Friday, August 14, 2020 / by Marc Papineau
Some landlords make the mistake of not increasing rents for great tenants. The problem is that by not increasing the rent year over year it compounds and could cost hundreds of thousands of dollars on the re-sale with a building that’s under-performing with long term tenants who don’t intend to leave because their rents are so low.
2. Always (where possible) separate utilities from the base rents
Without having any control over the utilities, tenants can often run up expensive utility bills and professional landlords prefer leases that exclude utilities, except for water bills.
3. Maximize every space you can
If you have a garage, open spaces for parking, lockers, basements, or lockers that are not being used or rented. Make sure to rent them out. Do not underestimate the power of an extra 50 dollars a month here and there. It adds up quickly and when investors calculate the value by dividing the net income by the sale price, these amounts drastically increase the value.
4. Identify lift opportunities
Investors often find no issue paying a premium for a property if there is a “Lift” opportunity. A lift is an opportunity to do some work, reorganize a space, build an additional structure, or add additional units where it will increase the net return of the property. Properties with a lift will often sell at, a higher premium than a brand-new turnkey investment (of the same asset class, location, size etc.). Be sure to add a comprehensive zoning review with the listing and point out where zoning can permit further development of the property.
5. Identify planning opportunities
With an ever-growing community, the city often builds new campuses, hospitals, schools, transportation hubs, parks and/or gentrifies areas. Depending on where you are located, a quick call to the city’s local building office can get you valuable resources, links, and materials about these plans. Identify those which are close to your property and be sure to get an evaluation done by a real estate professional on the kind of value they can bring to your property.
6. Get a pre-inspection
Nobody likes surprises. When an investor purchases a property and a potential issue is discovered, he can either take advantage and request a substantial reduction in price or he can walk away. Both of those do not bode well for your listing. Investors like certainty and do not like risk. Once a property cycles on and off once, it becomes increasingly harder to resell the asset as it becomes stigmatized. Doing your own home inspection upfront can allow you to identify problems and address them before listing or at the very worst, disclose them so the investor knows exactly what they are buying and cannot leverage the issue when it is discovered on the home inspection.
7. Get an appraisal by a well-recognized company
Usually, banks will request an appraisal as there is often, no default insurance. The banks will ask for an appraisal that can slow the sale down and it could take weeks and/or months. Having an appraisal ready can cut down the waiting time and reduce the chances of further complications. It’s also good to have an appraisal on file that supports your list price.
8. Get all your documents in order
When you sell the property. The buyer will want to do due diligence. Make sure to get a cloud drive with all your leases, expenses, receipts, permits, work orders, occupancy documents, fire retrofit certificate etc. Having this information readily available gives the buyer confidence that things are in order and also makes it easy to corroborate that the building is exactly what the listing claims it is. The fewer questions, the better.
9. Understanding conforming and legality
There is no worse scenario than finding out during a buyer’s due diligence that the building is not conforming with zoning guidelines, building code, municipal bylaws, and/or fire code. Make sure that you gather all the documentation to support the fact that your building conforms to the legalities. If you do not understand what this means. It is best to consult with a professional real estate agent who does. Otherwise, it could cost hundreds of thousands of dollars.
10. Hire a Real Estate professional proficient with rental properties
Selling with an agent who is experienced in selling rentals not only helps to manage all of the above but also to deal with tenants, showings, managing feedback, problem-solving issues as they come up, and negotiating a great price for you based on an in-depth understanding of the market as well as the sales history and trajectory of properties within your area.