Selling a multifamily property can be a lucrative opportunity to maximize your investment. The multifamily market is thriving, with a high demand for these types of properties. To ensure a successful sale, it’s important to take the right steps and make strategic decisions. In this article, we will provide you with valuable tips for selling multifamily properties.
Hire an Experienced Sales Broker
One of the first steps in selling a multifamily property is to hire a reputable sales broker. Look for a broker who has experience in selling multifamily properties, preferably in your market. Building a relationship with a broker early on can be beneficial as they can provide valuable insights and advice. They can also help you determine the value of your property and develop a marketing strategy. Choose a broker with a track record of selling similar properties at attractive prices.
Don’t wait until you’re ready to sell to start developing those broker relationships. Leverage the brokers long before you’re ready to sell, and then they’ll know your property, be more informed and give you better advice.
Prioritize Impactful Repairs
To increase the appeal of your multifamily property and maximize its selling price, prioritize repairs that have the greatest impact. Address any deferred maintenance, especially in base building items such as facades, mechanicals, roofs, and parking. These repairs can significantly improve the overall condition of the property and make it more attractive to potential buyers.
However, not all repairs are worth the investment. Consider focusing on essential repairs that will enhance the property’s value and aesthetics. Upgrading lobbies, amenities, landscaping, and in-unit renovations can be left to the next owner, who may have their own vision for improvement.
Consider renovating one apartment unit to serve as a showcase. This upgraded unit can help potential buyers envision the potential upgrades for the entire building and understand the estimated costs and income associated with those upgrades.
Craft a Compelling Sales Story
When marketing your multifamily property, it’s important to tell a compelling sales story. Create a well-crafted offering memorandum that includes a market overview, property highlights, financial information, lease and sale comps, and underwriting assumptions. The offering memorandum should convey why an investor should want to own the property.
A good offering memorandum is critical. It should provide a market overview, property highlights, financial information, lease and sale comps, guidance on underwriting assumptions, and tell the story of why an investor should want to own this property.
Avoid including an offering price in the listing. Instead, create a competitive bidding situation that will push the price higher. Brokers may suggest a “whisper price” to potential buyers, but the goal is to generate interest and receive multiple offers.
Leverage Good Rental History as an Asset
A strong rental history can be a selling point for potential buyers. If your property has a consistent track record of fully leased units or high market occupancy, it can attract investors. Ensure that your most recent leases demonstrate competitive rental rates or potential for rental increases.
Consider offering concessions to current tenants to offset any rent increases. This can help maintain occupancy levels and minimize the impact of a sale on existing residents. Coordinate property tours, tenant interviews, and lease estoppel requests through your broker to ensure a smooth process and maintain control over tenant communication.
Choose the Most Credible Buyer
When evaluating offers from potential buyers, it’s essential to consider their credibility. The highest bidder may not necessarily be the most qualified buyer. Ask strategic questions to assess their experience, reputation for closing deals, and ability to secure financing.
You want to give weight to the credibility of the buyer because it’s worth real money. Conduct interviews with shortlisted buyers, including their equity partners and key decision-makers, to gauge their commitment and capability.
Ensure that the buyer has their debt and equity capital lined up, and has worked with reputable lenders in the past. Consider any joint venture partners and the key assumptions they have made in deriving their purchase price.
Streamline the Due Diligence and Closing Process
Once you have accepted a bid, the deal is not yet done. The due diligence and closing process can take time, so it’s crucial to have a broker who can keep the process on track and efficiently move from letter of intent to contract to close. Time is of the essence, and delays can jeopardize the deal.
There is a saying that time kills all deals, and brokers play a valuable role in keeping buyers and sellers focused and moving efficiently.
Ensure that all necessary documentation and investment data are organized and readily available for potential buyers. This includes rent rolls, income and expense statements, utility information, and maintenance records. Conduct a thorough review of all tenant and property management files to demonstrate that all necessary due diligence has been conducted.
Enhance Curb Appeal and Amenities
When preparing your multifamily property for sale, pay attention to its curb appeal. Enhance the property’s exterior by pressure washing sidewalks, painting any peeling surfaces, and tidying up landscaping. Create an inviting environment by adding flowers, maintaining pool areas, and ensuring that amenities such as gyms and laundry facilities are in good working order.
Price Your Property Right with Comps
Determining the right price for your multifamily property is crucial. Conduct a comparative market analysis (CMA) to evaluate recently sold properties that are similar in size, location, and condition. This will give you an idea of the market value and help you set a competitive price.
Consider factors such as the condition of each unit, necessary repairs, and the capitalization rate (cap rate) when determining the price. The cap rate is a measure of an investor’s potential return on investment. Consult with a local real estate agent or appraiser to determine the average cap rate for your market.
Selling a multifamily property requires careful planning and execution. By following these tips, you can maximize your investment and attract the right buyers. Remember to hire an experienced sales broker, prioritize impactful repairs, craft a compelling sales story, leverage good rental history, choose the most credible buyer, streamline the closing process, enhance curb appeal and amenities, and price your property right using comps. With proper preparation and strategic decision-making, you can achieve a successful sale and realize the full potential of your multifamily investment.
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Residential and Multi-family Realty Services for Lexington, Richmond, and Surrounding Areas. We close over 40 million in sales each year. Our love for Central Kentucky and our clients is the key to our success. We provide careful guidance, persistence, and savvy marketing to deliver results for our clients time after time.
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