What You Need to Know About Selling Rental Property
Selling rental property can be one of the most financially rewarding experiences any real estate professional can encounter during his or her career. Aside from maybe the residential mansions in Beverly Hills, apartment buildings are commonly sold at prices that exceed residential property prices and thus generate more commission dollars for both the listing and selling agent.
It is not unlikely, for instance, that in a market where the average sales price of a house is $250,000 that a ten-unit apartment building one block over will sell for two-to-three times that price. And when you do the math (assuming a six-percent commission) even conservatively, the result would be $30,000 verses $15,000.
Another advantage associated with selling rental property comes in the form of what I will simply call “the benefit of repeat business”.
Once you sell a house it’s probably safe to say (barring something irregular like a job transfer or change in finances) that the buyer is no longer a potential customer for about five years. On the other hand since it is “investors in real estate” who purchase income property you are always faced with the potential that your customer might want to invest in more rental property; or given the right set of circumstances may even want to exchange one investment property for something larger.
In other words, when you sell investment property, you work with investors by association and therefore are always in a position to acquire repeat business and reap the benefit of additional commissions.
This was true with the first investment property I ever sold to an investor and in most transactions I was involved during the years since just as true. Real estate investors by their very nature are always looking for a property (or another property) that will make them money and this means repeat business for you and as a result more commissions earned.
Fair enough, but you can’t enter the income property arena thinking like a residential real estate person. There are a few things you need to understand about real estate investing protocol to be successful at it.
When you sell rental income property, you need to present the numbers. It’s not enough to simply point out the on-suite bathroom and large walk-in closet because real estate investors are only interested in the bottom line: “How much money does it make me?”
You must present the cash flows, rates of return, and profitability numbers for every rental property to your investors otherwise you could merely “pound sand” and lose the opportunity. This is not difficult with good real estate investment software.
It is also a good idea to become familiar with some of the essential returns real estate investors look for in a property when making an investment decision. Otherwise you will appear less-than-capable of working with rental property and lose credibility with the customer. Amongst other things learn how to compute capitalization rate and cash-on-cash return and understand the role of an APOD and Proforma Income Statement.
The truth about selling rental property is that you can make money at it; what’s more, it is not really that difficult. Once you make the decision to get involved visit my website and read the free real estate investing articles and learn about my real estate investment software. These are designed to help agents like you to get started off on the right foot.