“Every great leap forward in your life comes after you have made a clear decision of some kind.” – Brian Tracy

Apartment property investors are constantly asking me when is the ideal time to get their properties ready to go “on the market.” Before I answer, I wanted to share the biggest mistake in selling an apartment building. The #1 biggest mistake I see investors make is:

Selling when you NEED to sell.

I have seen many investors over the years literally leave tens of thousands of dollars on the table when they sold their property because of some change in their lives. Retirement, divorce, financial problems outside of their property investment, and any other life change that “forces” the need to sell. This is the biggest mistake I see investors make, and one that you should avoid.

Now on to when you should get your property ready to sell. In my opinion, I would start getting things ready at least one year ahead of time. I know, timing is everything and you may not have this much time due to circumstances being what they are, but ideally it should be about a year.

Why a year? The MAIN reason is to get the rent up as high as possible. You know the tenant that you have been really nice to over the years. Letting them get by with lower (sometimes a lot lower) than market rent? Well now is the time to get the rent up there.

Why? Remember, the main points of value will more than likely be the cash flow the property produces. So, the rents are key here.

Also, this will give you time to do the necessary work and capital improvements that the buyer would possibly discount once the property is on the market. I have known buyers that have literally changed the value of their buildings by tens sometimes hundreds of thousands of dollars by doing these things.

If you can get started working diligently on these at least a year in advance, and maintain focus, you will increase your sales price substantially over selling at a time when you NEED to sell. Timing can be everything, as they say, but getting the property performance up there as much as possible is key to a successful sale.

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Just When Things Were Bad, It Got Much, Much Worse

Property Values and Housing trades will be knocked from their knees to the ground April 22 by EPA.

Our nation’s pivotal economic engine, the home building trades, who have already been knocked out of the business of building new homes in this economy, have struggled to eek out some flagging work in renovations. That consolation market now will be decimated by a government initiative to remedy a faulty product that was discontinued for use before many of these builders ever picked up a hammer for hire.

The new EPA Lead Rule places all of the burden of compliance and financial consequence for the remediation of the long-prohibited product on the individual building tradesmen. If they fail to obtain the EPA training and also conform their practices to those procedures on all work on pre-1978 homes starting April 22, they will bear fines of $32,500 per day, an amount that is twice the annual salary for many of these folks. In addition to the burdensome training, the required procedures include wrapping the work area and wearing of special suits, like the isolation scene of the ET film. They also must follow prescribed cleaning, disposal of all materials, posting signs, inspecting, testing, as well as paperwork. Why is it that during the worst economic conditions of many of our lifetimes – why is it now that the government must place the burden of ameliorating a long un-used product upon the shoulders of the sector of the economy that is most uniformly hit by the economic crash? Why must these individuals bear this economic responsibility for a product that has been out of use for 32 years? Why now and why on their shoulders?

Who knew? A large number of affected trades people have not known of the Rule and its deadlines. The EPA did no wide-spread announcements to reach affected housing professionals. In practicality, the compliance for this Rule is impossible, since there are not even enough trainings to allow full compliance by April 22 for all of the trades affected. You might wonder, how about more trainers? Not possible either, since there is not enough trainer-training to multiply class availability, as local home builder associations have discovered. It is estimated by a local homebuilder group that only about 25% of the affected trades people will be trained in time. The remainder must turn away work on older homes, which for them is the only work that is available in this housing market.

What happens to energy efficiency makeovers? What about those government incentives to add insulation and better windows? Those programs were just starting to catch on in the pre-recovery economy, as the contractors adjusted their marketing and tooled up in those areas, and as consumers saw the payback in savings for those renovations. But with these new procedures in the EPA Lead Rule, the savings are gone, as the window job that was $350 now will cost $1,000 due to the burdensome additional labor and materials to address the requirements of the Rule. The EPA has even eliminated the opt-out for homes that do not house pregnant women and children. Thus, elderly who reside in homes they have owned for half a century, and to whom the offending products pose no danger, must also be subject to the expensive prescriptions of the EPA Rule. Those homeowners will skip the needed energy renovations and continue to struggle to pay their high energy bills.

Those same houses, with elderly owners, holding the investment of their lifetime, which were already deflated by one-third in the housing bust, now will lose even more value as those homes become un-sellable, due to this Rule. The majority of homes on the market in many areas, are homes older than 1978. Those inventories will deflate in value very quickly after April 22, as new buyers avoid the exorbitant costs of any repairs on those homes. The nation’s flagging economy that teeters on the value of homes, their sale, and the robustness of the housing market, will languish with this Rule in place. It has grave consequences for the entire economy.

What can be done? All Senators and Congress people should write to the Office of Management and Budget to delay the EPA Lead Rule, to study its consequences, and amend it before instituting it. They should petition the White House to do the same. Get them to do that. The bodies of Congress and Senate can also vote to suspend the rule altogether, in order for proper revisions to occur. Those revisions must include making training available, publicizing the requirements and deadlines to all affected trades, allowing opt-out for homes without children and pregnant women, and financial offset for the costs involved in ameliorating a toxic product that was discontinued in the trades 32 years ago.

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The Great Potential of Cleveland Investment Property

Though the current economic climate has left many people without homes and jobs, smart and determined real estate investors are finding great real estate deals in the Cleveland housing market.  Our new Cleveland investment property is an excellent opportunity for those that want a great deal of cash-flow and long-term appreciation potential.

All properties are extensively rehabbed with up to $25,000 in work per property.  All properties are tenant occupied and managed by professional management  Properties range from 3 to 5 bedrooms, 1-3 baths, and up to 2 car garages.

Cleveland’s cost of living is 15.5% lower than the U.S. average. It has also been undergoing major revitalization in all sectors.  The Economist has repeatedly voted Cleveland as one of the most livable cities, not only in the U.S., but in the world.

If you’re serious about beating the hard economy and making a great investment in cash-flow real estate then you should evaluate our latest offering of Cleveland investment property.

© 2010 Marco Santarelli

Norada Real Estate Investments


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