How to Make a Killing Selling your Multiplex
75The decision of when to sell your investment property can be complex, but rest assured, once the decison has been made, there are a few simple tips that will ensure that you maximize the value you obtain for your property.
1. Curb Appeal
Many investors erroneously assume that curb appeal is important in the sale of single family homes, but much less important than cash flow for income properties. However, nothing could be farther from the truth. While solid cash flows and potential for appreciation are very important, buyers' first impressions of your multiplex directly influence the price they are willing to offer. Buyers will take into consideration all amounts they will have to spend to upgrade the property and deduct it from their offers. There are many inexpensive ways to increase curb appeal. Consider slapping on a new coat of paint (interior or exterior) and planting a few shrubs around the property (it's amazing what a little minor landscaping can accomplish!)
2. Minor Improvements
Figure out which minor improvements tenants value most. Often it may be as simple as trading in that old stove for a newer (looking) stainless steel appliance or laying some new inexpensive tiles in the kitchen. While these improvements do cost some money, your value is created if you can carry out these improvements before a new tenant moves in, just prior to listing your property. These minor improvements will command higher rental rates, which will increase the building's net income and lead directly to a higher sale price.
3. Partner with a Listing Agent who Specilizes in the Sale of Multiplexes
All real estate agents are not created equally. I can not emphasize the importance of this measure enough. While most real estate agents will be happy to list your income property for you, it is crucial that you find a company specializing in the sale of such properties. The advantages of this are many. Firstly, many of these companies have a long list of investors who are constantly looking to purchase a property just like yours. Often, the agent can arrange a sale privately, saving you time, money and hassle. Secondly, a listing agent who understands the financials behind investment properties (and preferably owns his or her own properties) is vital. Being able to discuss expenses, potential revenues, cash flows and cap rates while negotiating the best price for a property, are necessary when selling an income property to any sophisticated investor. Follow this link for a great full-service company in Ontario, which specializes in apartment buildings and other investment properties; they offer mortgage services, property management and purchase and sale services.
4. Removal of Purchaser's Conditions in the Event of a Backup Offer
Most purchasers who submit offers on larger income properties make their offers conditional upon one or several events. These may include but are not limited to: inspection of the property, obtaining financing satisfactory to the purchaser or review of the financials and other documents regarding the property. It is generally in the seller's best interest to allow some conditions (I often shorten the time period within which I allow purchasers to carry out these activities), as many potential purchasers will not close on a property without satisfying some of these conditions. However, savvy sellers will often add a clause which allows them to be free to accept a more attractive, competing bid, should one arise. This clause forces a potential purchaser to remove any conditions associated with an offer (within a certain period of time - for example, three days), should a better offer be submitted during the conditional period.
5. Put those "5-Star" Qualities in the Spotlight!
Highlight all qualities of the property that give rise to a higher (perceived) value. Some examples are:
a) Chattels: Often, the chattels associated with a property (appliances, landscaping equipment, window coverings, other tools and equipment, etc.) have values which are negotiated separately from the price of the property. Your job is to highlight any and all chattels and increase the perceived value of these. Give as many details about each, being sure to mention the year of the model (if relatively new), any recent repairs, special qualities of each, etc. The higher the value that is assigned to each of these chattels, the higher the price that the property will command.
b) Goodwill: Does your multiplex sit in a landmark location? Is there heritage status associated with this property? What is the story with your building and how well do you know it? Although not based on pure economics, a building in an interesting location or with a famous past will often justify higher prices. Know your building's history well and exploit it for all it's worth!
c) Upgrades: As mentioned above, these speak for themselves. Again, your job is to determine which upgrades will give you the best return and them market, market market them..
d) New Development in the Area: Is there new development taking place in the area? If so, new residential or commercial development will often boost the value of your property (even during the planning stages - before the development has occurred). Be knowledgeable about any new (real or potential) development occurring in the area. Be sure to highlight this to potential buyers and forecast future increases in rent that will result from these new developments.
