Selling smaller income and multifamily properties is not an overly sophisticated process but overlooking small details can cost you big bucks. Buyers are going to consider location, gross income, condition of the property and potential to add value when making an offer.
As a seller, there‘s nothing you can do about location, the gross income might be maxed out, and adding value is subjective. The condition of the property is something very much in control of the seller and this can significantly impact the final sale price. Your job now is to make it easy for the buyer to want to buy.
It’s important to look condition from a buyer’s perspective. Many buildings, old and newer, will have deferred maintenance in the eyes of the buyer. Owner’s who keep up with major capital expenses when required (roof, windows, electric, plumbing, kitchens & baths) can still have a building that looks and feels tired or run down if they fail to keep up with small maintenance issues.
To maximize the value in a sale, focus your efforts in the following areas:
1. Heating and cooling: Not only are these big ticket items to replace but they are easy targets for building inspectors. Service and clean all heating and cooling units prior to a sale. Nothing screams deferred maintenance like a dingy furnace.
2. Electric: Older buildings in particular tend to have electric service and panels that have been updated on an “as needed basis”. Make sure you have the proper supply for the demand. Also, ensure all breakers and wires are sized correctly and no double taps exist. If the building is on circuit breakers, label the breakers if it doesn't require too much brain damage. Paying an electrician a few hundred dollars to tidy up the electric can go a long way. Remember, small things add up to big things. You don't want to give the buyer a reason to reconsider purchasing your property.
3. Plumbing & Plumbing fixtures: Correct any/all leaks and drainage issues. Make sure the fixtures work properly in the kitchens/baths and the toilets aren’t loose. Small leaks turn into big problems over time. This is another easy target for inspectors and they will light you up if they can because that’s what they get paid to do.
4. Basement: Walking through the basement shouldn’t be an Olympic event. Clean it out. Make sure it is properly lighted and ventilated. Organize tenant storage. If a buyer can’t wait to get out of the basement the same will go for your building in general, unless you are selling on the cheap.
5. Entrances / Exits: Make sure all exterior doors close, lock and are secure. Check for proper lighting in front/rear porches and hallways. Clean up debris, mail, tenant garbage, etc. I don’t know the exact return on a $10 broom and some elbow grease, but I bet it’s pretty good.
6. Windows: Windows can be big ticket items and a buyer knows that. If the windows need to be replaced and you don’t plan on doing it, price the building accordingly. If the windows in place have some life left in them, simply making sure they all close, lock and have screens should be on the top of your to-do list.
7. Roof: Another big ticket item. Replacing a roof can be costly but repairing a roof can be reasonable. Most roofing companies will give you a free estimate. If the roof is older and you can patch and repair for a few hundred dollars, you may want to consider it.
8. Grounds and Landscaping: General clean up to make the property presentable is all you typically need.
With any luck, you can complete a thorough pre-sale checklist of to-dos for a couple thousand dollars max and much less in many cases assuming there aren’t major repairs needed. If you don’t know where to start, ask your real estate broker or consider hiring a building inspector.
This will be money well spent that should allow you to achieve a higher contract sale price in a shorter amount of time.