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?
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.
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.
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.