When it’s time for an investor to let go of their commercial property – whether it’s because the property has depreciated, or there’s an opportunity to cash in on record-high property values, or it’s time to move – you’ll need to ensure a smooth sale.
Advanced preparation is key so make your property buyer-ready with these tips.
- Make sure the property looks attractive
Tour the property and assess the improvements and repairs it needs to boost its value in the eyes of potential buyers.
Well-maintained properties tell potential buyers that the owner cares enough about their investment to take good care of it. It helps convince buyers of the property’s potential return.
Possible improvements will depend on the property type. Industrial spaces will benefit from fresh exterior and roomy, well-kept interiors. Retail and office properties, on the other hand, gain plus points for having orderly parking lots (freshly painted lines, no potholes) and clean, clutter-free, and professional interiors.
While thorough renovation isn’t a prerequisite to selling, taking care of major maintenance ahead of schedule affords sellers a better position for negotiating, because it reduces the number of future issues a buyer would have to deal with.
- Hire an experienced CRE agent
Commercial real estate is a specialist’s market. Because of this, many CRE sellers and buyers seek the counsel of a real estate agent who specializes in these properties. More often than not, hiring an agent will save you more time, effort, and money than taking the FSBO approach.
An experienced commercial real estate agent offers:
- Deep insight and insider knowledge of local market developments and trends and how they may influence your sale
- Access to off-market buyers who tend to offer more for properties because there are fewer middlemen and more direct contact to a seller
- Access to other listings and buyer networks that are typically unavailable to FSBO sellers
- Expert and level-headed negotiation, even during contentious stages of the sales process
Properties offered at the right price quickly find buyers and allow sellers to move on to other things. To successfully navigate the complex price setting of commercial properties, analyze similar properties in the general area of your own property.
Are they located along streets with plenty of traffic? Have any of them been recently renovated? What makes them standout as attractive investments? These are just a few aspects that contribute to a property’s final selling price.
Next, consider your property’s value, which can be calculated from its cap rate and net operating income (gross rental income minus operating expenses, before taxes).
In 2019 for instance, the average cap rates for retail and office properties in Long Island hovered at around 7%. If an office building with a cap rate of 7% and a net operating income of $40,000 went up for sale, its estimated value would be about $571,430.
To successfully market your property to the right buyer, brainstorm which features they might look for in a new investment and why. Your agent can provide valuable context for constructing an accurate image. At the same time, think about the highlights of your property in terms of traffic, accessibility, demographics, tenant mix, and occupancy.
Ask if your agent is privy to the details of recently closed transactions. Both parties in those transactions might take an interest in your property despite having different motivations. Buyers can see it as a means of expansion, while sellers may be looking for a more lucrative investment (with the benefit of already having the financing sorted).
Once your property is ready for listing, take multiple pictures and include them in all online listings of the property. For the best results, hire a professional real estate photographer or videographer. They will show the commercial property for sale in the best light and showcase the features buyers are looking for.
Consider getting the property on a variety of platforms, particularly social media – which is now standard practice. Instagram, for instance, has become a powerful tool for attracting buyers in residential real estate because of its image-heavy format.
Do you want to know even more about the CRE sales process – especially when it comes to things like the closing costs for a seller in New York?
Call us at 917.741.4296 or send an email to info(at)alexandermeskouris(dotted)com to schedule a consultation with me, Alexander Meskouris, a real estate expert on commercial real estate in Manhattan and Long Island, New York.