The reasons people sell their owned multifamily assets are many. Very often the trigger point for listing income property has little to do with the property itself and everything to do with ownership. For one, commercial real estate investing is not a part time business. Sometimes people (owners) just get tired of the grind and decide to devote their time to other money making endeavors.
Some sell because of financial or operational burnout. Sometimes selling is spurred by just not wanting to have the responsibility anymore; sometimes it's a financial imperative. Then there's age; age of the owners, age of the income property. Here are four reasons multifamily assets are listed for sale:
• Distressed property
• Distressed ownership
• Both - distressed property and ownership
• Neither- distressed property or ownership
In many instances (not all) the reason people sell their income property has nothing to do with the property itself. The passing away of a single owner within a group can be the trigger point for listing a multifamily property for sale.
Again, this has nothing to do with the quality or operations of the multifamily asset.
In a distressed market everyone wants to know the reason for selling. Like knowing this information is the holy grail. It is not. This information is one factor in the "buyer" decision making process. Note that most of the time the information provided is for purposes of motivating the buyer.
Consider the psychological aspects of investing in the stock market. Do investors buy or sell strictly based on the financial standing of a particular stock? No- the nuance of information that surfaces about a stock can sometimes have more impact on value than reported numbers. The same is true for of multifamily assets.
Reading the tea leaves of why income property is for sale might be a fun hobby, but there is seldom a single reason for selling. Remember, at some price, you can buy anything. The question is: then what? (exploring buyer motivation is for a different post).
Granted, there are occasions where speed of action is necessary based on the needs of the seller. More importantly, it should be your own due diligence cadence that drives a buying decision- not the needs or desires of the seller. Remember, after closing they go home... never to call or talk to your team again.
Reminder: there are no short cuts to quality due diligence and never a reason to close a deal without title insurance. Most people are pretty straight forward. This doesn't mean they desire to share their deepest thoughts on the matter with you.
There are many reasons people sell. For buyers, the focus should be on the reasoning behind the buying decision
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Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. We discuss best practices in multifamily management and methods related to how to buy apartment complexes. Our focus is sharing strategies and tactics that can be implemented and measured. For more information, visit: www.MultifamilyInsight.com