Seven Mistakes to Avoid When Selling An Apartment

How You Can Spot and Avoid the Seven Mistakes that Can Literally Ruin Your Apartment Investment – Making Sure You Make Money When You Sell an Apartment Project...Avoiding the Surprises that Can Cost Thousands of Dollars.

Dear Apartment Investor:

Even though investing in an apartment is becoming more and more commonplace, selling a project correctly is like finding an honest politician.  Plus, when you put a project on the market at a time you think may be “the right time” you’re still subject to those SURPRISES that can cost thousands and make that “great investment” a real loser.  You can prevent your next sale from being a loser by avoiding the following mistakes:

1.  Not Putting Yourself in the Buyers Shoes.

You almost want to buy the project over again in your mind and ask yourself, “based on the future of the location and condition of the property will a buyer find the project attractive?”  If you hesitate in saying “yes” you must definitely do more analysis as to the salability of the project and the area. 

2.  Not inspecting all units prior to putting the project up for sale. 

Most of your units you are familiar with but what about the ones that you haven’t been in over a year?  Be sure that prior to selling you go through the units AGAIN to make sure that you (and the buyers) will not have any surprise repairs, pets or guests.  One bad unit could cost you thousands on the negotiating table.

3.  Work only with realistic income and expense figures.

Save yourself a ton of time and money by working with realistic figures.  By selling the project based on the rent you think you can get and lower expenses that you think a new manager could get just won’t cut it.  Be realistic – buyers will be aggressive when the figures are actual not projected.

4.  Do not sell without looking into tax deferred exchange or contract sale. 

If you have had your project for a long time it is in your best interest to talk to an expert about a tax deferred exchange or installment sale.  These methods could save you literally thousands in taxes.  This should be the very first thing you do before putting your property on the market.

5.  Work with an experienced broker that will work smart and protect your interests at the same time.

The best brokers specialize in apartments and have a designation such as CCIM or SIOR.  Do not work with a Realtor that has open houses on Sundays and expect them to know how to assist you in a profitable marketing campaign of a project.  Prior to working with them be sure to ask how many units they have sold!  Get references, ask how they will market the property and check their track record. 

6.  Not examining and maintaining the property before the sale.   Don’t let maintenance and repair work go – get it taken care of NOW.  Sometimes its hard to justify some of the costs of keeping the buildings well maintained but think of it this way – IF YOU DO NOT SPEND THE MONEY NOW TO MAINTAIN YOUR PROJECT THE BUYER WILL – IN TERMS OF DISCOUNTING THE PRICE FOR WORK HE WILL HAVE TO PERFORM TO BRING IT UP TO “PAR”

7.  Not factoring in enough vacancy and reserves. Remember you may not like it but the buyer, appraiser and banker will factor in vacancy and management fees even if you have no vacancy and if you manage the property yourself.   In putting your numbers together use current rates for vacancy and management.