Ready to cash in? Rob has all the tips on preparing to sell rental property! You’ve bought, sold, and renovated your multifamily investment. Go through this checklist to make sure you are prepared to sell it!
Preparing to Sell Rental Property When It’s Time For the Sale
Rob starts out by explaining the full cycle of real estate, which is “buy-fix-sell”. The final step, of course, is selling your property. Here are some tips to get you ready for that sale:
When you are preparing to sell rental property, you must understand that it has been an ongoing process since you acquired it. The entire time you own a multifamily dwelling, you are continually repairing and upgrading it.
Gather any and all documents you will need for prospective buyers. The more information they can easily access about your property, the better. Keep all of these documents online in Dropbox or Google Drive.
Interview the selling broker. Make sure you vet them properly.
Negotiate the broker contract. A good contract benefits both sides.
Review and qualify potential buyers’ offers. The broker may provide you a spreadsheet so you can see each buyer’s qualifications.
Select the buyer. Offers will soon roll in. It’s up to you to choose the right one.
Open Escrow. This process will pave the way for the last steps in the selling process.
Manage all the buyers’ requests while Escrow is opening up. They will be looking for your title agreement, income reports, and more to make sure everything is kosher. Again, you should have digital copies online for them to review.
Maintain occupancy and collections during Escrow. If your buyer is applying for a federal loan, you must keep occupancy at 90% minimum for 90 days. Otherwise, you will need to file for an extension. Your deal will fall through if you can’t get one.
Join Our Community
Do you own multifamily properties? Do you aspire to build wealth? Then you should consider joining our online discussion group, the ATL Community! Each month, Rob Rowsell will teach you what you must do in order to build wealth in the real estate business. It’s not as easy as it looks! Property taxes, liens, and legal fees can all be hard to navigate, so having a successful guide in your corner like Rob is a must! Enroll today!
Here is successful entrepreneur Rob Rowsell, discussing real estate deal acquisition from a 30 Thousand Foot view. Read on and watch along in order to examine the big picture of a rental property deal with Rob. You can never go wrong when you are learning from a proven multifamily investor and business coach.
What Does Real Estate Deal Acquisition from 30,000 Feet Look Like?
Networking To For The Right Real Estate Deal
In the first segment of this deal flow talk, Rob lists a few of the real estate websites he frequents. Specifically, Loopnet and Crexi are favorites. He does not search these sites for the purpose of finding his preferred property deals. Rather, he uses them as a real estate networking tool. He builds relationships with the brokers who are selling properties in the specific locations that he is interested in. Rob requests that they put him on their email lists. Then, he offers to meet them for lunch to talk business when he is in their town. Eventually, these may just lead to the property deals that Rob likes to fill his buy box with.
Underwriting The Property Offer
Congratulations! You are now ready to make an offer for the property. Underwriting the property offer is the first step. This can be a very tedious and time consuming process. However, it is a necessary task for you to check off your list. Next, after you can make the offer to the seller, you can move on to the LOI (letter of intent) phase. This phase also includes the back and forth negotiation, which takes place between the real estate buyer and the seller.
Get excited, because after that, it will be time for the lawyers to get involved. Each party’s attorneys will work together to draft the PSA, or Purchase and Sale Agreement. Once the PSA is complete, then the real estate buyer will work with a Transaction Coordinator. The Transaction Coordinator is there in order to help open an Escrow account for the property. A Critical Dates Document will then be drawn up. This document outlines when each specific payment will be due for the property.
What Are Lawyers’ Duties In Real Estate Deal Acquisition?
Are you ready to close on your new (to you) rental property yet? Nope, not quite yet! Next, your lawyer will be tasked to do their financial due diligence. This will prove that the property’s value and income are 100% correct. It will also make sure that the billing accounts are all paid up. Nobody wants to buy a run down property that still owes a bundle in delinquent utility bills. Here is a pro tip from Rob: No income statement from a seller will match up 100%. As long at it is close, then you are good to go. Your broker and your attorney should have access to all the records that you requested in your spreadsheet.
