Why Should I Sell My Multifamily Property?

Why should I Sell My Multifamily Property?

There are a number of reasons why people decide to sell their multifamily property, but most can be categorized into three groups: Problems, Opportunities, and Changes.

With this decision though comes the consideration of capital gains tax and how to ensure you are getting the most for the sale of your property.

There are several reasons why people do sell:

Problems:             

• Management
• Vacancy
• Maintenance
• Stress
• Health
• Debt
• Neighborhood
• Interest Rates

Opportunities: 

• Strong Market Values
• Alternate Investment
• End of the Hold Period
• Tax Savings

Changes:               

• Divorce
• Death
• Retirement
• Partnership Split
• Relocation
• Consolidation
• Diversification

What do I do with the sales proceeds? I don't want to pay Capital Gains Tax!

There are several options for sellers to defer or minimize capital gains taxes:

• 1031 Exchange
• Delaware Statutory Trust/Deferred Sales Trust  (DST)
• Tenancy in Common Investment (TIC)
• Installment Sale

How do I know I am getting the most money for my property?

We not only market properties for sale. We make a market for properties we represent. Each offering is thoroughly underwritten, aggressively priced, and accompanied by loan quotes to expedite the sales process. We leverage our broad national marketing platform syndicating to the top CRE Listing Sites with direct outreach to our investor database and an orchestrated competitive bidding process that yields higher sales prices. 

What is my property worth?

Contact Us to discuss what information is needed to complete a Complimentary Commercial Broker Opinion of Value (BOV). 

I’m not interested in selling at this time.

This is understandable as only about 5% of the market trades in any given year. We are also happy discuss any purchase or refinance interests and recommend some physical and operational changes you can make to add value to your property you will appreciate when you eventually sell.  

 

Have you thought of selling your property and would like to know what it's worth? Request a valuation for your property below:

Request Valuation

eXp Commercial Chicago Multifamily Brokerage focuses on listing and selling multifamily properties throughout the Chicago Area and Suburbs.

We don’t just market properties; we make a market for each property we represent. Each offering is thoroughly underwritten, aggressively priced, and accompanied by loan quotes to expedite the sales process. We leverage our broad national marketing platform syndicating to the top CRE Listing Sites for maximum exposure combined with an orchestrated competitive bidding process that yields higher sales prices for your property.

 

https://www.creconsult.net/market-trends/why-should-i-sell-my-multifamily-property/

Show Don't Tell - Using Data to Drive NOI

Using Data to Drive NOI

Real-time data helps multifamily leaders make better decisions, faster; ultimately being the key to driving NOI. We’re big proponents of using data to show your people what to do next versus telling them what to do. It’s a crucial practice to driving sustained organizational revenue and winning as a team in an industry that lags others in terms of innovative practices.

Here are three actionable use cases that our team presented at the RETCON 2022 Conference to illustrate the NOI power of showing versus telling.

Marketing Case - Show What Ifs

A multifamily client (Asset Manager) was faced with a New York property that was falling short of its occupancy goals despite a relatively high-cost unit marketing spend.

Instead of immediately increasing their marketing spend, they dug into the data and found:

1. Property Lead to Visit conversion exceeded the NYC market’s (37.9% vs. 24.6%)
2. Property Visit to Application conversion lagged the NYC market (8% vs. 43.2%)
3. Property Cost per Lead is $65 compared to the NYC portfolio average of $50
4. Property Cost Per Lease of $844 compared to the NYC portfolio average of $500

Here’s where the rubber meets the road. Conversion after touring was less than half of other NYC projects. This revealed a few great opportunities:

• Was Marketing overselling? Was Leasing following up? Was pricing right?
• What were the reasons the property couldn’t convert prospects?

While it may seem counter-intuitive to reduce Marketing spend while trying to drive more traffic, using the data to play out what-if scenarios (traffic conversion to application, optimizing traffic sources, etc.) allowed the client to focus on key areas to drive efficiency and effectiveness.

Visualization Case - Show Trends

In the first month of a lease-up, another multifamily client (Owner Operator) was reviewing the leasing velocity data of their high-rise development. They started their conversation with a look at the occupancy and availability through their elevation visualization.

This allowed them to visualize current data using 2D, 3D, and geospatial models of their lease-up. Seeing some floorplans/stacks lease more quickly and others more slowly, they found there was something geographically appealing about a particular side of the property.

This revealed a big opportunity:

• Add the $500 amenity fee to applicable units before losing more revenue
• Double-check for other missed amenity fees across the property

Data visualization allowed the team to quickly spot this unusual trend and gain clarity around unit-specific nuances that were impacting leasing and NOI.

Renewal Case – Show Variables

We’ve all heard the age-old saying that it costs more to hire a new employee than it does to retain one. Well, the same goes for multifamily, thus the importance of effectively managing renewals, which often make up 50% or more of a property’s NOI.

A multifamily client (Owner Operator) built an analytically driven culture and NOI within their organization by deploying a Renewal Negotiation Dashboard that co-mingles data from different sources so that Community Managers could see all the variables that might play into a resident’s decision to renew their lease or not.

