As many of you know, I got into mortgage brokering after I purchased my first investment property (triplex) in Hamilton in July 2006. I recently exited the business venture and sold the property. Overall, the investment was a great one; it appreciated by approximately 50% over 6.5 years, generated strong cash flow from day 1, had great tenants and it provided capital for more investments. You might be wondering why I sold if it was such a great investment property. The reality is I live and conduct my business in Toronto, I have 2 young children and I want to focus on buying more properties in Toronto's east end (Leslieville, Upper Beach, The Beach, East York...) where I have a duplex. Selling an investment property can be a tricky ordeal especially when all 3 units are tenanted. Here are 3 things you need to know when selling an investment property:
You might ask why would the seller care about the tenants if the property is for sale. What if the property doesn't sell or the deal falls apart at the last minute, then how will the relationship with the tenants be repaired? As much as investing in real estate is about numbers, it is also about the people. If the landlord takes care of the tenants who are paying customers, they will take care of the property like it is their own home. The tip here is to speak to the tenants in person to let them know your intentions of selling the property and understand their working hours (you don't want to show the property at 10am if the tenant is a night shift nurse). Giving the tenants a Starbucks or Tim Horton's gift card is a nice gesture.
2. Period Between Sale Going Firm And Closing
The period when the sale goes firm to closing day is a transitional period where the property has to be kept up and all issues have to be addressed by the landlord such as furnace malfunction and electrical repairs. The property has to be in "working condition" when the ownership is transfered to the buyers. Otherwise, the buyers can come back and request reimbursement.
3. Closing Day
I found closing day to be the busiest day of all due to 2 tenants moving out. The property had to be handed over in clean condition and free of debris. Having many tenants over the years, certain items were left in the storage area which took 2 trips to the city dump to discard of. I am lucky to have my realtor who has a pick up truck (he is a real estate investor as well) who helped me purge the garbage.
Everyone's experience will be different depending on the property owned: condo apartment in Toronto, multiplex building or duplex. Falling in love with the numbers is one aspect of real estate investing, but getting your hands dirty is another part of the business that many don't talk about. Happy investing!