For me, commercial is a buy and hold investment.
I want good solid properties with little or no maintenance issues…
and most importantly, strong leases, good cash flow and happy tenants with stable, successful businesses.
When I get properties that like I tuck them away and keep them for the long term.
Honestly, why would you ever get rid of a property like that?
Having said that… of course, there are times when you’ll want to sell.
Maybe it’s underperforming.
Maybe there are better opportunities out there.
Maybe it’s time to sell the small ones and reinvest that money into bigger deals.
Whatever the reason you’ll want to get the best price for your property.
Here are a few things to consider in preparation for making it available for sale.
1. Fix up
Spend a bit of money making it look nice. Make sure it gets a coat of paint and a bit of a tidy up.
It’s still a property, after all, which buyers are going to want to see. The better looking it is and the fewer maintenance issues it has, the better.
Consider talking to the tenant and asking if you can make some changes – most will be very happy to have you spruce the joint up.
2. New leases
The longer the leases, the easier it is for new owners to get finance. The more people who can afford it the more competition you’ll have.
Depending on timing you may find that it is near a rent review and you can put up the rents. This will increase the value of the property.
The other thing to do is ask the tenant if there is anything they want to be done to the property.
I once had a tenant who really wanted an industrial size air conditioner for his restaurant, but he couldn’t afford it. We cut a deal. We agreed that I would put in the air conditioner and that the rent would go up.
This meant that the property was valued higher not only because of the added amenity but mainly because the rent was higher, so it was worth more.
If you can pull off this kind of deal and then get the tenant to sign a new lease you’ve just massively increased your potential value.
3. Facebook marketing
Start a Facebook page, take some nice photos. There are only so many words you can include in a listing or an information memorandum.
If you have a website or a Facebook page with videos of the property, you will be giving buyers much more information.
Now keep in mind that almost no one does this… so you’ll stand out.
The only people that really use this strategy are developers doing pre sales. Take a leaf out of their book and prep this kind of material before you list for sale, and you’ll have much more qualified buyers.
4. Do your own cap rate research
At some point, before you set a price and list for sale you may want to get some appraisals or a valuation.
Not from a bank but from commercial valuer or agent.
But here’s the trick. You don’t have to take their word as law. Do some research yourself. Find properties that are at the higher end of the scale they work from and find reasons why they should consider your property in that top range.
You have to sell it to the valuer and the agents.
Make your pitch to them and convince them that they should value your property as the high end. Show them evidence. Show them examples of properties they should compare to yours.
Doing these things will not only add measurable value to your property allowing you to ask for more, but will also add intangible value…
They will add psychological value. All up you are looking for ways to add value to the vendors, the valuers and the banks.
Do this, and you’ll be getting the best price you could possibly get for your property.
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What about you? Got any other tips you think might help get a better sale price?