The following data provided all the answers to questions that a resident might raise during a renewal discussion and empowered managers to know the entire lease story for any resident who walked through the door within minutes.

• Financial data - ledger information to see whether there were outstanding amounts owed
• Revenue management data – to see how market rates were trending vs. the offered rent
• Leasing history data – no matter who handled the renewal, they had all the information
• Service requests data – gauge a resident’s satisfaction with the quality of the apartment

By making this data available, Community Managers across the organization were empowered to gauge when they were in a position of strength to negotiate or weakness.

These are only a few examples of wins that have come out of using data to show versus tell. What could your data be showing you? How could you be using data to lead your teams to faster and better decisions? Is your data hindering or driving your NOI?

 

Source: Show Don’t Tell – Using Data to Drive NOI

https://www.creconsult.net/market-trends/show-dont-tell-using-data-to-drive-noi/

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2023 State of The Commercial Real Estate Industry

Join eXp Commercial President James Huang and Economist KC Conway on January 17 for a fireside chat as they discuss the state of the 2023 economy and how you can prepare your business for success in the changing market.

Date: January 17, 2023
Time: 11 a.m. - 1 p.m CST
Location: eXp World > eXp Commercial Auditorium

 

 

+ Add to Google Calendar   + Add to iCalendar

https://www.creconsult.net/market-trends/2023-state-of-the-commercial-real-estate-industry/

Midwest home to most competitive rental markets in U.S. for 2022

As the year ends, renting is at its highest level in half a century. The increased adoption of “work from home” provided many people the freedom to experience life in a new location.

What were the hottest rental markets in 2022? RentCafe.com analyzed the largest markets in the U.S. where data was available by honing in on (1) the number of days apartments were vacant, (2) what percentage of rentals were occupied, (3) the number of prospective renters competing for an apartment, (4) what percentage of renters renewed their leases and (5) the share of apartments completed this year.

Vacant units, nationwide, were occupied within a month, on average, and a heightened number of renters chose to renew their leases. Rapid inflation and surging interest rates forced many people to put their dreams of homeownership on the backburner, but with 95% of apartments already occupied, finding a new unit in any market was competitive, to say the least.

Renters in search of a lower cost of living flocked to the Midwest. Milwaukee, Wisconsin, and Grand Rapids, Michigan, were among the most competitive metros this year, based on the report, the latter boasting a city occupancy rate to nearly 97%. The shortage of supply there only increased demand, with 18 prospective renters in competition for each apartment. Milwaukee, too, had an average of 18 renters vying for a single unit, taking each off the market in less than a month.

Suburban Chicago ended the year as the country’s 18^th most competitive rental market, according to RentCafe. Nearly 70% of renters here decided to stay put and renew their leases, further driving competition—close to 17 renters applied for each available unit, a number well-above the national average. With occupancy rates touching 96%, the metro was far from meeting the aggressive demand for housing, despite the increase in newly delivered units.

Surprisingly, Chicago Urban didn’t make the cut on this list. Good or bad news, depending on who it’s being considered by. The rate of renewal leases here reached 56.5%, and an average of 11 renters competed for each vacant apartment.

 

Source: Midwest home to most competitive rental markets in U.S. for 2022

https://www.creconsult.net/market-trends/midwest-home-to-most-competitive-rental-markets-in-u-s-for-2022/

The Dangers of Selling Commercial Property Too Late

The last downturn

cost those who chose to sell commercial property an average of

30.3% of their property value

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Reason #1

Why people sell commercial property too late:

Complacency

 

Complacency is the most dangerous state to ignore.

It’s the moment before the market corrects and values decline. When the market goes through this initial correction, our natural tendency is to be complacent because initial corrections actually look like a cool-off period.

Then we expect the market to pick up again and continue with its growth phase.

But, the market continues to deteriorate and worries creep in as we wonder what is going on. Next, it is normal to say to yourself that your investments are good ones that they’ll ultimately come back.

When the market continues to soften until it seems there is no hope in coming back, that’s the absolute bottom of the market and the worst time to sell.

 

This point of capitulation is one of surrender and of asking how the government could let something like this happen.

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Reason #2

Why people sell commercial property too late:

Ownership and Identity

 

In order to avoid loss, people will overvalue what they own.

That is what Richard Taylor, Daniel Kahneman, and Jack L. Knetsch identified with the Endowment Effect. In fact, Kahneman and Knetsch won the Nobel Peace Prize for their research in this area of behavioral economics.

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It’s normal for people to overvalue what they own.

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In a study with Cornell undergrads, broken into groups and given identical coffee cups, Kahneman and Knetsch told one group to value the cups they owned and the other group to value the cups they would purchase.

They found the undergrads with the coffee cups were unwilling to sell their coffee cups for less than $5.25 while their less fortunate peers were unwilling to pay more than $2.25 to $2.75.

But, it was Carey Morewedge’s research into the Endowment Effect that revealed that it’s not loss aversion that leads to overvaluation, it’s ownership and identity.

Morewedge found that it’s our sense of possession that creates the feeling of an object being mine, which then becomes a part of our identity.

 

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Reason #3

Why people sell commercial property too late:

Loss Aversion

 

Why is it so difficult to sell commercial property in a market decline?

