Selling a multifamily commercial property can be profitable, even if the units need a little updating. However, understanding what potential investors want in an investment property is essential to ensure you’re setting yourself up for the best potential to sell. Now is a great time to sell your multi-family property. With interest rates on the rise, many potential buyers are priced out of the market. These buyers still need a place to live.
Additionally, many cities are seeing growth and a need for multi-family housing. This demand means that there are investors ready to purchase properties at a fair price.
When investors look at multi-family properties, a few key things indicate a property could be a good investment.
A good market
Ideally, investors will have a steady stream of potential renters for their residential properties. The property’s location within the local market significantly affects the value of the investment. Market conditions are uncontrollable, but you should keep an eye on the market when timing your sale.
Common factors that indicate a healthy market for multi-family residential properties include:
- Diversified job markets
- Steady population growth over the last 20 years
- Good local schools
- Lower crime and poverty rates
- Median income above $35,000
- Low unemployment rates
Properties located in areas with a small or decreasing population, high unemployment, and high crime rates are less likely to attract investors. If you own a property in one of these neighborhoods, finding an investor is not impossible, but it could take a little more time.
Landlord friendly states
Managing real estate properties is already tricky enough. Investors are less likely to take the plunge when working in a state with complicated laws. Some states, like New York, have very lenient tenant laws, and landlords may not be able to evict non-paying tenants for up to a year. City laws vary, even in states that favor tenants, so your mileage may vary.
Regular cash flow
Investors purchase multi-family commercial properties for income stream purposes. Multiple tenants mean more opportunities to collect, pay the loan off quickly, and use the additional funds to purchase other investments or use them as payroll. Turnover isn’t uncommon in multi-family units. However, minimizing the turnover time and the number of empty units is essential for maximizing investment returns. If your property has a history of keeping long-term tenants, it will appeal more to potential investors.
You can help create more reliable cash flow by addressing common tenant complaints like responding to issues quickly, making repairs quickly, adding amenities, and creating a friendly living environment.
If you’ve fallen behind on necessary maintenance, you can use this to your advantage. Many buyers, including Brick, look for value-add property. Valued-add properties are multi-family residential properties that have room to improve and increase in value. Examples of situations that allow for value-add include:
- Operational adjustments (management changes for efficiency)
- Renovations
- Rebranding
- Low occupancy
- Under market rent
Appreciation: In addition to cash flow, some investors are looking to purchase properties with the potential to increase in value over time. Now is a good time to sell your property as property values have increased. As demand for housing options increases, multi-family units are continually attracting investors.
Property condition
Depending on the investor, property conditions may play a significant role. Properties that are well maintained will likely fetch a higher price. In addition, well-maintained properties are likely to attract more long-term renters. Well-maintained properties don’t have to be new. Keeping the units up to code and in clean condition goes a long way toward creating a more attractive investment opportunity.
Cost of owning the property:
Owning commercial -residential property offers numerous opportunities for investors, including the ability to live in one unit while renting out the rest of the property. One of the most critical factors a potential investor considers is the cost of owning property. Potential investors will consider the total cost of purchase, loan interest rates, property taxes, utilities, maintenance, and rent.
If the property needs serious updates or repairs, investors will also factor that into their offer.
Summary
When investors are looking at properties to purchase, they’re primarily concerned with location, quality, and cash flow. Understanding the current rental market, maintaining your property, and ensuring a steady group of renters will make it much easier to attract potential investors.
Ready to sell, but want to avoid the hassle of listing on the traditional market? Brick purchases commercial residential. We’re looking for commercial residential properties that fit into one of three categories:
Core Plus: These properties are low to moderate risk and offer the potential of additional cash flow with cosmetic improvements, more thorough resident vetting, or management changes. Core plus properties are high quality and regularly occupied and offer the potential for stable, low-risk cash flow.
Value-add: Value-add properties have more risks but offer greater potential for increased cash flow. Common issues with these types of commercial residential properties include occupancy rates, major management issues, and/or deferred maintenance.
Opportunistic: Properties that have more complex issues with potentially delayed returns fall into this category. Common issues with opportunistic residential properties include rehabilitation or development issues, empty or vacant buildings, and ground-up developments.
If your commercial, multi-family property fits any of these categories, reach out today for a fast cash offer.
