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When it’s time for a property owner to prepare their apartment disposition, there are many items that they need to consider and “check off” in order to ensure that the property can sell at the highest price possible and to also make the transaction process a smooth one. In my opinion as a multifamily property broker, there are three main categories to address before marketing an apartment property: property financials, property appearance, and managerial aspects.
The first category, and arguably the most important, are the property’s financials. This is a very important part of getting the building ready to sell and should be highly prioritized by owners. Apartment property owners should start thinking about the building’s financials long before they intend putting the property on the market. Investors and banks alike will want to analyze the property’s trailing 12 month profit and loss statement. Landlords want to have their numbers portray an upward trending picture as it relates to their rents and expenses. The building’s occupancy levels and rents are a catalyst for an upward trending rent roll. For a landlord to stabilize the rent roll with market level rents and low vacancy, adds value. The same principle applies to the expenses of the building.
Owners can pre-emptively implement cost cutting strategies that drive the buildings expenses down. These can be as big as:
- Billing back for utilities
- Hiring a more affordable, more efficient management company
- Fighting property taxes to things like installing low flow toilets or installing high efficiency lights
Upward trending financials should be coupled with diligent and accurate accounting of all extra income and capital expenditures (ie. Having capital expenditures excluded from reoccurring repairs and maintenance). Not only should these items be diligent and accurate in the way they are accounted for but they should be reproduced and updated on a monthly basis. Clean and accurate financials make underwriting the building straightforward for both investors and banks. This is especially important in a market that has a lot of velocity and deal volume. The less financial questions and unknowns paired with upward trending financials, the smoother the transaction will go for everyone involved.
The building’s physical appearance and first impression
The second category is addressing the physical appearance of the building to ensure that the property makes a good first impression. There is a large list of items that an owner can do to make sure that the property shows in its best light.
I think that some of the most important ones are as follows:
- Ensuring that the boiler room is organized and cleaned. This means removing any signs of obvious leaking, rust or corrosion.
- Closely monitoring the general cleanliness of the building. This can be a daunting task on a bigger building but it is important to make sure that hallways, laundry rooms, common areas, exterior common areas and trash areas are all kept clean and free of debris and trash.
- Landscaping is key to making a good first impression on the investors that are touring the building. Insuring that these areas are well manicured and free of weeds and animal waste help assure that a building makes a good first impression.
- Owners want to check and see that there are no noticeable safety hazards. This includes making sure that snow and ice are properly removed and that there are no encumbrances to a building’s fire code. Owners can strip a parking lot, which can really boost the curb appeal of the property and contribute to that great first impression of a property.
- A new paint job or even the touching up of chipping paint can go a long way in the appearance of the building.
- Finally, landlords should fix or replace obvious signs of rust especially in and around the exterior hallways and around the stringers and stairs.
This concludes the work that can be done to the physical appearance of the property before getting it ready to sell. Some of the items I mentioned here can come at great expense to an owner, so the owner should know what their target price and disposition strategy is before getting the building ready for sale. Having a disposition strategy will help owners decide how much money and work they need to put into the building to achieve their desired price.
Marketing process and managerial aspects
The final category is managerial aspects. There are a handful of items owners can do to improve the marketing process and secure a smooth sale.
Some things to consider:
- Deciphering how to best do showings. Showings will inevitably happen during the marketing process. With that being said, having a few relatively clean tenants that the owner has a good relationship with and can show the units on a consistent basis will make the showing process an easy one.
- More often than not, owners have a management firm employed that does all of the day-to-day work at a building. Owners want to make sure that management is made aware and incentivized to do a good job in helping the sale and transition from old owner to new owner a smooth one.
- Finally, owners should hire a qualified broker or brokerage team like TalkToAl.com to represent them in the apartment sale. When choosing the right broker, owners want to make sure that the broker knows the property and surrounding location very well, has sales experience in the area, is someone they trust and get along with, and finally is a broker who has a strong track record in achieving the highest sale price for their clients.