3 Reasons Why Multi Family Properties Fail to Sell & Tips to Overcome Them
There is nothing more deflating in real estate than having a property fail to sell in the open market. The number of Multi Family properties that are not selling on the market have been inching up in the past couple of years, despite our real estate markets experiencing great growth and demand.
So, why would a multi family property fail to sell in this type of market? And how can you save yourself from making the same mistakes?
In my experience of working with “recovering expireds” (sellers I represent after a terrible experience on the market), I have observed the most vital reasons of why properties sit on the market with cobwebs, circling sharks & very unhappy owners.
Reason #1: Sellers Not Preparing the Property for Today’s Buyers
The multi family real estate market has seen phenomenal growth in the past decade. Everything from residential multi family (duplexes up to quadplexes) to apartment buildings has seen fantastic appreciation gains in value, however, still one of the most daunting challenges facing the industry right now is availability of quality labor force. So, what does this have to do with not being able to sell a multi family property on the market? Well, in today’s market you have a lot of money in the pockets of multi family investors, owners and developers that are looking to expand their portfolios, but they just can’t afford the time it takes to complete an add-value remodel/rehab like they have been before. So now, they are on the hunt for turn-key (or close to it) that are performing well and don’t need much in remodels or significant repair issues. There was a time and place for prospective multi family buyers to look for “add-value” deals, but it isn’t the time now and it won’t be for a while. Lots of money targeted towards multi family property investments is being held up right now because property that demands too much construction or remodeling is not worth the fight given our skilled-labor shortages in the country.
TIP #1: Invest the time & money into your property to actually attract today’s multi family buyers that will pay you handsomely for a turn-key situation.
Reason #2: A Dud Marketing Plan that Isn’t Targeting the Ideal Buyer
Selling Multi Family property isn’t the same as selling residential property. Now you probably whispered “duh” underneath your breath when you read that, but I can’t tell you how many times I see ineffective and useless marketing information for Multi Family properties. I’m sure that you didn’t buy your most recent Multi Family property because the living room was airy and cozy on a nice winter evening or the high vaulted ceilings. Did you? No, you didn’t. You focused on how much money the property would make you, how much of a headache it would be to manage it, what repairs or maintenance would need your attention and how soon, etc. My point: The marketing plan for a Multi Family property needs to be tailored to the IDEAL buyer and the mediums used to REACH that ideal buyer need to be chosen carefully. The marketing plan needs to stay away from useless fluff and give the ideal prospective buyer a very compelling message of value for the property. A final word on this: Multi Family investors/buyers are not dumb and the more fluff and mediocre marketing they see in a given property, the more they will beat you down on price and smell a deal.
TIP #2: Make sure to identify the ideal buyer for your property first & make sure there is a very clear marketing plan to reach them. In today’s buying climate, traditional marketing practices should be abandoned & digital strategies should be the focus.
Reason #3: Hiring a residential real estate agent to sell the property (typically friends)
You might feel more comfortable and safe with an agent that you have done business with before, or maybe it’s a good friend that you think can really take care of you on the transaction. Although this is a nice and admirable approach, it isn’t a smart one. Having an agent that specializes in the area of Multi Family property sales will be one of the smartest moves you can make. Why? Because even though you have a good friend that happens to be an Orthopedic Surgeon, you wouldn’t consider that friend to perform cardiac surgery on you – would you? Those are two different areas of expertise and the same goes for real estate. Time and time again, I have walked into some nasty relationships gone awry between “friends” because of a real estate deal gone way wrong. Preserve your friendships and stay the course on hiring experts within their fields and you will be positioning yourself for better results in your transaction. Everything from developing an effective marketing plan to negotiating the absolute best price for your property is directly correlated with the real estate agent you choose to help represent your interests.
Tip #3: Create a shortlist of agents (3 is ideal) that only specialize in Multi Family properties and conduct interviews with all of them to determine the strength of their value & experience. It’s worth the time to be in better hands.
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3 Reasons Why Multi Family Properties Fail to Sell & How to Overcome Them
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