10 Steps to Sell Your Multi-Family Home for All It’s Worth

If you’re selling a multi-family home, you’re likely ready to trade up from your starter duplex, triplex, or quadruplex investment property or have determined it’s a good time to cash out altogether.

Today’s multi-family market is bustling with activity, saturated with aspiring and accomplished investors looking to purchase properties just like yours. According to the National Association of Realtors, the multi-family market has been the most “attractively bought property asset” in recent years. Researchers predict that multi-family investment volume will climb to $148 billion in 2021, representing a 33% gain over the 2020 estimate of $111 billion.

Still, even with the market on your side, selling a multi-family home is complex. You’ll need to compile your rental earnings, coordinate showings with tenants, and make strategic repairs that won’t eat away your profit.

We spoke with three property investors from across the country and a top real estate agent with experience in the industry to arm you with ten tips to sell your multi-family home for all it’s worth.

1. Appeal to your target audience

The target buyer pool for your multi-family home depends on a number of factors, so consider details like the location, age, and condition of your property before you list. Use the questions below to help identify your target audience so you can tailor your marketing efforts.

• Where are you located? 
• How old is your property?
• What are the repairs and improvements needed? 

Questions like these reveal a great deal about your multi-family home’s ideal buyer. For instance, if you own a newer building in a popular tourist destination, include some income projections for short-term and vacation rentals in your listing to entice investors looking for Airbnb rentals. You might also highlight local activities and attractions in your listing with a note saying “15 minutes from the beach,” an attractions map, or drone footage.

If you own an older property, appeal to the flippers. “I’m looking for opportunities to increase income and increase value,” says property investor Kyle McCorkel in Hummelstown, Pennsylvania. McCorkel’s ideal investment property is either “completely vacant and falling apart” or “underperforming. “For example, we bought a four-unit, and all the rents were at $500 or $600, and we feel like with the right improvements, we can get all the rents up to $1,000 or $1,200.”

To estimate repair costs effectively, McCorkel likes listings with pictures of every unit in the building, including details like the condition of the roof and foundation. He also scans for expenses like shared utilities to determine what long-term costs he might be responsible for paying.

Consider the characteristics of your multi-family home and let those details inform your marketing.

2. Review your current leases and tenants’ rights

As a seller, know where your tenants’ leases stand so you can communicate occupancy with buyers.

In most states, it’s perfectly legal to sell a property with tenants, and a seller can easily transfer lease agreements and security deposits to the new owner. Some buyers even prefer occupied buildings, so they can begin earning rental income immediately.

“In my experience, people like occupied,” says Jade Shenker, Director of Tenant Relations for Prospect Management and a long-time investor with properties in Miami and New York. “But every [area] is really, really different.”

In some circumstances, evicting a tenant may be necessary to secure a sale. Andy Kolodgie, a property investor who buys, rehabs, and sells multi-family properties in Washington, D.C., and Delaware, has kicked out tenants for many reasons, from neglected mold issues to obsessive hoarding. “No matter how much you fix up the property, there’s always going to be that one unit that’s really bad, and it’s just not going to sell well,” he comments.

Your tenants have the right to remain in the property until their lease expires, regardless of who owns the building, but if you need them out, there are ways to evict tenants legally. You can give occupants the legal minimum notice period to move out (usually 30 to 60 days) if your tenants are on a month-to-month lease.

If your tenants have fixed leases, you may need to offer some cash incentives. One process by which many landlords negotiate for tenants to vacate the property is called “cash for keys.” In this strategy, a landlord may provide relocation costs, a security deposit, and even a tenant’s first month’s rent for a new place.

In this scenario, note that beyond paying for incentives, you’ll sacrifice rental income until your property sells. “I would not want to kick out my tenants to sell,” Shenker shares. “You don’t want to be responsible for a $12,000 or $13,000 mortgage every single month. If you take on that risk by kicking everyone out, then you’re going to want to sell quicker.”

3. Coordinate showings with tenants well in advance

While it is possible to sell a property with tenants, showing occupied units comes with drawbacks.

For one, almost half of all states require landlords to notify their tenants 24 to 48 hours before entering a property, so you’ll need to book showings a few days in advance. Kolodgie recommends using a notification system like Calendly to coordinate showings with tenants.

Additionally, though you can ask occupants to vacate the space and keep units tidy, you can’t guarantee their idea of “clean” will meet your standards.

Kevin Fruh, a top real estate agent in Massachusetts with more than 15 years of experience, recounts one situation when he showed a property with tenants to a prospective investor:

“Everything was taped shut with blue painter’s tape,” he laughs. “Cabinets, … closets, … the toilet seat. He obviously didn’t want anything to be touched … and that’s one of these small, weird hurdles, where you’re like, ‘Okay, I guess I can’t look under the sink!’”

