Why Twelve Months
Most owners call a broker once they have decided to sell. By then the price is largely set, not by the market, but by decisions made over the previous several years and by a file that is missing half of what a buyer will ask for.
Commercial property is priced off net operating income. A buyer takes your NOI, applies a cap rate, and that is your number. At a 7 percent cap rate, every recurring dollar of NOI is worth about fourteen dollars of price. Renew a month-to-month tenant, recover CAM you had been absorbing and take personal expenses off the books, and $24,000 of extra income can move value by roughly $343,000.
What Buyers Pay a Premium For
- Income they believe: signed leases with term remaining, tenants who pay on time, and a rent roll that matches the bank statements.
- A complete file: every lease, amendment and reconciliation, ready on day one.
- No surprises: problems disclosed early get negotiated. Problems found in week six of due diligence get re-traded.
The Countdown
- 12 months out: lease cleanup, early renewals, an estoppel dry run and a clean financial file. This is where price is actually made.
- 6 months out: build the due diligence file and commission your own inspections, then decide what to repair and what to disclose.
- 3 months out: price off verified NOI, clear title, loan and entity issues, and plan any 1031 exchange before you have a contract.
- 1 month out: make the property show well, assemble the marketing package and get ready for the first showing.
The workbook includes checklists for every stage, worksheets for lease exposure, repair decisions and value at several cap rates, and the questions to ask any broker you interview.
The examples in this guide are illustrative. Cap rates, values and tax consequences vary by property and market. This is not legal, tax or investment advice; consult your attorney and CPA before acting.
