Anyone who has been investing in real estate for some time has surely tried to sell an investment property at one point or another.
It’s called marketing. During my thirty-year real estate career, I certainly did my part. And while my attempts didn’t always produce a successful result, the experience taught me a few things about marketing rental income properties that I’d like to pass on.
Most of them are common sense, but they are mentioned as a reminder because there are real estate agents and sellers who need to hear you. The remaining tips are more subjective, but are included to help you consider what might be a more effective marketing approach than the one you’re using.
Above all, never make your marketing packages too vague. When you leave out important financial data, it is very difficult for a buyer to properly determine whether or not it presents a good investment opportunity. And this will usually lead to more data sharing with a buyer or agent which, at the very least, will be time consuming and, at worst, could cause the buyer to lose interest in the deal altogether.
Second, resist the temptation to skew the property’s financial data to sound overly optimistic. Maybe rents can go up, for example, and you want to disclose it. But if you over-inflate what you think might be future rents, you risk losing your credibility with the buyer, or you may end up wasting your time on a deal that never has a chance anyway, once it’s properly put through. diligence of the buyer. Keep your estimate assumptions realistic.
Third, and this is a bit more subjective, don’t present marketing packages that contain everything except the proverbial kitchen sink, at least not in your initial presentation. Distributing more than a three-page property report at your local investment club meeting or in response to a phone inquiry is overkill, in my opinion. Remember, you’re just trying to generate a response from credible investors with valid interest; a more complete set of reports can always be presented during subsequent exchanges.
Okay, now let me show you the essentials that worked for me. For simplicity, I’ve organized them by category: the numbers and the reports.
The numbers
Aside from the sale price (which is a given), you’ll want to provide a detailed breakdown of the property’s annual cash flow and calculations for at least two rates of return.
1. Cash flow
Cash flow is crucial because it is essentially what the real estate investor is buying in the rental property. So figure it out for at least the first year of ownership by focusing on the following three financial items:
- gross rental income
- operating expenses
- debt service
2. Rates of Return
Rates of return (at least the two listed below) are important for the investor to determine whether or not their returns are being met, as well as providing a good way to compare financial performance and property value to other rental properties. of similar type. in the market area.
- capitalization rate
- cash against cash
reports
Here are two reports that I commonly used for initial queries. Both clearly show the cash flow of the rental property and each includes the capitalization rate and cash-on-cash rates of return. Therefore, they are informative, easy to read and understand, and straight to the point. Consider them as examples.
1. Flyer Marketing
This announces the listing to the community at large (ie investment meetings, calls, and peer inquiries). (Sample available on my site).
2.APOD
This allows you to show your own investor-clients a probable scenario during the first year of ownership. (Sample available on my site).
In one word
An effective way to market rental income property is to consider the process in two stages: the initial presentation and the follow-up afterward. Keep the opening presentation concise; even a report with enough data to reveal the property’s description, estimated cash flow, and investor rate of return should be adequate to capture the interest of credible buyers when they exist. And save all other reports (eg, acquisition funds, pro forma income statement, rental listing) for follow-up exchanges later.
