Good decisions on buying apartments start with insightful modeling carefully refined by experienced underwriting and due diligence. With the right pricing, sensible financing, improving demographics, and effective management, wise real estate investors normally prosper over the long term.
Much more difficult, and sometimes even more important, is knowing when to sell a multifamily investment. While every prudent apartment investor should always have a clear exit strategy, many assume everything will go according to plan over a period of years. What happens when it doesn’t?
Holding a property longer when the stars don’t align is often the least disruptive choice. However, the reality is time is not always your friend.
- What worked yesterday may not work tomorrow.
When things are not working out as planned, first look to property management. Do you have experienced, professional, licensed management in place? Trying to minimize this expense or winging it often costs substantially more in reduced asset value and ROI. Professional management can quickly add value to your bottom line. From revenue management and optimal marketing, to strong vendor relationships and process improvements that increase property value, professional property management can pay for itself lightning fast.
Is your current management on top of things? Are they consistently looking for ways to improve the key metrics at each of your properties? Do they have their finger on the pulse of the market? If not, it may be time for a change.
- You’ve got equity on your side
A run up in property value is cause for celebration and a prudent time to review multiple options. Is it time to harvest equity with re-financing? Do you have sources for investor-friendly multifamily financing to do this? Better World Holdings is well versed in apartment refinancing, 1031 exchanges, capital infusion and strategic financial planning. Is it time to sell outright, capture equity or seek more value-add in a different promising investment? It can be quite freeing to divest an older property, capture years of sweat equity and invest in a new opportunity that makes you want to jump out of bed. Do you know when each strategy is best deployed? These are conversations we have with multifamily investors every day.
- Knowing When To Pull The Trigger
Too often, investors are slow to realize when their strategy is not developing as planned. Things change. Markets shift. Loans come due. New developments may overshadow existing properties.
If you are running out of ideas on how to optimize cash flow and make more money, it may be time to sell. If you are bored, tired, frustrated, grumpy and want to kick the cat every day, it may be time to sell.
Sometimes, the exit strategy, structure, assumptions, direction or support are not all they could be. If you are reluctant to change direction, it may be in your best interest to sell, or at least restructure.
Not being in a position to sell doesn’t necessarily mean failure, but failing to identify when your strategy is no longer working puts you and your assets at risk. If you’re not moving forward it’s probably time to move on.
- Emotions
People invest in real estate to make money. Over the life cycle of a multifamily investment, some owners become emotionally attached to certain properties in their portfolio. It may be the location. It may be the staff. It may be the hard work that was put into a rehab and the beautiful turnaround it achieved. Pride of ownership is only natural, but emotional attachment can lead to an inability to objectively judge the pulse of the market. That’s where having professional multifamily advisors and experienced asset managers at your fingertips is critical.
These professionals help take the emotion out of key decisions that can make or break the long-term prospects of your investment. Presenting you with hard market data, detailed reporting and proactive ideas for continuous improvement helps you keep you’re a clear eye on fundamentals and focus on the optimal exit strategy. Those only willing to tell you what you want to hear are not in your long-term best interest.
Where are you in the life cycle of your apartment portfolio? Is it time to review your exit strategies? Are loans coming due? Do you need strategic refinancing, workarounds and conversions? We thrive on these questions and finding the solutions.
Whatever the class of apartments, there are specific strategies that work amazingly well at every stage of the investment life cycle.
Better World Properties, Better World Holdings and Better World Consulting offer complete apartment life cycle solutions. All under one roof.
Give us a call. We love to talk apartments.
(713) 559-6975