The investment sales section of our commercial real estate industry is quite special. You are serving a special type of buyer and on that basis you really do need to package the property, the tenancy mix, and the income stream to attract the buyers.
The buyers of investment property are looking at the opportunity that the asset provides today or into the future. As agent, it’s your job to match that focus to the listing and pull in the inquiries. Investors think mainly about three things being:
- Income stability (lower risk)
- Income growth (net income)
- Capital gain (yield driven)
Look at every investment listing with due regard for these factors.
Exclusive Listings are Critical
When you understand the current property market in a comprehensive way you can tap into the best listings that are suited to an investor. Exclusive listings are required to successfully promote this type of property; don’t bother with ‘open listings’ as they will waste your time. Choose the best method of sale to get more inquiries for the listing, the highest price for the property type, and shorten the time on market. It’s a good formula to work by.
In most cases of marketing an investment property you should publicly promote the property across all media types to attract all available buyers and create inspections; in that way you will get a reasonable price for the market conditions.
If the property is located in a prime position then you would be well advised to not put a price on the property but auction it. Let the market set the price; the seller should understand that a good property will attract reasonable levels of investment inquiry and the auction process helps boost inquiry and price intensity.
To take a property of this type to the market, here are some important factors or principles to research and merge into your promotional and inspection efforts:
- Rental detail: You will need to cover off on gross rents, net rents and outgoings to run the property. Are the rents aligned to market rents and current leasing conditions? Do you think there are factors of growth in the rents given current market conditions or leasing predictions? How does the net rent compare to other properties in today’s market?
- Outgoings: Look at the outgoings or running costs for the building or property. How do they compare to other properties of similar type, and also the industry averages? If the outgoings are too high, it is best to fix the problem before any marketing commences.
- Yields: The yield for the property will be determined by the ratio of net income to the potential price. Yields will change based on the quality and type of property, as well as location and opportunity. You must know about other property prices and rents to calculate yields in a meaningful way.
- Leases: Get the lease detail and review all leases for income, expiry, and occupancy; they will have a big impact on passing income and growth. Some leases are more favorable for investment sales. You will need to read the leases as part of preparing a property for promotion.
- Tenant mix: Understand just what tenants you have in the property and how they are positioned for ongoing occupancy. Some tenants provide a real positive impact and image to a property marketing campaign. Any threat of vacancy should generally be removed from an investment sale before you promote. To help that process you can establish a ‘tenant retention plan’ to show buyers as they consider a potential purchase.
These 5 basic principles of investment sales will help you attract buyers to the listed property and market it efficiently and directly; that’s how you get a good price and shorten the time on market. Be prepared to ‘package the listing’ and do the best you can with your exclusively listed investment property.