Smart Tips For Selling A MultiFamily Building Posted By Paul Sian On Thursday November 16 2017
Smart Tips For Selling A MultiFamily Building Posted By Paul Sian On Thursday November 16 2017
Great Read on Selling a Multifamily! Thanks Paul Sian. Worth the read.
Many out of state buyers are looking to make a purchase of a multi-family building here in Cincinnati, Ohio and Northern Kentucky due to the lower cost as compared to other states. With the lower cost and higher Return on Investment (ROI) out of state investors are lining up to purchase great cash flowing properties and as a resultGreater Cincinnati multi-family propertiesare at 5-7 year highs. While demand is high that does not mean multi-family building owners can expect a cake walk when it comes time to sell. Multi-family building owners still need to prepare their buildings so that they attract buyers who want a ready to cash flow building as opposed to those buyers looking for a bargain. Bargain hunters will only be interested in a building if the price is in the bargain range.
A multi-family home is a building that allows for two or more families to live together in separate apartment/living spaces but generally under one roof. Conventional mortgage financingcan be used for multi-family buildings when there are no more than two to four units in the building. Anything more than four units requires commercial lending products in order to purchase. Due to the allowance of conventional mortgage financing for 2-4 family buildings buyers can actually buy one of these buildings as owner occupied and pay a lower amount for down payment (anywhere from 0% to 5% depending on the loan program). If a buyer does not intend to occupy the building then down payment requirements are in the 20-25% range depending on the lender. For commercial mortgages for multi-family buildings greater than four units down payment requirements can be in the 20-30% range or more depending on lender requirements.
Read on for some multi-family preparation for sale tips…
LEAVE ONE UNIT VACANT
In a multi-family building that has 2-4 units it is advisable to leave one unit vacant if possible. By keeping a unit vacant in the building showings can be done at any time with very little notice required. With any tenant occupied unit notice requirements generally mean letting the tenant know at least 24-48 hours in advance of a visit. Multi-family building buyers can view the vacant unit and determine if they like what they see. If the buyer wishes to see the occupied units then a second appointment can be made to view the occupied units after sufficient tenant notice has been provided. This results in less time wasted for both the buyers and the tenants.
As noted above with 2-4 unit buildings buyers are able to purchase the building as owner occupied and live in the building with a much lower down payment than if they were to buy it as non-owner occupied. The vacant unit allows buyers who want to live in their new purchase an opportunity to do so without the need to move any existing tenant out. While a buyer can purchase a building as owner occupied when all of the units are occupied there may be costs associated with ending a lease early for tenants on long term leases in order to allow the buyer to get an apartment to live in.
For buildings with five or more units the current owner should have a vacant unit available during the time on the market in order to allow for quick and easy showings for any potential buyer who wants to see the property. By having a vacant unit a buyer has the opportunity to see how a typical apartment looks in a building and should be able to tour other common areas as well to view overall site condition. If the buyer likes what they see they can schedule up a follow-up appointment to see the occupied units or they may be ready to make an offer just based on what they saw and allow their inspection team to evaluate the occupied units at a later time.
VACANT UNIT PREPARATION
Just because a unit is vacant does not mean it should be left as is with the thought that the new owner can deal with it as they see fit after they buy it. If the vacant unit was left in very poor condition by the prior tenant then this will reflect poorly on the building owner. Most investors looking to buy a multi-family building want a building that has been cared for. A unit left dirty and without basic repair reflects poorly on the current owner which could cause buyer’s to wonder how bad the other units and common areas in the building were treated over time. Just as with a home there should be some pride of ownership in an investment, if the seller cannot be bothered to keep their building looking decent then don’t expect any reasonable offers on the building. Instead the buyers looking for a deal are likely the only ones to make an offer on the building and the offer will reflect the poor condition of the building. Instead units should be cleaned up and ready to rent for another tenant just as if the seller was not planning on selling the building.
ADDRESS DEFERRED MAINTENANCE
If your building has areas where maintenance has been deferred due to time or budget constraints now is the time to get the deferred maintenance tasks completed. Whether they be in common areas or in tenant areas cracked windows, leaking pipes, missing shingles and more should all be addressed. Not only does addressing deferred maintenance make a building look better to potential buyers it can also help deter future damage whether it be from criminals looking for an easy target or a tenant thinking since it is broken or in poor condition anyway why care if it gets worse. Building owners should also contact apest professionalto treat any pest problems as potential buyers don’t want to have to dealwith termites, bed bugs or more when the current owner should have been dealing with it in the first place.
As is normally recommended for a single family home a pre-listing inspection is a valuable tool that can save time and money when it comes to selling a multi-family building. Theinspection can uncover issues with the buildingthat could be repaired which would mean one less repair that could cause a buyer to walk away. Too many repair issues coming up on a buyer inspection could cause them to change their mind about purchasing a building and since it generally takes longer to sell multi-family buildings compared to single family buildings that represents a lot of wasted time if a multi-family building owner has to put the building back on the market due to a buyer backing out. The pre-listing inspection is not only a smart thing to do since it will remove one area that could result in a deal falling apart, but the cost for the inspection may even be tax deductible too.
GET AN APPRAISAL
Due to the nature of multi-family buildings, especially when there are more than four units, finding the right price for such a building may not always be possible using traditional methods. As with selling real estate in general the amount paid for the building when purchased, the amount of money spent on upgrades and updates or the actual cost to build a new similar building play no part in determining the current price of a building. A better way to determine price would be to get an appraisal from an appraiser who has experience with appraising multi-family buildings. Not only will the appraisal allow the building owner to determine a good sales price when on the market, in the event a buyer’s lender comes in with a lower appraisal amount the prior appraisal may help if the buyer decides they want to appeal their lender’s appraisal.
