There may never be a right time to sell; however, there are many reasons to sell! These reasons may include exiting the market for good at the end of a long or short and successful career in apartment building ownership. Changing generations and the next generation isn’t interested in the business. Upgrading your portfolio to larger and more self-managing buildings. Changing your mind about ownership and your desire to be a hands-on manager. These are only a few examples of the reasons and there are as many reasons as there are people.
Implementing a strategy is important once the decision to sell has been made and a timeline that works for you should be included in the strategy. You need to step back if you already haven’t and analyze why you are selling as this will affect the timing of the transaction and your next steps. Regardless of why you are selling, you should look at the building from a buyer’s point and a seller’s point of view and analyze your assets’ strengths and weaknesses. There may be items you have been planning to repair or upgrade which should be completed before going to market. Another key component is financing and understanding the limits imposed on a buyer by the lenders and the potential cost of breaking any terms in the mortgage. The question on hand is how you can maximize your value with the least amount of expense and in the least amount of time. Remember the market is prepared to purchase any building in any condition but the market isn’t prepared to overpay for any building in any condition. The rule of thumb when doing repairs and capital item upgrades is not to invest more in these repairs than the building is worth, or the projected return. This means if there are required repairs or upgrades and not enough time to benefit from the increased rents you may want to consider selling your building in an “As Is” or “Where is” condition or take your time, complete these repairs, and increase your rents on turnover and benefit from the increased NOI. I find most of the time owners of this type of asset class are remarkably familiar and experienced in the marketplace and the value of their asset. However, even if you are or if you are not, finding guidance that can demonstrate value is key. Most people are surprised when they realize how lopsided the marketplace is, and how many buyers there are versus available products for sale regardless of condition or size.
You will always know you have priced your building correctly when there are multiple offers from qualified buyers. The key is to achieve this in the least amount of time with the least number of headaches for you and your tenants. The marketplace is busy to the point that if you have one or two offers you may have a good idea of how much your building is worth; however, if you receive 4 or 6 offers you can be assured of the value.
I once heard a top owner of 1000’s of doors say that the strategy implemented by him, and his team is to buy and hold for the next generation. This is a great strategy, but it isn’t for everyone, so if you are thinking of selling you need to interview as many professional people as possible and then commit to your strategy.