The market for multi-family properties (particularly in Essex County) is booming, but listing your multi-family property is still a big decision. You may have owned it for years, or you may just be flipping an investment property you bought 10 months ag0; either way, it is an important decision with a big asset and there are several factors you should consider before listing your property:
Get Your Multi-Family Property Ready for Sale
One of the most important factors for investors who are looking to buy a multi-family is the amount of maintenance it will need. A property that isn’t prepared for sale can appear to have more maintenance than it really does.
Clean it, organize it (and stage it if you need to) and make sure any major issues have been addressed. Most investors are ok with multi-families needing a little updating and or cosmetic work but if you’re trying to fetch a premium for your property than you might want to consider fixing the following: roof, heating systems, electrical systems, hot water heaters, and make sure there’s no foundation issues.
Also, be prepared to provide prospective buyers details on the home’s systems for customers to see. When were the heating systems installed? When was the roof installed? What is the age of the hot water tank(s)? How old are the windows? Any electrical or plumbing upgrades recently completed?
Have your real estate agent provide you with a checklist of home systems so you can make sure you’re fully prepared to answer questions the buyer or investor has.
How Should I handle Existing Tenants?
Often times you may have tenants that are Tenant At Will (TAW) currently living in your property. Some people suggest that you sign them to a new lease to ensure that the new buyer has an income stream. While there is merit to that idea, we always recommend my sellers to leave them TAW and let the new owners decide on what they want to do.
This way you give the new owner the option to decide on new rent amount (and to make improvements if they want). Another thing to consider is that many multi-family buyers (particularly first-time buyers) may want to take over the building under an “owner-occupied” status and move into one of the units. This will allow them to do that.
Hire an Agent Who Has Multi-Family Experience.
It may seem self-serving, but it is in your best interest to you hire someone that has sold investment properties in the past, or better yet, someone who ONLY sells investment properties. It’s a completely different transaction and many real estate agents are intimidated by income properties and or simply don’t know the jargon involved. They may not understand how to calculate return on investment, or what cap rates are. Marketing a multi-family property is a completely different animal from a condo or single family and many residential agents won’t know how to promote the key points that investors want to know and see.
If you want to sell your property for a premium, you’ll need to find an agent who understands the market. Often times, inexperienced agents won’t include rent roll (projected or current) and they rarely include operating expenses. This is a HUGE red flag and an indicator that he/she doesn’t know or understand the multi-family market and probably shouldn’t be listing one of your biggest assets. This can also be a turn-off for potential investors.
Have Important Documents Ready for Review.
When selling a multi-family, it’s important to have financial documents readily available for prospective buyers. Multi-families are often purchased as an investment for potential buyers. Having the financial documents available can be extremely helpful in the long run for buyers. Running to the registry of deeds, a lawyer’s office or a safe deposit box can cost valuable time and encourage prospective buyers to look at alternate properties.
The most important financial document that should be readily available when selling is the yearly net operating figures. This document shows a potential buyer the income from monthly rents and cancels out the expenses of the property, such as yearly insurance, taxes, trash removal, common electric, water/sewer usage, and any repairs that have been completed recently.
Other items could be documentation relating to roof age or warranties, the age of the homes HVAC systems, and any receipts of remodeling projects that have been completed. Having records and receipts showing the ages of these components give themselves a huge advantage because of the truth and honesty from the sellers.
Want to Learn More?
Download our free Ebook “10 Things to Consider Before Selling Your Multi-family” by filling out the form below.