Hi guys. Willie Mandrell with the Mandrell Company and today I want to talk to you about five things that you must do prior to selling your multi-family property, your 2- to 4-unit residential or larger investment property. Here are five things that you must do or consider prior to putting that property on the market.
Number one, and the most important thing, is keeping your tenants informed. Nothing can spoil a sale faster than having a tenant who was uninformed about the sale and now objects to that sale, is uncooperative in terms of letting potential buyers in or coordinating with your realtor. You really want to keep your tenants informed about the sale and educating them about the process prior, letting them know that if they’re under lease currently, their leases are going to be respected by the new buyers. If they are worried about rent increases, having that conversation with them prior.
I think the most important thing is also informing them about showing times. We’re going to be having an open house on Saturdays and Sundays from 11 to 1. The realtor is also going to be contacting you for showings in between on Tuesday nights or Wednesday nights. We’re going to try to keep it to a minimum, as not to disturb your quality of living. We don’t really want to interrupt your dinner time or special family events. Keeping that open line of communication with your tenants is going to help the sale move a lot more smoothly than having them uninformed. Making sure you keep your tenants informed, number one.
Have a pre-sale inspection. This is not an absolute necessity, but it can really help move the sale along. If you have a home inspector come in prior to actually putting the house on the market, the home inspector will tell you which appliances are not working correctly, which plugs are not grounded, does your roof look a little older, does the foundation need some type of pointing? If you have a pre-sale inspection, you can learn a lot about the property that you might not have otherwise known, and give you an opportunity to address some of these issues prior to putting the house on the market, and can make the sale go a lot more smoothly than having the reverse happen and having the buyer do the home inspection, and then them coming up with issues and the potential sale falling apart later on.
Number three. Check your smokes. If you are operating with a two- to three- or four-family residential property, the sale cannot take place unless the Boston or local municipal fire department comes in and assures that your smoke detectors are in the proper working order and the proper position within the home as well. Making sure that you’re going around and checking your smokes, that they’re ten feet from every bedroom, that if you own a three-family or above, that the hallways, the common area, the back and front hallways, plus the basement are hardwired to an electric panel. Talk to your realtor about the requirements for the smoke inspection. They are most likely going to coordinate with the municipality, the local fire department and make sure that smoke inspection happens for you. Making sure your smokes are in good working condition, because the sale of that property will not happen if they are not.
Number four, very important as well, talking to your CPA about the sale of that property. If you’re selling that property, are you taking the cash and doing something with it? Are you cashing in? Is it closer to retirement? Your CPA is going to be able to advise you on the tax consequences. The federal government wants their money. The state and local governments also have a stake in the sale of your property as well. Talking to your CPA will give you a good understanding of what’s going to happen with the cash after the sale of that property. It’s something you really want to do and really understand prior, so you can make accommodations. Maybe you want to minimize your tax liability, and talk to your CPA about a potential 1031 exchange, an exchange from one investment property to another. Talking to your CPA is very important.
Last but not least, is you want to talk to an attorney, a good attorney. If you don’t have an attorney that you work with, not everyone does, you can get an excellent real estate lawyer or attorney suggestion from your real estate agent. We, as real estate agents work with attorneys on a regular basis, and we can refer you to someone good that’s in your area that knows your real estate. The reason you want to do that is you really want to have a relationship because as you’re going along and there’s certain paperwork, the offer form, the purchase and sales, the closing itself, the attorney might want to get power of attorney to sign for you at the closing, so you don’t necessarily need to attend. There’s a lot of legal aspects of selling property that you want to talk to your real estate attorney with as well.
THere’s the five things that if you do these five things, you’ll be in very good shape to have your sale move smoothly. Keeping your tenants informed, getting a pre-sale inspection, check your smokes, talk with your CPA, and hire a lawyer. If you do those five things, you’ll be in very good shape for a smooth sale of your multi-family property.