Billion Dollar Portfolio by Brent Sprenkle

Author:Brent Sprenkle [Brent Sprenkle]
Language: eng
Format: epub
Published: 0101-01-01T00:00:00+00:00

The Cost of Making Money

“I sell when I have raised the rents as high as I can and any further rent increases lead to vacancies. I’ll also sell if I’m having problems with the building or have a management or tenant issue. Two to three years is the longest I’ll hold a property that’s underperforming.”

—Rao Yalamanchili

It’s expensive to sell real estate; that’s just the bottom line. If you’re on a limited budget, the only way to really grow your empire is by performing some sort of exchange. You don’t have to sell everything, but you sell the buildings that just don’t fit your business plan anymore. Another good reason to sell is the building is too small or it’s too much work to manage. Many people sell buildings because they’re just plain difficult, as in management intensive and not worth the amount of work in comparison to the cash flow they receive.

It’s almost as much work to manage a five-unit building as it is to manage a fifty-unit building. It’s one mortgage to pay, one property tax bill to pay, one roof to fix, one sewer line to fix, and one phone call to make to verify that it’s doing okay. More experienced buyers want to acquire larger buildings because of that; it is called obtaining a greater economy of scale.

When you’re ready to sell, it’s a good idea to pick the right time of the year. It’s best to go to market at the beginning to the middle of the year. The time to not go to market is July and August when people are on vacation, as well as November and December when people just aren’t paying attention. In my opinion, January to June and then maybe September and October seem to produce the best results. However, if you live in a place where there is snow on the ground from December to March, you might want to wait until it warms up. You want to put buildings on the market when buyers and brokers are at work, when kids are in school, when people are checking their emails, taking and returning phone calls and are ready for business.

Your best price comes when the highest amount of people have their eyes and attention on a new listing. You want a competitive situation where you have multiple interested buyers, so you then receive a variety of attractive offers and you can then obtain competition amongst buyers for your property. You don’t want to sell your building when there’s nobody looking.

Most of all, during this process, you need to listen to your broker.

Many people are just not comfortable letting someone else run the process. It’s a control thing. But it’s the reality of hiring a professional to handle something that needs to be done where you don’t have the same level of expertise or tools. You can look at it like hiring a plumber. Sure, you can probably fix that plumbing yourself, but at what cost? You’re going to most likely end up spending more for materials, and you’re going to have more headaches.

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