While we focus on NOI and Cap Rates when buying apartment investment properties…we still pay close attention to curb appeal…that’s part of what attracts potential tenants. With that in mind, when preparing to sell a multifamily property we want the grounds to look the best they can without breaking the maintenance budget.  If you can’t afford to do everything, do everything you can.

PHASE ONE:  Before listing a multifamily property take a walk around it with a different focus. Try to looking at it as you would a plane when you board. The psychology of safety is that when things look messy, ill planned or in disrepair, we perceive that higher risks are present.   To ease traveler’s fears airlines strive to have passengers enter a clean and neat plane.  The multifamily analog is we stripe the parking lot so it looks sharp, prune tall bushes….particularly those near buildings.  Mowing the lawn is a must. Adding colorful flowers to the landscaping is a good idea. 

Create scenes, viewpoints that best displays the pluses of the property.  The marketing photos and videos will use those to attract attention to the property.  The financials will be what ultimately sell an investor…but the marketing images increase the odds of a buyer taking the time to look close enough to view the financials.

PHASE TWO:   The first items that any investor or buyer’s broker will ask for is a Rent Roll and Profit and Loss Statement.  Those need to be  current and readily available upon request in electronic format.  In this climate actual results must be delivered.  Proformas…”the art of the possible” are acceptable…but only if real numbers are shown as well.  That may be enough information for a potential buyer to submit a Letter of Intent (LOI), but that is only the tip of the research iceberg.  In order to be ready to go to market, Sellers need to have the entire Due Diligence Package complete and ready for submission to the Buyer.   Imagine that you are an interested investor that requests a complete package…only to be told that will be sent in a few days or weeks. 

The best time to forward information requested in the initial interest phase is immediately.  Delays create the impression of increased risk…higher perceived risk inherently reduces perceived value.  Contrastingly, Sellers and Seller’s agents that anticipate questions and answer them in advance of their being asked create trust and value.

In my next article I’ll discuss everything that belongs in competent Due Diligence Packages…and how that package will vary based on the size of property.

Free Offer:  I will give you up to two hours of my time without cost or obligation.  That includes reviewing wealth building strategies, tax deferral opportunities, disposition/acquisition tactics, equity analysis, etc. 

The fine print:  You pay for the coffee.  Contact me at: 503.577.1034 or rick@rosecitycre.com.

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Investors are increasingly turning to Cost Seg.

Not every tool is appropriate for every investor, but my job is to make them aware of what is available to them so they can make  informed decisions.  One of the tools that has been around for years, (but is only now starting to see much application,) is Cost Segmentation.  Most investors use depreciation as part of their tax deferment strategy; cost seg. greatly accelerates the permissible amount of depreciation in the first years of ownership.  The effect is to offset much of the current tax liability from profits of operation.  For some investors it offsets all current profits and provides a hedge for income derived outside of the producing property.

Investors love getting depreciation on appreciating assets!

Cost Seg simply lets them get more of what they want…and earlier.  What’s not to like!  It works like this:  the concrete in a building has a much longer life than a washing machine…even if it’s a Maytag.  It makes sense to permit the apartment owner to use an accelerated depreciation schedule on the washing machine, the drapes, the pool equipment, etc., than the concrete.  For years some accountants have cherry picked a few items that were obvious and used shorter “dep scheds.”  Cost Seg is the same process…but on steroids.  The “bright line” ruling on this is that for Cost Seg studies a “Cost Engineer” (not “Cost Accountant”) must perform a site inspection to determine what components are subject for accelerated depreciation.  There are tables with thousands of components…each with their individual depreciation schedules.  The accumulated list of items sets the basis for what may be used in which years. 

What’s the best time to initiate Cost Seg.?

The most fruitful time to have the experts perform a cost seg study for a project is at acquisition.  Years later it may still make sense…but its aways best from the first year of ownership.  For this reason I believe that it is the duty of a (good) investment broker to inform his clients about cost seg.  Even more so than a tax accountant.  Some tax accountants see cost seg as a threat to their position rather than an adjunct to their valuable services.  The real litmus test should be: “What’s best for the client?”

What does it cost? Where do I sign up?

Costs vary from project to project based on complexity.  That permits it to be a viable tool on $500,000 acquistions as well as mammoth developments.  For every dollar invested in Cost Seg you will likely get a much higher return than you do on the property itself.  Much higher. I talk several times a week with a Director of the largest Cost Segmentation provider in the nation.  One of the services that I offer investors (whether they are my client or not) is a no cost cost seg feasibility study.  I ask for the opportunity to be of service.  Please contact me at: 503.577.1034, or rick@rosecitycre.com.

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The future of the residential market is not clear in my crystal ball…but it takes no wizardry to assess the current situation:  There’s a lot of good people hurting right now.  A few of the folks that are upside down have taken foolish risks, but there are many more that  may even have a legacy of success, of winning and good luck…but whose joss just ran out.  Whether they got there for good reasons or bad, the many who are down on their luck are easy prey for charlatans and thieves.   There are real and effective solutions ranging from working out a loan accommodation, to creating a short sale.  In a short sale a homeowner’s bank permits the house to go for less than is owed.  This can result in a much, smaller credit rating hit than bankruptcy or just walking away from the home.  But it needs to be handled by a pro.

Enter Donna

Folks that have had a rough go of it deserve to be helped by someone that is not only compassionate, competent, and trustworthy, but by someone who will be their passionate advocate.  My friend Donna exemplifies these traits.  This specialty is well outside of the capabilities of most homeowners…it also exceeds the training and expertise of most real estate agents.  Donna’s Accomodation success percentage is 4 times higher than the average.  (Her win/win percentage is 100%.)

Perhaps most telling about her character, Donna was the CEO and teamleader of a branch of the third largest real estate brokerage in the US.  She left that position to be of service to those in need.

Who can you help?

1. Friends, family and acquaintances who need an accommodation workout to save their credit.
2. Someone who needs a short sale expert to evaluate options.
3. Those desiring a rapid turnaround on selling their home.
4. First time homebuyers and investors looking for value priced homes.

Be kind to those you care about and forward this information.  If I was in need…I’d want Donna fighting for my family’s future.  Wouldn’t you?

Take action today:  503.577.1034 or:  rick@rosecitycre.com.

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