To encourage occupant flexibility and compliance, consider some incentives like a free month’s rent or refunding the tenant’s security deposit. If your tenant remains problematic, consider a cash-for-keys arrangement to relocate them before you list.

4. Weigh if the cost of repairs is worth it

Investors want to profit from their multi-family property investment as soon as possible. As a seller, you can make your property more attractive and “turnkey” by tending to repairs before you list.

However, not every update is worth the expense. Consider these questions to determine which repairs can increase your property value.

• How would addressing the repair impact your property value?
• How long will it take to fix the issues?
• What is the condition of comparable sold multi-family properties in your area?
• Would you rather handle repairs and foot the bill or skip the work and accept lower offers?

There are plenty of investors looking for a property they can flip, but not every fixer-upper is worth their time and money. Not only will they need to fork out the cash for necessary repairs, but they’ll also lose rental income during the renovations.

“I would prefer to [buy] properties that don’t have foundation and structural issues,” says McCorkel. “It’s hard to estimate how much it’s going to cost, so it adds a lot more risk.”

McCorkel doesn’t always rule out properties with substantial repairs; he just factors the cost of repairs into the purchase price when determining an offer price. “If it’s going to cost me $10,000, then I’m going to want the price to be $15,000 less,” he explains. “As long as the numbers make sense, I’m comfortable doing almost anything.”

5. Tidy up the back and front yard

A joint study by the University of Alabama and the University of Texas at Arlington reveals that homes with attractive curb appeal sell for an average of 7% more than similar properties with a drab exterior. According to experienced investors, multi-family homes can also benefit from a little landscaping.

“What I’m trying to do is convince somebody that comes in that they can rent this place for more than I’m renting it,” says Shenker, “so that an investor comes in and they’re like, ‘Wow, this person is only renting it for $1,200 a month? I think I could rent it for $1,800.’”

“Even though it’s multi-family, people still like things to look good,” echoes Kolodgie, who recommends simple improvements like trimming the lawn and adding some flowers. “Sometimes we hang plants on the outside to give more of a vibrant, positive feel.” You can also arrange mulch under shrubs and around trees to add a decorative element and reduce the maintenance your yard requires.

Since the buyer will be responsible for the upkeep, invest in low maintenance landscaping when enhancing your curb appeal:

• Frame the doorway with hanging baskets or potted plants. A pop of color on the door can add to the visual appeal.
• Consider some window boxes with colorful flowers like petunias and geraniums.
• Swap out grass for river rock or gravel and consider a stylish stone paver path. Some regions even incentivize property owners to take out their lawns to conserve water, like Southern California, which pays $2 per square foot of lawn you remove.
• Add some drought-tolerant and pest-resistant flowers, like the red-flowering currant. Search for plants native to your area before you buy.

6. Update units to increase your ROI

Consider giving tired units some TLC to add to your property value. For instance, property investors Kolodgie and McCorkel both agree that splitting the utilities in older multi-family homes is a worthy investment since this can increase the buyer’s income.

“Sometimes in older units, the utilities might be shared, [and] it always ends up screwing with the landlord,” Kolodgie explains. “What we’ve found is trying to sub-meter that or bring it into the unit itself and then passing the cost on to the tenant … [generally] increases the value of the property.”

In Kolodgie’s area, splitting the water is the primary update, while for McCorkel, it’s heat. “We just looked at a six-unit, and the guy has owned it for 40 years,” McCorkel explains. “It has this gigantic gas furnace … and it’s costing him $500 a month. That basically ended up being a deal-breaker for us. We couldn’t justify paying his price if we were going to be paying $500 a month to heat the whole building.”

If you’re considering changes to your utilities, check your municipal ordinances to make sure you’re authorized to make those updates.

Another improvement to consider is minor fixtures and finishes. In the kitchen, for instance, Shenker suggests a few smaller updates like new countertops and stainless steel finishes. “You could do this for less than $3,000, and it’s going to look like a brand new kitchen,” she explains.

Before you begin updating your units, talk to a real estate agent for insight on market trends to help you assess what current buyers want. “The question buyers will ask is ‘how much can I rent this space for?’” McCorkel adds. “If you have to put granite countertops in there to get $1,200 rent instead of $1,000, then that’s a good update.”

7. To price your property right, consider the comps

For multi-family properties, nailing down the right price can be a difficult process. Here are some of the main factors that influence price:

• The condition of each unit
• Necessary repairs
• Capitalization rate (i.e., how much an owner can profit from renting the units)
• The building’s value when last purchased
• Current market conditions

To ensure you price the property right, start with a comparative market analysis (CMA). A top real estate agent can help you evaluate recently sold properties similar to yours in size, location, and condition for an accurate picture of what homes like yours are selling for. That way, you know if you’re getting low-balled and can walk away before it’s too late.

“Very standard practice is [to look at] the last three [to] six months,” Shenker explains. She encourages sellers to list the property a little higher than what previous homes have sold for. “Investors always low-ball.”

