When to Sell
Select income property good for the long run. Selling is time-consuming and expensive. It will lake at least a few years to earn an above-average return. The capital-gains lax can be devastating, especially in cases where the
depreciation has been depleted.
Sometimes it makes sense to sell. You may want to focus your efforts on a particular type of property or in a particular location. You may get an offer that's too good to refuse. You may have emergency expenses. These are good reasons. But, if you want a premium price,
the time to sell is when
business conditions are favorable and the future is bright. The worst thing an owner interested in selling a prosperous enterprise can do is wait until the business starts turning down. Sell your apartment when occupancy is up to 100 percent, rents are at market level from way below, and the building is throwing off lots of cash.
How to Price
After conferring with the listing broker on market conditions, comparable sales and listings, and available financing, set the asking price. A rule
Buyers who can afford the property can get "more property" for their money elsewhere. Buyers who cannot afford the price simply won't look. A property priced right is half-sold. A fair market value is determined by comparing the property with similar properties that have recently sold and with similar
properties on the market. This market-analysis approach is more accurate than the
appraiser to determine its fair market value. Also, check the property's
assessed value. Often a property is assessed at a certain fraction of its market value. The assessments may have been made years ago when the property was selling for less. FHA and VA appraisals tend to be lower than sales prices in a rising market.
Here are ways to attract offers:
1. Price your property within 5 percent of fair market value.
2. Help finance. Particularly for commercial properties, buyers need help with down payments or reducing monthly mortgage payments. It's to your advantage to appeal to the greatest number of buyers by accepting the greatest range of financing plans. However, make sure you
understand the risks of "creative financing."
3. Consider picking up some of the dosing costs or giving an allowance for repairs and redecoration.
Improvements
The motivations for improving a house or an apartment building are a need for more space, comfort, and convenience and a sense of pride.
Consideration is seldom given to whether these improvements will increase the resale value of the property. Some improvements may not add as much to the
property value as you paid for them. Buyers are generally unwilling to pay extra for finished basements, greenhouses, bars, tennis courts, and saunas¡ªanything that's out of the functional mainstream. They are willing to pay for such items as heavy insulation, paved driveways, modern kitchens, and finished laundry rooms.
Stick to improvements that add top dollar value and strive to present a clean, neat structure. Create a general impression that the property has been well cared for.
Showing the Property
When someone asks to see the property, take his name and telephone number and ask him to give several times that would be convenient for him to see the property. Try never to refuse an appointment. Check with your tenants and arrive at a time satisfactory to all. When the prospect arrives, draw his attention to the property's good points. Don't exaggerate. Answer all
questions honestly. Anticipate answers to these questions:
1. Why do you want to sell?
2. Are you willing to trade?
3. Will you finance?
4. Will you consider an installment sale?
5. What repairs need to be done?
Answer these questions cautiously. You don't want to commit yourself to an unfavorable deal. Nor do you want to close the door on a sale.
