions:
- How much is the rent amount for each unit?
- Are any of the rents subsidized?
- What is the term of any/ all leases?
- What does the rent of each unit cover?
Be prepared: Preparation is important when selling an investment property. Investors/ buyers always look out for well-maintained properties. Here are some of the areas you need to be prepared:
- The curb-appeal
- The common areas
- Parking areas
- Garbage and Recycling Areas
With proper planning, you are able to tackle several of the projects well in advance and even help to reduce ongoing expenses while making sure your rents are at or near market rate. By presenting a solid financial track record to prospective buyers with a great history of two years’ income and expenses as well as show-casing a beautiful property that you have already dealt with the headaches and repairs – you will be able to command top dollar in your rental market.
The bottom line: ensure the multi-family is prepared for the market.
- Hire an experienced agent (Again, your property manager could be the best option to help you prepare and sell your property).
Get documents ready: Gather all important documents pertaining to the multi-family (financial documents, warranties, current leases, etc.)
Selling an investment property can be overwhelming but preparations and a good understanding of what should be done will make it easier.
Most of all, having real estate professionals like Centurion in your corner is a must.