Compute The Rate Of Return For The Following Cash Flow How to Effectively Market Your Rental Income Properties

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How to Effectively Market Your Rental Income Properties

Anyone who has been involved in real estate investing for any length of time has certainly tried to sell an investment property at one point or another.

It’s called marketing. In my thirty-year career in real estate sales, I’ve certainly done my share. And while my attempts haven’t always resulted in a successful outcome, the experience has taught me a few things about marketing rental income properties that I’d like to pass on.

Most of it is common sense, but it’s mentioned as a reminder because there are real estate agents and sellers who need to hear this. The remaining tips are more subjective, but included to help you think about what marketing approach might be more effective than the one you’re using.

First of all, don’t make your marketing packages too vague. When you leave out important financial information, it is very difficult for a buyer to adequately determine whether or not this represents a good investment opportunity. And this will usually lead to a further exchange of information with the buyer or agent that will be time-consuming at the very least, and at worst can cause the buyer to lose interest in the business altogether.

Second, resist the temptation to distort the property’s financials to appear overly optimistic. Maybe rents can go up, for example, and you want to find out. But if you overinflate what you believe to be future rents, you risk losing credibility with the buyer, or you could end up wasting time on a job that has no chance anyway, once it undergoes buyer due diligence. Keep your estimated assumptions realistic.

Third, and this is a little more subjective, don’t present marketing packages that contain everything but the proverbial sink – at least not in your initial presentation. In my opinion, distributing more than three pages of property reports at your local investment club meeting or in response to a telephone inquiry is overkill. Remember, you are only trying to get a response from credible investors with a valid interest; a more comprehensive set of reports can always be presented during subsequent exchanges.

Okay, let me show you the essentials that have worked for me. For simplicity, I’ve organized them by category: numbers and reports.

Numbers

In addition to the sales price (which is a given), you’ll want to provide a detailed breakdown for the property’s annual cash flow and calculations for at least two rates of return.

1. Cash flow

Cash flow is key because that is essentially what a real estate investor buys into a rental property. So calculate for at least the first year of ownership by focusing on the following three financial elements:

  • Gross rental income

  • Business expenses

  • Debt service

2. Rates of return

Rates of return (at least two listed below) are important for an investor to determine if his or her returns are being met, as well as providing a good way to compare a property’s financial performance and value to other similar rental properties in the market area.

  • Limit rate

  • Cash in cash

Reports

Here are the two reports I typically used for initial queries. Both clearly show the rental property’s cash flow, and each includes a cap rate and cash-back rates. So they are informative, easy to read and understand and straight to the point. Consider them as examples.

1. Marketing leaflet

This announces the listing to the wider community (ie investment meetings, calls and peer inquiries). (Pattern available on my site).

2. APOD

This allows you to show your own investor-buyers a likely scenario during the first year of ownership. (Pattern available on my site).

Basically

An effective way to advertise a property with rental income is to consider the process in two stages: the initial presentation and the subsequent follow-up. Keep the initial presentation concise; even a single report with enough data to reveal the property’s description, estimated cash flow and investor rate of return should be enough to attract the interest of credible buyers when they exist. And reserve all other reports (eg procurement funds, proforma profit and loss account, lease list) for subsequent exchanges.

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