The Importance Of Physical Inspections In Property Deals
Often, your chosen property management company will need to walk through the doors for a thorough inspection. The company will physically inspect everything with you before the sale. You should expect to pay them a reasonable fee for the walk through service. After all, you will get what you pay for. Make sure that you take the initiative to hire some third party specialists to inspect the roof, plumbing, and the HVAC. Many times, the person who is selling the property is unaware of the existing problems in these areas.
Rob usually likes to purchase the rental properties which require a few renovations. One of the most important parts of his standard real estate business plan includes setting a schedule for these much needed renovations to take place. Once the property renovations are through with, then it can command a much higher amount in rent payments. Make sure you inform the potential new tenants of the fact that these improvements will be worth the extra charges on their rent.
The Final Steps of Real Estate Deal Acquisition – Engage With Your Power Team and Investors
Does everything check out with your new real estate deal acquisition? Then you will need to make sure that you keep engaging regularly with your Power Team. This team will include your lawyers, your lender, and your property management company, as well as your insurance company. You should also preferably assemble a team of reliable investors who have pledged capital to your venture. Keep them in the loop through each and every step of the buying process. This is mission critical in order to ensure good faith with them.
Now, take over the property and celebrate! Wow, that real estate deal acquisition sure was a whole lot of work! There are plenty of tasks yet to come though, for you, new multifamily property investor. You should take a break and reward yourself now!
Join Our Real Estate Investing Community
Do you own multifamily rental properties? If not, do you aspire to do so one day? Then you should definitely consider joining our online discussion group, the ATL Community! Each month, Rob Rowsell will teach you what you must do in order to build wealth in the real estate business. It’s not as easy as it looks! Property taxes, liens, and legal fees can all be hard to navigate, so having a successful guide in your corner like Rob is a must! Enroll today!
Rob Rowsell stresses the importance of working closely with your CPA before you make an offering memorandum. Review the details and summary of your P & L every month, so if the day comes that someone wants to buy your business or real estate property, you’re ready to sell.
Advantages of an In-House Bookkeeper
Rob recalls an astounding previous experience of working with an outside CPA. When they returned his records, they had drawn up a P & L, despite not having anything organized. They didn’t ask any questions in order to gain a deeper understanding of his business. He then understood the advantages of hiring an in house bookkeeper.
Let’s say you have a potential buyer interested in your business. They will need to examine your books before making an informed purchase decision. When you don’t pay close attention to your numbers, they will come back with many questions that you as the owner can’t answer. If there are too many question marks surrounding your records, they may walk away. Who needs that headache?
If you have the capacity to employ your own bookkeeper, you should. Whether you’re gearing up for a sale, or providing numbers for your business coach, you always have the answers on hand. Your bookkeeper should know all of the categories and formulas needed to run the financial side of the business, so you, the owner, can focus on other duties.
Offering Memorandum Checklist – Review Your Finances Monthly
Next, Rob suggests a monthly numbers review with your financial officer. A single one hour meeting each month should do it. Don’t let any other tasks interrupt this important meeting. You need to concentrate on both the detailed and summary versions of your P & L statement. Require that they generate those numbers by the 12th of each month. This way, you can make any course corrections necessary. Make sure you have a paper copy, so you can highlight important lines and make notes in the margin. Hold onto your copy for future reference.
This process is so crucial if you have a potential buyer. If you don’t have up to date numbers to include in the offering memorandum, you might miss out on a huge payday. Quarterback those numbers, because nobody will care as much as you do!
Join Our Community
Do you own multi-family properties? If not, do you aspire to one day? Then you should consider joining our online discussion group, the Addicted To Life Community! Each month, Rob Rowsell will teach you what you must do in order to build wealth in the real estate business. It’s not as easy as it looks! Property taxes, liens, and legal fees can all be hard to navigate, so having a successful guide in your corner like Rob is a must! Enroll today!
