When you’re an owner facing a vacancy or a significant vacancy percentage in one of your properties, you may be at a crossroads. You could be considering selling the property, but it may make more sense to try and find a new tenant or tenants, even if that means repositioning the asset. Before deciding whether to sell or lease the facility, there are 10 questions you should ask yourself, Chris Roth, a principal and shareholder with Lee & Associates in Carlsbad, CA, tells GlobeSt.com. Below, his list and what to do with the answers.
1. If I sell, where else can I invest my money? Sit down with your agent and have them provide you multiple options available locally and across the country.
2. What is my property worth today for sale? Have an agent who is active in the specific region where your building is located walk your building and provide you with an opinion of value. Ensure that agent has sold numerous properties in that region and has gathered appropriate comps.
3. What is my property worth today for lease? Same as above.
4. Do I want to own a different type of real estate investment? A lot of our clients own management-intensive properties and would prefer to sell in order to exchange the proceeds into a single-tenant net-leased property that will result in little to no management. Other owners may not like the single-tenant net-leased investment since it may result in a large vacancy. For them, selling the asset might be the best option, to exchange it into a multi-tenant building that will result in less vacancy risk.
5. If I lease, what type of return will I receive on my money? Have your real estate agent run a financial analysis to determine your rate of return. You will need this number in order to evaluate other investments apples to apples.
6. If I sell, what type of return will I receive on my money? Once you determine what other types of property you would be interested in purchasing, have your real estate agent provide a financial analyses to determine the rate of return you will receive on the money invested. The analyses should include the closing costs of the sale and the new purchase and the tax implications.
7. Does my accountant agree with the analyses? Your accountant and your real estate agent should be working hand in hand to analyze your best decision moving forward. Neither advisor can provide accurate recommendations without the other’s assistance.
8. Is there more demand for leasing or selling? If the decision is too close to call, look to the market to make the decision for you. Many times the big difference is in the amount of prospects looking to purchase vs. lease or vice versa. Ask your agent if you are in a leasing market or buying market so as to avoid sitting on a vacant building.
9. Does my property have deferred maintenance? Are there any upcoming issues that will require a large monetary outlay in the near future? Are there any new regulations coming forward that will affect the property? Are there any environmental concerns? Maybe this can all be avoided if you decide to sell and purchase a newly constructed property that is low maintenance and up to code.
10. And lastly, have I found the right broker? The right broker can make all the difference in your ownership decision. Be sure to shop around to find one who has your best interests in mind, listens to you and helps you make the right decision—one that will deliver results.
Source: Globe St.com - Carrie Rossenfeld is a reporter for the West Coast region of GlobeSt.com and Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
Dy Associates is an Oakland Real Estate company specializing in commercial, home and investment property in the Oakland and East Bay Area. We provide real estate services including buyer agent, seller agent, short sales, commercial and investment acquisitions, loan facilitation, hard money lending, financing assistance property management. Articles are provided as information only. We do not provide legal or general investment advice.