I know now is not the best time to liquidate properties but I have been thinking I want to take that step.
Now the question arises on how to go about it. Let me know what you all think.
1) Sell all properties (six condo's) as a package? This would be hard to do in my opinion. It would probably require a cash buyer. I need to net $500K and that is a large amount of cash for an investor to come up with. I understand banks do not offer blanket loans anymore for multiple properties. I can show on paper a 9% real return after all taxes, HOA fees, insurance, ect. Properties are paid for free and clear.
2) Sell them individually with the renters in place? I see this as most practical. The only factor is the time involved. I would much rather be a blanket deal.
3) Lease Purchase? I like the idea of a bigger price and larger monthly rents until the option is exercised but the new Frank Dodd regulations may hinder that.
What is your opinion on the easiest and most efficient exit strategy? Any other ideas/comments/advise?
Thanks a million.
Are you willing to discount for a package deal. That is what it boils down to. How marketable are they to an investor who buys them in bulk and sells them off individually?
Gee, why not take the time yourself to market them for the highest dollar involved?
In my opinion it depends first on the product you have and the market. For example in Las Vegas prices have surpassed what would be considered great investor returns. So an end buyer would be willing to pay more for properties than an investor. If you want to target end buyers you will arrive at the highest price by showing properties as vacant and nicely presented (I don't know if you are near the end of the leases?). However if the market is allowing for great returns, the situation may be the opposite - where the desired return allow for higher than sold comps value. In that case selling the properties occupied to investors will be the way to go.
I've helped several clients sell in your situation. As @Guy Raveh mentions, part of your marketing decision will depend upon the price to rent ratios and investor demand at those levels. If the ratios are good for investors, then selling with tenants in place is probably a good idea. In this situation, I've usually recommended that you give the tenants a heads-up and let them know that you will limit showings to buyers after an accepted offer.
Conversely, if the ratios don't favor investors, then I would recommend waiting until the properties are vacant before marketing for sale. Tenants usually aren't too cooperative with showings (unless they have something to gain), and you can't control the environment.
Depending upon your situation, you could offer incentives to the tenants. I would lean more towards offering them an incentive to leave early versus a reduced rent while marketing. This goes back to my reasoning in the previous paragraph.
A third option would be to sell directly to the rents that can qualify for their own financing. You would benefit in this situation, because you wouldn't have to get agents involved (no commission). Although, it may be beneficial to hire an agent on a reduced flat fee basis to push the paper.
I wanted to update this post after learning some legal points. Per the attorneys, Lease Option sells 'should' be avoided now since the Frank Durbin regulations came into law on 1/1/2014. It looks like that is a dead end going forward. As a matter of fact, any seller financing should be avoided (in their opinion) unless you are a licensed mortgage worker. Although a court has not given an opinion on this issue yet, who would want to be the first to be sued with all the new regs.? Not me.
I guess I will liquidate slowly as each condo's lease expires. Thank you for your replies!
That should have read "Frank Dodd" not "Frank Durbin".
i'd sell one by one. more cash this way.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing