Commercial and Multi-Family Property Exit Strategies: How to Make the Right Choices for Your Portfolio

Written by Apartment Management Magazine on . Posted in Blog

By Elizabeth Reynolds and Bob Wess, KW Commercial

No matter which Exit Strategy you choose, partnering with the premier brokerage firm is key!  Spectrum Properties provides full brokerage services.  We partner with you from acquisition through exit strategies.  We are your “one stop shop” for real estate, partners for life!

Your Investment….Our Focus.  Your Asset….Our Experience!

Here are eight key exit strategies. We hope you find these tips useful for making the right choices for your portfolio.  Knowing your exit strategy upfront is essential!

  1. Quick Turn. Evaluate these deals for cash flow, appreciation and/or for equity gain at the time of acquisition.  Establish a network of investors looking to “Move Fast”. Secure the deal by putting it under contract and negotiate your purchase price.
  2. Force Appreciation.   For those non-performing properties and those investors who are looking for big returns, this is an ideal strategy.  Look for properties that need exterior improvements, lack curb appeal, require new or upgraded landscape, lighting and/or parking lot improvements.   These properties may need interior improvements such as; lobby/entry area updates, elevator repairs, ceiling and/or interior finishes in order to bring them current and more relevant.  Eliminate major deferred maintenance items such as roofing, fencing, plumbing, HVAC, water heaters and electrical issues. Next reduce the overall reoccurring expenses by renegotiating with existing vendors and/or bring in new service providers.  Now that the property looks fantastic and you have marketed it in order to cure vacancies, it is time to increase the rents. Finally, create pass through expenses based upon a percentage of the rents per unit. Not only has the overall property value increased, so  has your NOI!
  3. Refinance. Given the NOI of your property has now been maximized, you are ready to move forward and refinance the property.  Interview lenders and appraisers, request loan proposals and understand the key terms of these loan options. Determine if the loan is recourse or non-recourse and be sure to not over leverage.  During this refinance process, understand how much you want to pull out of the property in order to re-invest and grow your portfolio. Remember: Real Estate is the best investment vehicle for leverage!
  4. Sell With Owner Financing.  Carry paper in the short term to allow for maximum sales price.  Enjoy strong cash in flow without the headaches of property management.  Hold onto your collateral and ensure good ernest money deposit as well as higher interest rates.  By providing this short term loan you are able to create a spread, paying an interest rate of 6% to the bank and financing to the buyer at 9%, earning 3% on the loan.  This provides the buyer time to optimize the property, prior to refinancing it with a long term loan option.
  5. Conversions/Highest and Best Use. Condo conversion projects were big in the early 2000s.  Consider the trailer park conversion to a mobile home park.  Mix use products are ideal in the cities, creating a place to work/live with office and studios.  Rezoning is ideal these days as many investors are purchasing industrial properties and converting them to creative office or buying infill lots and repurposing them for the highest and best use based upon the need for that area.  Flattening the property and rebuilding is an option, especially for those small single family lots, amongst commercial and retail.  
  6. Outright Sale. When considering the sale of your property, you might consider a 1031 exchange or just an outright sale.  Spectrum Properties is here to assist you through these processes.
  7. 1031 Exchange.  Often investors do not realize the taxation on a personal residence is far different than taxation on income or investment property. 1031 Exchanges offer tremendous advantages and are well worth investigating, prior to selling
  8. Hold and build Tremendous Wealth.  Enjoy annual rental increase, gain operating efficiencies once your property is optimized, establish advantageous long term financing, experience the power of multiple tenants – pooling their money to pay down your mortgage.  Depreciation, Depreciation, Depreciation!!  

Maximize your Portfolio with Spectrum Properties!!

KW Commercial

Elizabeth Reynolds
Commercial Broker
Over 25 years of experience in commercial and multi-family acquisition, management and construction. Ms. Reynolds began her career as a property manager for a large multifamily complex, while completing her Bachelor’s degree in Operations Management at Cal. State Polytechnic University.  Elizabeth has successfully overseen various real estate departments including; Property Management, Operations Management, Sales/Business Development, Acquisition/Market Analysis, Financing, Advertising/Public Relations as well as Supply Chain, Information Technology and Program/Project management.

KW Commercial

Bob Wess
Director of Wess Commercial Group at KW COMMERCIAL in Orange County, CA
Director and Senior Advisor to corporate and private clients on real estate investments. His background includes most categories of commercial properties but specializes in the sale and leasing of single-tenant retail, multi-family apartments and senior living facilities in Southern California. Bob has been a leader in the real estate industry in well-known public and private corporations for more than 30 years with over 2 million sf either bought, sold or developed and has experience in many of the markets throughout the U.S. Bob is a licensed California Real Estate Broker, a Counselor of Real Estate [CRE], has a Masters Degree in Real Estate from the University of Southern California [USC], a HCCP designation for tax-credit affordable housing and is a Certified Property Manager [CPM] candidate through the Institute of Real Estate Management.

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