According to Brafman and Brafman, authors of Sway: The Irresistible Pull of Irrational Behavior people will go to great lengths to avoid perceived losses.

What’s more, people also succumb to their will to recover what once was.  They will spend whatever it takes not to lose, be it time, money, or emotional resources.

Imagine watching someone playing craps in Las Vegas. When they are on a roll, taking in their winnings, they race through the growth phase, reaching the peak of the game.

They feel ecstatic.

But what happens when the tide turns and they start to lose?

They enter the complacency stage, call it a short turn of bad luck, and keep playing.  They believe they will return to the top. But their bad luck continues.

By waiting to avoid losses, people hold off and then sell at the wrong time — maximizing their losses.

 

They lose their winnings, keep playing and generate losses. They would rather hold onto the idea of getting back to where they were at almost any cost than realizing their loss and moving on to another opportunity.

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Reason #4

Why people sell commercial property too late:

Self Reliance Time Traps

Time Trap #1: Self-Education

 

People will self educate online because it is free and immediately available. A review of the search term on Google for “commercial real estate trends” returned 152 million results. A search for “commercial real estate trends YouTube” turned up 310 million results!

No doubt, an abundance of free information in the form of market data, blogs, market reports, and online opinions on what’s happening in the market is available.

Time Trap #2: Friends, Family, and Non-Commercial Advisors

 

When we aren’t sure what to do, we often consult friends, family, and non-commercial real estate advisors for input. Unfortunately, these people will not want to be the ones to say sell because it is easier to say no and risk being wrong than to say yes and risk not being right.

Plus, most of these folks will not have the data that you have seen here. These people are more likely to share anecdote based advice like “My friend made a killing in real estate. You should hold on, it will come back.” Remember, people who made this mistake lost in 2008-2010.

Time Trap #3: Hire a Traditional Broker

 

It is easy to find a traditional broker, given that 1 in 164 people in the United States today have a real estate license. According to the National Association of Realtors, there are about 2 million active real estate licensees in the United States.

The problem is that most traditional brokers do not specialize in Commercial Real Estate, Investment Sales and further specialization by property type. 

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Have you thought of selling your property and would like to know what it's worth? Request a valuation for your property below:

Request Valuation

eXp Commercial Chicago Multifamily Brokerage focuses on listing and selling multifamily properties throughout the Chicago Area and Suburbs.

We don’t just market properties; we make a market for each property we represent. Each offering is thoroughly underwritten, aggressively priced, and accompanied by loan quotes to expedite the sales process. We leverage our broad national marketing platform syndicating to the top CRE Listing Sites for maximum exposure combined with an orchestrated competitive bidding process that yields higher sales prices for your property.

 

 

https://www.creconsult.net/market-trends/the-dangers-of-selling-commercial-property-too-late/

Off-Market Multifamily Sellers Are Leaving A Ton Of Money On The Table

Off-Market Multifamily Sellers Are Leaving A Ton Of Money On The Table

Marketing a property can increase the sale price by up to 23%, which runs counter to the idea that off-market deals can achieve higher values because a buyer will be more aggressive to seal a trade.

The perception is when a seller has one buyer vying for an asset, that buyer is more aggressive and willing to pay a premium because they don’t want the seller to get into a bidding war for the property. Our research found the opposite.

This is a sign it is in the best interests of owners to undergo a marketing campaign for their properties. Growing allocations from institutional investors toward real estate are still driving a sizable pool of investors into bidding for multifamily assets, and a full campaign is what drives the premiums.

The job of a broker to create a competitive environment on behalf of the seller. Putting a building on the market determines the strongest buyer.

That may not be necessarily based on price alone. If one buyer has a higher-priced offer but weak financial backing, versus a buyer with a stronger track record, taking a lower offer is the way to go. It’s our job to give the seller those options and we do that by marketing properties and generating the highest number of qualified offers possible.

There are numerous case studies where a seller received an off-market bid, put it on the market, and the off-market buyer still bought the asset but at a higher price.

 

Have you thought of selling your property and would like to know what it's worth? Request a valuation for your property below:

Request Valuation

eXp Commercial Chicago Multifamily Brokerage focuses on listing and selling multifamily properties throughout the Chicago Area and Suburbs.

We don’t just market properties; we make a market for each property we represent. Each offering is thoroughly underwritten, aggressively priced, and accompanied by loan quotes to expedite the sales process. We leverage our broad national marketing platform syndicating to the top CRE Listing Sites for maximum exposure combined with an orchestrated competitive bidding process that yields higher sales prices for your property.

 

https://www.creconsult.net/market-trends/off-market-multifamily-sellers-are-leaving-a-ton-of-money-on-the-table/

1120 E Ogden

Retail / Office Space For Lease | 3,674 SF | $20/SF NNN
1120 E Ogden Ave, Suite 101 | Naperville, IL 60563
Broker: Randolph Taylor rtaylor@creconsult.net | 630.474.6441

https://www.creconsult.net/retail-office-for-lease-1120-e-ogden-ave-suite-101-naperville-il-60563/?wpo_all_pages_cache_purged=1