Friday, June 29, 2012

How to Sell Your Property the Right Way

There are plenty of people who claim to have deals but is it really a deal?  For those of us who are seasoned and know our craft well, we always find it interesting when sellers (or those who claim to be sellers) come to us all excited that they have so many deals and that we will be so impressed.  What impresses me is a seller who is a professional, knows what they're doing and can offer us a truly good deal with verifiable value.  Now that's a real deal!  We don't mind digging for the information, but we need to at least see some value before we dig, so help us see that value all of you sellers out there.

I've found that in most cases there aren't good enough numbers to justify an offer and we need to dig to find those numbers, so it's not a deal at all when we find poor numbers; the buck stops there.  To make an objective investment decision we need certain bits of information.  Buyers will not buy something that they cannot determine value to a reasonable degree.  It is a seller's responsibility to highlight value and justify it, and it's a buyers responsibility to verify that value.

There are many sellers who just don't have their act put together.  They send financial reports without thinking about what they're sending and asking if we would be interested in their offering?  Hmm, let me see....I have an asking price, no address and no financials, no comps, no nothing?!!  Now for those of  you who practice this sort of behavior, how can an investor decide if this is something that has value and if they want to invest more time to look into it further?  Let me answer that question for those people: WE CAN'T!  Do not waste investor's time with poorly constructed offerings which have no information, or insufficient information.  Please learn what investors need to see.  If you are looking for a retail sale, then go to a realtor and let them handle it for you.  They will help you get your property sold and help with the marketing. If you're looking to sell to investors privately, please understand what we need to see.  Don't throw all of the due diligence onto your buyers and you should perform it yourself at least minimally so you understand what value it has before you sell it.  It will make your selling life that much easier by doing some work on the front end.  Selling your property is not simply throwing mud against the wall and hoping some will stick.

For multi-family properties, investors need at minimum, NOI (net operating income), occupancy % and at least 2 - 3 years P&L plus the current rent roll.  The P&L should be presented in a trending report (monthly numbers).  If you have repair figures, provide them.  Ideally this should be from a third party.  Don't hide your numbers, be honest and up-front about your property condition.  The more organized your information, the easier your sale.  

Also for those of you multi-family rehabbers / repositioners out there who like buying low occupancy product and "fixing it", plan on keeping your property for at least 6 months past stabilization to get more value out of it.  Don't buy a 20% occupied building, rehab / reposition it and fill it to 85% + occupancy and once you hit that 85% level, put it up for sale.  You won't get your maximum money out of it.  Buyers want to see a history of stable income and so do lenders before they lend, so bear that in mind and plan ahead for it.

For single family home sellers, provide your potential buyers with comps from a third party source, a repair estimate from a third party source and also a subject-to appraisal based on the repairs.  When an investor sees those documents it makes their analysis and decision making much easier.  Yes you need to spend some money on those reports, but it will pay dividends for you.  One more thing on single family homes.....put it under contract and then communicate your numbers to your buyers list.  If you do that, you don't need to really worry about being circumvented because you control the deal.  It'll save you time and it will also communicate to your buyers list that you are a serious seller and should put more money in your pocket when you do close the deal.

Until next time, Happy Fourth of July and Happy Canada Day and  to all of my American and Canadian friends!

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