When to Open the Books

Question

Hi, I have a couple of my STR properties listed for sale. A buyer is interested and is asking to see the books (income/expenses). At what point is it customary to share this? I want to at least see a POF letter. I'd ideally like to see a contract with an income contingency that is provable, e.g., I'll buy your home for $2.5MM with the contingency that you can prove it makes $30K/month.

Luke Carl · Answer

If it’s a 1-4 family it doesn’t matter if it makes a billion a year it’s still worth the same amount as the one next door making zero.

If it’s a commercial property you should share this in the DD stage. Once it’s under contract.

Rohin Dhar · Answer

I'd echo everything  @Dustin Allen said.  If it's an existing short term rental, I expect to see at least the earnings history prior to touring the place or making an offer. It should just be part of the informational packet your agent makes available for marketing the property if someone asks. If the expense data exists, even better, but typically that's not available or reliable.

Since this is single family residence, these financials won't impact the appraised valuation, but they very much influence how much someone would be willing to pay!

Anand S. · Answer

I'm with you @Luke Carl and @Bruce Woodruff.

@Dustin Allen did you get sellers willing to share that information without even seeing the property? Was it detailed books or just high level? I imagine this was for multifamily or businesses.

Dustin Allen · Answer

@Anand S.

This is for Short Term Rentals. We frequently get gross numbers from their management. Occasionally, we’ll get the detailed breakdown for each month with average nightly rates and days per month. Every once in a while we get all that and a full accounting of the expenses paid by seller both through management and separately by them.

Bruce Woodruff · Answer

I have had to wait until escrow to see financials (at least in one case). This was on a restaurant. This might scare away some buyers, but would definitely get you the real-deal buyers. I would never show your cards until at least you have a serious letter of intent and proof of funds. You will get rid of looky-loos for sure.....

In this hot market you can afford to be picky, if your property is worth it....

Dustin Allen · Answer

@Anand S.

When representing buyers, we ask for this before even seeing the property in person. This has nothing to do with the financing potential and everything to do with direct market knowledge. If you have the property optimized and are running it to its full potential, it can easily persuade the buyer to pay a premium for the property. If you’re asking $2.5M and only making $30k/month, we’re going to ask you what’s wrong with the property or your rental system.  Often when we see really low numbers, it’s because the owners are using it on holidays and peak season for their own use.

Anand S. · Answer

Got it. Thanks.

When to Open the Books

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