As any commercial real estate agent will tell you, the goal of investing is to receive the highest possible return on investment (ROI). There are numerous ways to boost your ROI, and most of them involve preparing for the sale early. The six strategies below have been designed to help you increase your property’s net cash flow (NOI) or overall value.
1. Inspect the Property and Anticipate Future Damage
Your property has a low chance of being rented or sold if it’s dilapidated. Ensure it’s ready for tenants by investigating air quality and checking for leaks, drafts, and infestations. To reduce maintenance costs and ensure the property is ready for sale, inspect the roof, drains, circuits, and plumbing. Hire a contractor for any repair or restoration work needed.
Improving the property can add value, justify increased rental rates, and prevent future damage. Installing energy-efficient windows or air conditioning units can reduce utility expenses while adding a green space may give you a competitive edge over other properties on the market.
2. Do Your Due Diligence
Prepare your commercial buildings for sale by:
- Ordering a preliminary title report and inspecting issues like monetary liens and overdue taxes;
- Updating files to include all leases, amendments, and modifications, along with copies of all tenant correspondence, plus a historical and year-to-date rent roll;
- Servicing contracts for existing vendors;
- Collecting copies of all maintenance records and capital expenditures;
- Compiling historical and year-to-date profit and loss statements;
- Assembling an updated Phase 1 and 2 environmental assessment report, ALTA survey, zoning reports, and insurance studies.
3. Find the Right Representation for Your Property
Hiring an excellent commercial real estate agent can make the difference between selling your property right off the bat or having it wither on the market month after month, with no buyers in sight. Another thing to note is that there is nothing to lose with hiring a realtor as they are compensated only after the property is sold.
Having a realtor represent your property for sale will assist you in determining a fair and realistic asking price based on current market conditions, ensuring a favorable ROI, exposing your property to a network of motivated buyers, and managing the negotiations and paperwork when the sale is closed.
4. Conduct In-Depth Market Research
Before selling a commercial property, it’s important to gauge its value and future potential. Other commercial investors, property investment advisors, and local realtors can assist you in this evaluation.
After completing your research, you’ll be able to determine the right asking price. All in all, by setting your expectations based on data, you can understand the potential ROI of your time and effort and make informed decisions.
5. Market Your Property Digitally
Learning how to stand out in the saturated real estate market is one of the most important steps in maximizing your ROI. Having your property listed on a high-traffic website is imperative. Aside from a general description of your property, your listing should contain a description of the locality, as well as the type of tenants it can accommodate. The rise in commercial real estate online marketing tools has revolutionized how buyers are discovering and interacting with properties through virtual tours, online Zoom calls, drone aerial videos, and more.
6. Screen Tenants
Screening tenants is important for maximizing ROI as you are more likely to avoid nonpayments, property damage, and turnovers if you have quality tenants from the start. Establishing reliable communication and clear expectations with your tenants will also ensure relationship success.
Utilize the six strategies above, and you’re sure to increase the ROI of your commercial real estate property.