As a commercial real estate broker with a focus in apartment investment sales based in Southern California, one of the markets with some of the highest barriers to entry in the nation, multifamily investors have to be more savvy in implementing strategies to increase cashflow when investing in apartments more now than ever. The demand for apartment buildings in many owners’ minds may lead them to believing that they can save money by selling their property without using a commercial real estate broker, especially if they are a licensed real estate agent themselves. Here are some reasons as to why you may want to think twice before moving forward going FSBO.
SELLING OFF MARKET MEANS THAT YOU ARE LIMITING YOUR OPTIONS AS AN OWNER TO THOSE WHO ARE AWARE OF THE PROPERTY”
As a result, you are limited to a small group of people (i.e. the person(s) who solicited you tell sell directly) meaning that it is unlikely that you are receiving the highest price the market will command. As an investor looking to buy “off market” means that they can acquire a property with attractive yield, as they do not have to worry about becoming involved in bidding wars over the property. From an owners’ perspective, it limits your options for exposure for your property. Furthermore, if the sellers’ expectation on price his at or above market, it is unlikely that they will receive their asking price “off market”.
THE MARKETING OF A PROPERTY WELL TAKES TIME AND EFFORT
Even in today’s real estate market, selling your property using a For Sale By Owner approach (poorly taken pictures, coupled with spreadsheets showing financials) is not a viable strategy to attract the attention investors with the capital to pay top dollar for your property. An investment sales agent’s job is to sell the upside of the property even if the property is in poor condition, underperforming financially as a result of below market rate rents or nonperforming tenants, once the listing agreement is signed that has what the agent has committed to do-in short become your (and the property’s) marketing, public relations and negotiations expert.
Even if you are an owner that has the ability to perform all of the above the question becomes do you have the time to dedicate to these endeavors, which can take anywhere from a few months to a year to execute.
A continuation of the previous reason, the time you spend on marketing (if you are a licensed real estate agent selling his/her own property) public relations and negotiating could be better spent managing your property, maintaining or growing your business or spending time with family. (Note: if you are a licensed real estate professional, just because you can sell your building yourself, it does not always mean that you should-if you have partner(s), this could be interpreted as a conflict of interest as you stand to receive a commission off of a property you own, taking away from the joint profits of your joint business venture.
In conclusion, while selling your property without a commercial real estate agent’s representation may save you some money, the time invested in the effort of selling for sale by owner and well as the limited exposure of selling off market can cost you much more than you gain.