Determine
the price range that you are comfortable with and that is
reasonable for you to sell your income property. For example, if
you purchased your investment for $500,000 within the last five
years and you put $75,000 into renovations your equity in your
home is now $575,000. Is this acceptable to you? Or do you
expect to sell your home for over $800,000? Of course we all
want to sell for the highest price possible but you must be
clear in you mind what is the lowest number you will accept.
There are a
few things you should do to determine a marketable price:
The
Cost of Selling
Calculate your selling costs (brokers' commissions, title fees,
taxes, etc.) and loan payoffs (mortgage, termination fees, etc.)
to arrive at a net figure. This figure is the anticipated sum of
money that you will receive at closing.
Your
Next Investment
Establish a plan to put the proceeds from your income property
into another investment vehicle. Try to keep your money working
for you at all times. If you need periodic access to large sums
of capital, invest in short-term guaranteed interest products.
Establish a line of credit if necessary. Do you have a 1031
Exchange Facilitator identified if you are doing a 1031?
Your
Equity
Spend time with your accountant or financial planner to
determine how to make your money work best for you. Determine if
you are prepared to offer a owner-carry loan to a buyer or if
you will need all of your available equity in the property. For
example, you may not want to realize all of your money in one
lump sum upon selling to avoid potential tax implications.
Mortgage
Issues
If
you have purchased another property, investigate the possibility
of transferring your existing mortgage to the new property. Or
it may be prudent to blend mortgage rates (depending on how
favorable lending rates are at the time). Discuss your options
with your lender.
The
Financial Story
Prepare all the appropriate financial statements that will be
requested by potential purchasers. This information is often
more important to a potential buyer than the property itself.
Your Southern California income property advisor should be able
to assist you in preparing and including proper financial
statements in your feature sheets.
Selling
price
Establish a sales price for your property that you feel is
representative of fair market value, but be aware that
overpricing a property often aids in selling other lower priced
ones that are comparable.
Factors
that DO NOT affect your property's value:
-
What
you paid when you bought (or built) your house
-
The
cash proceeds you want or need from the sale
-
What
any real estate professional says your property is worth
Buyers
dictate the best price obtainable for your property by engaging
in comparison-shopping. A buyer will not pay more for one
property than he or she would have to pay for another similar
property.
To
best determine your selling price you should have an experienced
income property agent who knows the market for your property
type complete a competitive market evaluation.
This
appraisal will show what buyers are willing to pay in today's
market by:
-
Demonstrating what buyers have actually paid recently for
similar properties
-
Showing
what buyers have not been willing to pay under current
market conditions
-
Focusing on other properties which are now competing for
buyers attention
A
competitive market analysis gives you a solid foundation for the
realistic pricing of your property.
For
Southern California Real Estate,
The OC Coastal Group is your best
source for up to date market information on income properties.
Call today for a market evaluation of your property.
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