When you are ready to sell, the bottom line is that you need an advisor that will pay attention to your needs, focus on your property, maximize the exposure of your property and create the highest possible value based on current, accurate market knowledge. We begin the process with a detailed review of your property and then, prior to the sales process, we assist you with ways to enhance the property’s market value. We have a full marketing plan that includes web site and internet listing services, advertising, direct and email marketing, established communication with the brokerage community, brochures, property signs and other resources.
As your advisor, our goal is to maximize the exposure of your property to maximize its value in the market. Through our SIOR network and internet marketing we can make sure your property reaches the widest audience of potential buyers, worldwide if necessary. As a seller, you need a long term advisor to look out for your best interests, not a broker just trying to make a quick sale at your expense.
Selling Your Commercial Property for Top Dollar Originally published in Inside Business
Jonathan Commercial Properties
Maximizing your property value in any market is critical. Through years of experience dealing with the sale of commercial properties, we have seen owners make costly mistakes over and over again. These mistakes can reduce the value of your property and turn a great investment into a loser. In this article we’ve outlined seven basic tips for selling your property. See how you can put them to work to get top dollar for your commercial property.
First, put yourself in the buyer’s shoes. Ask yourself, would you buy the property again, based on the future of the location and the condition?
Will a buyer find this property attractive?
Look up and down the street. Who are your neighbors?
How are other properties on the street maintained?
Are the neighborhood businesses growing or shrinking?
If you hesitate in saying “yes, you would buy it again”, maybe you need to look more carefully at the property. Is it worth what you’re asking for it?
Second, take care of maintenance before you try to sell. Commercial properties need to look good, too and the physical appearance, outside and inside, really does count. Start with the basics:
- ✓ Clean up and patch the parking lot
- ✓ Replace broken outside lighting fixtures
- ✓ Refresh landscaping and replace dead plants
- ✓ Seal up cracks in the walls
- ✓ Repair damaged doors
- ✓ Replace damaged or discolored ceiling tiles
Don’t let repair work go. Sometimes it is hard to justify some of the costs in keeping the building and property well maintained. But think of it this way, If you do not spend the money to maintain your property, the buyer will – in terms of discounting the price for the work they will have to perform to bring it up to their expectation.
Third, get your expenses under control, especially for commercial investment properties. Every $100 in reduced expenses can add $100 to the bottom line which can equal about $1,000 in building value. This is a great way to add a little extra value to your building, but don’t go overboard. Buyers will put in their own reasonable expense numbers, if your numbers are way too low or you leave out basic line items.
Buyers will also often ask for a history of the property’s expenses so they can make a year to year comparison. Investors value a property based on the Net Operating Income, which is directly related to the expenses for the property. Owner-users look at expenses such as electrical usage and maintenance expenses as part of their cost of owning the property. Make sure your expenses are under control, but as we mentioned above do not skip on maintenance.
Deferred maintenance is the fastest way to have a buyer discount the value of your property.
Fourth, save yourself a lot of time and aggravation by working with realistic income and expense numbers on your property. By trying to sell your property based on rents you think you should be getting and lower expenses that you think a new owner might achieve, isn’t going to cut it. Be realistic. Buyers will be even more conservative when they realize your figures are projected or unrealistic.
Fifth, factor in for vacancy and reserves. Remember, you may not like it, but the buyer, appraiser and lender will factor in vacancy and management fees even if you have no vacancies and even if you manage the property yourself, as an investor or as a user. When lending money, the lender always looks at the worst-case scenario. In the case of your property, the lender will use the vacancy rate for your type of property, in your market area. The lender will also figure out how much it is going to cost them if they take the property back and have to pay to have it managed while it is on the market for sale. In putting your numbers together use current rates for vacancy in your market and current fees for management services.
Sixth, thoroughly inspect the entire property. You know your property inside and out, and you have been around it for years. When you are ready to sell, it is time to take a step back and look at your property with a buyer’s critical eye. Be sure that, prior to selling, you go through the entire property again to make sure that you and the buyers will not have any surprise maintenance issues.
On a day-to-day basis, you may overlook what could be a costly item because you are so used to looking at it everyday. You may have a tenant that has been in the property for years and you may think there is no reason to inspect his unit. Before a buyer closes on a sale, a thorough property inspection always takes place. Now is the time for you to make sure that property inspection doesn’t dig up any surprises. One bad area could cost you thousands of dollars at the negotiating table. Inspect every corner.
Finally, work with an experienced commercial broker. The best commercial brokers specialize in commercial property and have a designation such as SIOR or CCIM. If you are going to work with a broker, work with someone that understands your property type, understands the market, knows what to look for and is willing to point out the strong points and the weak points.