Do you have a plan or exit strategy for selling your investment property?
There are many triggers for a sale – some can be anticipated and planned for and other triggers will catch you off guard like divorce, moving, health reasons, unplanned retirement or even death.
If you have some time to plan…. you can determine your parameters for the optimum time to sell your property outright or to participate in a 1031 tax deferred exchange to buy another property.
SOME TRIGGER’S ARE:
Earning Potential Realized
Michael bought a retail strip center that was run down and had a high vacancy rate and he was able to purchase the property at a discounted purchase price. Michael did his homework before the purchase; he knew what the property was bringing in with its current rental income and he knew if he rehabbed the property he would be able to command a higher rental rate and fill the vacant units. After figuring in the costs of the improvements, the higher rental rates, the time frame to fill the units and the potential net operating income (NOI) Michael was able to determine his ideal time to sell & meet his profit goal.
Retirement & Moving
Joe is retiring from Maine to Southwest Florida and he did not want the hassle of being the owner/landlord of his 50-unit apartment complex. He enjoyed the regular income and wanted that income to continue into his retirement. Initial considerations to maintain his income were that he could hire a property management company to take care of the property or he could do a 1031 exchange where he would sell his apartment complex and buy a less labor intense NNN property in Florida thus deferring any income tax. In the end, a highly qualified buyer was found for his 50-unit apartment complex and Joe seller financed the new mortgage. Joe continues to bring in a monthly retirement income and the payment of taxes is spread over the life of the mortgage.
Rhonda is going through a divorce; she & her soon to be ex-husband, John, have acquired a large portfolio of investment property, which was going to fund their retirement. They needed to decide how to divide the properties &/or the proceeds in an equal manner. There were many considerations – not only the value of the properties but also the tax considerations of the sale. An appraisal of the individual properties needed to be done and their accountant needed to determine the tax consequence of selling each property. To further complicate matters; Rhonda’s father had left her two properties & she wanted to maintain ownership of them, she also wanted to continue owning investment properties where John just wanted to cash out. In the end, fair market value & a cost basis were assigned to each property. Most of the properties were sold but Rhonda was able to retain her father’s properties & to use the 1031 exchange to buy new investment properties & defer paying taxes. John was able to cash out.
Why use Rideout Commercial Group to sell or lease your property?
At our first meeting, it is important for us to understand your reason for selling or leasing – as there are often consequences. For example – selling a commercial property may trigger capital gains & cost recovery taxes but if you are looking to purchase another investment property we can suggest you use a 1031 exchange to buy the new property & defer you taxes. We may also suggest taking payment of the sale over a number of years to decrease your tax hit in year one. If you are leasing out your investment property – you want to make sure you are getting the right income stream in from the leases, as that will determine the sale price of your property. Longer-term leases are also more favorable to buyers of investment properties. We can also direct you to local professionals prior to listing your property such as lawyers, accountants & financial planners to answer any questions that may arise.
PROPERLY PRICING YOUR PROPERTY
Your listing needs to be priced right. Listings that are properly priced sell closer to the asking price than properties that have been listed too high then need to be reduced. If you have an income property to sell, you need an agent who knows the local market and what type of return investors are looking for in their geographic area as this along with the net operating income will dictate the asking price.
LISTING YOUR PROPERTY
Unlike residential real estate, it is difficult to find commercial properties listed for sale & for lease. Commercial real estate is listed on many platforms & some require a premium subscription service. You need an agent who uses all of the platforms so your property listing will be seen everywhere.
LOCAL MARKET KNOWLEDGE
We know our local market and stay abreast of any trends that will affect your property listing, whether positive or negative. If there is a local news story that will help market your property, we’ll include it in our marketing material.
Marketing your property to the widest possible audience, in an effective manner, is our goal. In addition to our online listing platforms, our email blasts and direct mail, we have a large network of investors, developers and commercial real estate agents we share information with.
We also work to educate the buyer on any value added benefits that will increase the odds of getting your listing sold. Such as a new company that is moving into the area, an airport that is expanding or a new development that impacts the local economy.
We will communicate with you on a consistent basis. We will make you aware of any changes in the market, which may affect your listing. We need to make sure we are proactive in dealing with those changes and keep ahead of the curve so your property is listed at the optimal price to sell.
Once your property is under contract, the work starts. Due diligence for a commercial property can be extensive and often there can be continued negotiation during the process to keep the deal intact. Financing a commercial property can be a challenge for buyers so connecting them with lenders who know the local market is invaluable in getting the deal done. Some times we need to be proactive & creative in our thinking to get the deal closed.
How to get started – The Process
- We would love to meet or conference with you so we can discuss your needs, your motivation and your time frame.
- We will also conduct a Needs Analysis to make sure we are addressing your main issues & concerns.
- We may need to conference or consult with your lawyer, accountant or financial planner or other professional to make sure we have the proper financials or other relevant information and that we are putting together a plan that is in keeping with your goals.
- We will then present our findings and conclusions to you and determine the course of action you wish to take.