WORK WITH A REAL ESTATE AGENT WHO KNOWS HOW TO SELL MULTI-FAMILY BUILDINGS
Selling a multi-family building is different than selling a single family building mainly because there are different types of buyers involved. With a single family home the buyer can be a person looking to buy a home to live in or an investor looking for something to add to their portfolio. Multi-family buildings on the other hand are mainly being looked at by investors. The occasional owner occupying multi-family buyer may come along when the building has four or fewer units but for the most part investors are the primary ones looking to buy multi-family buildings and as a result traditional home marketing does not work for multi-family buildings. Hence the need towork with a real estate agent who works with multi-family buildings. Even better would be to work with one who not only works with multi-family buildingsbut may even own some themselves. By working with a professional real estate agent you will be getting access to their network of contacts and knowledge of the market in order to better help get the multi-family building sold.
Due to the recent attention the Greater Cincinnati area has been receiving for their relative lower cost multi-family buildings there has been increased purchase interest by out of state investors. Many out of state investors are looking for properties that are ready to go and start earning them a return on investment as soon as they can close. By properly preparing a multi-family building for sale building owners can help ensure they get top dollar for their property.
About the author: The above article “Tips For Selling A Multi-Family Building” was provided by Luxury Real Estate Specialist Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you. Contact me today!
I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.
Author:Andrew Bingham Phone: 513-830-4362 Dated: November 25th 2017 Views: 100 About Andrew: Licensed real estate agent in Ohio with training in Principles & Practice, Real Estate Law, Real Est...
View our latest blog posts in your RSS reader. Click here to access.
A word from Chris Russell, CEO of Plum Tree Realty:
"One of my greatest passions is to use our real estate business to help alleviate suffering in this world. So we take proceeds from Plum Tree to help orphans, feed the hungry, heal the sick and hurting, and to aid the homeless ... both in the States and abroad. We are not about "getting rich." We are about making a difference. So when you do business with Plum Tree Realty, you can know that a portion of your money is going toward helping those on this planet who are in need of help. Together we can make a difference!"
To help people realize their dreams in home ownership and real estate investing through the highest levels of broker services at the most affordable prices available.
Our Core Values:
Integrity in every relationship, decision, and transaction.
Truth in word and deed.
Hard work that keeps us ahead of the competition.
Sacrifice of our own interests for the gain of our clients.
Commitment to excellence in every task we perform.
Respect for all people.
Giving to those with whom we work.
Areas of Expertise:
Residential Real Estate Sales and Purchase
Commercial Real Estate Sales, Purchase and Leasing
Real Estate Investing (buying, selling, holding, rehabbing)
Property Management and Leasing
Putting it Together
Plum Tree Realty is a premier real estate marketing company focused on helping buyers and sellers get the highest level of real estate services. We help home owners, for instance, who have homes for sale in Mason, Ohio to price their homes in a competitive way since the market is growing in such a fast rate in that area. When a buyer is looking for West Chester, Ohio real estate for sale, we can guide them to the very best deals that are available, and we can give them expert advice as they make such a huge purchase. We cover all of the major real estate markets of the Greater Cincinnati including the following hot markets:
Cincinnati, OH Real Estate (homes for sale)
West Chester, OH Real Estate (homes for sale)
Madeira, OH Real Estate (homes for sale)
Monroe, OH Real Estate (homes for sale)
Indian Hill, OH Real Estate (homes for sale)
Hyde Park, OH Real Estate (homes for sale)
Blue Ash, OH Real Estate (homes for sale)
Lebanon, OH Real Estate (homes for sale)
Loveland, OH Real Estate (homes for sale)
Fairfield, OH Real Estate (homes for sale)
Hamilton, OH Real Estate (homes for sale)
Liberty Township, OH Real Estate (homes for sale)
Kenwood, OH Real Estate (homes for sale)
Mount Adams, OH Real Estate (homes for sale)
While some people search for homes according to the suburb names, others are very interested in the top school districts in the area such as homes for sale in Mason School District, homes for sale in the Lakota School District, homes for sale in the Wyoming school district, homes for sale in the Sycamore school district, homes for sale in the Monroe School District, and more. Our agents are highly-skilled in placing families in the best school districts in Cincinnati according to the desires of each family involved.
Of course, we also have great skill in helping buyers and investors find foreclosures, short sales, bank owned homes, and other great investment properties in the Greater Cincinnati Metro Area as well. Many of our agents are investors themselves, so they are great at helping other investors be the first one to the "golden egg."
We also have agents who specialize in helping families who are relocating to Cincinnati, Mason, West Chester, Blue Ash, Madeira, and any of the other regions in Southwest Ohio. It's great to have "feet on the ground" when you are looking to make such a move.
Plum Tree Realty has also become quite a favorite company for those who like to try to sell their home as a For Sale By Owner in Cincinnati as well. The reason for this is that we offer a $500 flat-fee listing to home owners who would like to sell as a FSBO, but they would also like to have a presence on the Cincinnati MLS search for homes for sale. Most FSBOs miss that exposure, but for just $500, we can help them get listed on the Cincinnati MLS and find buyers at the speed of ... the internet!
While most brokerages feel they have the best agents in Cincinnati, we truly believe that we are at the top. Many larger companies like Sibcy Cline, Remax (RE/MAX), Coldwell Banker West Shell, Comey & Shepherd, and others are at a size that makes it difficult for them to react to the markets and changing times at a great speed. Since Plum Tree is smaller, we are able to respond to market conditions rapidly and efficiently which gives us a disting market advantage. Remember: "It's not the big who eat the small; it's the FAST who eat the SLOW!"
Home Sales Slip, but Remain StrongAverage Price Sets Record for 16th C
"We used plum tree realty to sell our house. The experience was superb, we will never use a different realty company for this process. We were under contract within the first week of signing with them."