Brokerage experts, Jospeh Chaplik, Linda Fritz-Salazar and Greg Frick give the below advice when considering buying or selling apartments:
- If you are considering selling, I would recommend working with a broker and brokerage firm that has the following: They should have a specific and sole expertise in the apartment market and a good history of past transactions as well as current activity. Working with the right professional is the main difference with selling correctly or making huge errors.
- I stress street appeal and operational health of the investment. Simple cosmetic enhancements and bookkeeping housekeeping can have a significant impact on the final sales price. The property’s appearance is the first perception a Buyer will have. The owner that shows pride in his property is a step up from the others. From simple items such as trimming bushes and trees, cleaning up around the dumpster and parking lot or replacing unit numbers on front doors to touching up paint on trim, gutters, doors, window sills, fences and gates will all have a positive effect on the property’s appearance.
- The operational health of a property can be a best foot forward by having organized books and records. Make sure all leases are up-to-date and tenant files are organized and orderly. Keep a monthly “rent roll that will show all of the particulars for each unit, not just the day and the amount of rent paid. Things like move-in date, lease expiration date, refundable deposits and [information] all make the potential Buyer feel secure with the records.
- Maintain a monthly record of all income and expense items, in detail and keep receipts. The more organized you are, the more impressed the Buyer will be.
- Find a firm that knows how to listen. By listening to what your goals and objectives are, a good broker can help put a plan together that will help achieve your goals. Be careful of those who might just tell you what you want to hear! The person you work with should listen to you and be willing to tell you when, given all the circumstances involved, it’s not in your best interest to sell your property. Then, when you’re sure the time is right, choose a brokerage team with the experience, knowledge and skill to implement an effective plan of action.
- If you are considering buying, I would recommend working with a broker and brokerage firm that has the following: They should be experts in the apartment market and have the knowledge and deep resources to assist with finding the right property for sale. There should be a lot of data given to you by your broker to help evaluate the right purchases and how it compares to the rest of the market. They should also know the future potential of properties and how to protect your investment and help grow it.
- Before giving advice to an investor, it is imperative that we find out what the investor wants and/or what he/she needs. Wants are wishes and I, as much as most, understand unless you have a wish, you will never have a wish come true; realize needs are where we should start. Many investors come to our market and say they want an 8 or 9 CAP only to realize they need cash flow to cover the debt, if they need to borrow and they need to put some money in their pocket after all expenses are paid. That’s not necessarily an 8 CAP purchase, initially. It doesn’t mean a 6.5 or 7 CAP property at a time of purchase can’t get there.
A second piece of advice or piece of the puzzle to match is to find out what the investor plans to do for management. Many owners prefer to self-manage, staying very “hands-on” and involved. Conversely, many have no interest at all in this facet of ownership and will gladly let someone else take care of the broken toilets and leaky faucets. Management plays a large part in the success and profitability of multi-family ownership.
I do not want to overlook, perhaps, the most important piece of advice and that would be to find a broker who is experienced, not only in selling apartments, but ownership, management and the ongoing success of the investment.
- In addition to the above, you need to have someone working for you with the expertise to analyze the properties in terms of valuation and operations. In any transaction, it’s “surprises” that come up that prevent a sale. You will be best served by working with an expert who can identify potential surprises and find solutions in advance.
You’ll also want to work with someone who is not afraid to tell you whether what you’re hoping to find is in line or out of line with the market. A Buyer coming into this market sometimes needs to be educated on whether their expectations in terms of return and pricing are realistic.
Look for a firm that doesn’t push you into a deal because it benefits them. Find someone who does what’s right for you. A client can get the most out of a broker/client relationship when they are acting in sync over the long term. Brokers are always on the front lines of what properties are coming to the market. The more they know about you and your investment goals, the more great opportunities will come knocking at your door.
[Editor’s Note: Considering buying or selling your property? For over 30 years, AOA Commercial Brokerage has provided California apartment owners with experienced, professional Real Estate Agents to list and sell their apartment buildings. Before buying or selling, consult with one of our Agents and realize the following benefits:
- Proven marketing tools unlike any other brokerage firm. Your property will be featured in the AOA Magazine and distributed to over 100,000 apartment owners monthly.
- A detailed multi-point marketing plan
- Experienced in 1031 tax deferred exchanges
- Supported by the largest, individually-organized association for apartment owners in the United States
To request a property evaluation for the purpose of listing your building with AOA, please call (800) 827-4262.]
Joseph Chaplik is President of Joseph Bernard Investment Real Estate, headquartered in Portland. Reprinted with permission of the Rental Housing Journal.