How To Sell My Apartment Building?
3 Easy Tips!
Selling an apartment building requires more legwork than a standard single-family house. You can’t hop on Zillow and get a Zestimate for an apartment. Apartment buildings vary widely. Apartment building buyers are different from regular house buyers. The common house buyer is driven by emotion, and is concerned with neighborhood, curb appeal, and family needs with intending to move in. As opposed to emotion, apartment building investors focus on due diligence and profitability.
If you have any apartment buildings you’re looking to sell, please click here or contact us directly at (323) 719-1026.
Here are 3 tips to get the most out of your apartment building sale!
Tip #1 Charge Market Rents
Are your tenants paying below market rent? This is a common problem for landlords trying to sell their apartment. Investors make offers based on rental income: more rental income means higher sale price. If you want the highest offers possible, lease the units at the market rents. You can check market rents on Rentometer.com as well as on Zillow & Craigslist. Local realtors and property managers also have up-to-date local rental information.
Fair market rent is based on several factors.
Location: Geography dramatically impacts market rent. Rental units in a desirable neighborhood or near the best school district garner high rents. On the other hand, rentals in a high crime or run down neighborhood rent for less.
Size: Market rent increases with square footage. Tenants will pay more for an additional bedroom or bathroom.
Amenities: Great views, outdoor space, central air, new renovations, gym, pool, parking, in-unit washer and dryer, pets, furnishings, balcony, cable ready, high speed internet, gated access, public transportation increases rent.
Tip #2 Make The Unit’s Tenant Ready
Common apartment repairs include broken appliances, leaking ceiling, leak under sink, dripping faucets, hot water heater, bugs/rodents, garbage disposals, clogged toilets, broken HVAC. Some real estate investors will make repairs on their own, others simply want to buy rent ready property. “Turnkey” rentals are ideal for investors not willing to make repairs and sell for a lot more than apartment buildings in need of heavy renovation.
According to Investopedia, a “Turnkey Property” is:
A fully renovated home or apartment building that an investor can purchase and immediately rent out. Turnkey properties are typically purchased from companies that specialize in the restoration of older properties. Those same firms may also offer property management services to buyers, minimizing the amount of time and effort they have to put into the rental.
Rent ready is attractive to individuals that want to invest in the real estate market, but don’t have the time, interest, or resources to renovate a home or handle maintenance.
Tip #3 Find A Buyer
Every apartment building owner and apartment building sale is unique. You may be willing to wait months (even years!) to get the price you want. If you are looking to sell sooner rather than later, setting a price below “market” ensures a quick sale. Rather than letting your apartment building collect dust on the open market, find a buyer yourself! The primary criteria in purchasing an apartment is the Capitalization Rate (“Cap Rate”).
According to Investopedia, a Cap Rate is defined as:
The capitalization rate is the rate of return on a real estate investment property based on the income that the property is expected to generate. The capitalization rate is used to estimate the investor’s potential return on his or her investment.
The capitalization rate of an investment may be calculated by dividing the investment’s net operating income (NOI) by the current market value of the property, where NOI is the annual return on the property minus all operating costs. The formula for calculating the capitalization rate can be expressed in the following way:
Capitalization Rate = Net Operating Income / Current Market Value
There are several ways to find a buyer for an apartment building. Find the owners of local apartment buildings (similar to your apartment as possible). Search the local county appraiser website to find owner name and address. You can write a letter to solicit an offer, or call if you can get their info online. Another option is to contact the local city/county municipality to pull up rental licenses. A rental license is frequently required before a unit may be rented out. Apartments with units leased at market value receive higher offers. You can list your property for sale with a local real estate broker. The benefit is your property will appear on the MLS and draws more attention to the sale. The downside is paying upwards of 6% in agent commissions and 2% in closing fees. These fees add up fast!
Ready to sell your apartment building?
Click here or contact us directly at (323) 719-1026.