If there aren’t any comps, Kolodgie recommends setting your price at or a little above your best guess, then letting the number float down. “Typically [in] those areas with no comps … you’re going to have to wait [to sell the property],” he shares. “If you’re trying to sell it as fast as possible, then mark it down as low as you’re willing to go, see if you can get a couple offers really quickly, then try to mark it up a little bit.”

In addition, Shenker encourages sellers to pin their property’s capitalization rate, or cap rate. When an investor considers purchasing your property, they want an idea of how much money they’ll make off of the investment; the cap rate is the most common way to that data. In general, the higher your cap rate, the better the investment opportunity.

You can calculate cap rate with the following formula:

Cap rate = net operating income / total investment

According to a recent survey from CBRE, an American commercial real estate services and investment firm, the average cap rate for North American multi-family properties ranges from 5.20% to 5.49%. An attractive cap rate for your property depends on many factors, including your location, property class, and current market conditions. Speak with a local real estate agent, commercial real estate lender, or appraiser to learn the average cap rate for your market.

8. Collect necessary documentation and investment data

When investors walk through your multi-family building, don’t expect them to gush over those expensive double ovens or the newly installed fountain out front. They want to see numbers.

“The investor doesn’t care what color the rug is. They care what the expenses are,” says Fruh.

“You really need to dial that in because that’s what people in the investing community want to see.”

When you’re prepping materials for potential buyers, here are some essential documents to include:

• Rent roll: income and expenses related to your tenants
  • Income from each unit: ”If you can supply what the income is on both rentals and short-term rentals, that’s a huge thing for investors to know, especially now that Airbnb is becoming so popular,” says Shenker.
  • Utilities: Outline utility costs and who pays for them. “Water, sewer, trash, … anything that’s paid by the landlord, I’m going to want to know approximately how much it costs per month,” says McCorkel.
  • Lease terms: Clarify whether your tenants have a month-to-month or fixed lease.
  • Bank statements: “We found that the value is significantly increased when we provide bank statements that show tenants are paying on time,” says Kolodgie.
  • Security deposits: Provide information on your tenants’ security deposits.
• Property expenses:
  • Cost of maintenance, repairs, and updates: Detail the cost of recent repairs and updates. You should also provide documentation like warranties and receipts that show the age and condition of your home’s systems and structures, such as the HVAC and roof.
  • Property management fees: Note any property management fees if you’re working with a third party.
  • Homeowners insurance: An investor may want to know how much you’re paying annually for home insurance.
• Details on each unit: Include basic property details, including the number of bedrooms and bathrooms and square footage.
• Inspection and appraisal results: Include findings if you conducted a pre-listing home inspection or appraisal.
• Certificate of occupancy: If you built or significantly remodeled your multi-family home, you may need a certificate of occupancy that certifies that the building is up to code and safe to occupy. Contact your local zoning or building department to find out if you need this document.
• Violations or citations: Share any citations regarding sanitation, water, elevators, etc.

Gather these documents in a simple packet for potential buyers to reference. With this data ready to go, you can fast-track your sale.

9. Take listing photos that cater to your ideal audience

When your unit is finally fresh and clean, hire a professional real estate photographer to showcase your property’s best features. One study suggests that homes with high-quality listing photos can sell 32% faster than those without them.

Here are some tips from long-time property investors on what to feature in your photos:

• The exterior of the building: Your first photos should showcase the front of your property, especially if you’ve invested in improving the curb appeal.
• Occupied and unoccupied units:
  • Properties with four units or less: McCorkel recommends photos of every unit. “If I see enough pictures, I can estimate the rehab cost without even going to see the property, and that helps to save me a ton of time.”
  • Properties with five units or more: Shenker suggests including photos of the best unit and an average unit.
• The flow of a unit: Shenker recommends a video walk-through to give buyers an even better picture of the building.
• Furnaces, air conditioners, and electrical box panels: Even if you don’t include these in the listing, you can provide them to prospective buyers who request more photos.
• The roof and basement: McCorkel appreciates photos of these areas, so that he can evaluate the condition of the flooring, foundation, and such for estimated repair costs.
• Security features: If crime is an issue in your neighborhood, Kolodgie suggests installing some security features and highlighting them in your listing. “In certain areas, you definitely, absolutely, 100% need to have security systems,” he says.
• A map highlighting attractions and activities in the area: If you’re in a touristy area, Shenker recommends a map highlighting local attractions.
• Drone video: Shenker suggests this tip for larger cities (when allowed). “That’s a really good way to quickly show the area,” she adds.

10. Hire an agent with experience selling multi-family homes

Investment properties and single-family dwellings are apples and oranges in the real estate business, and not every agent has the expertise to assist their clients with both products.

Before you get started, enlist the help of a top real estate agent with experience in the multi-family industry.

With the right agent, you can:

• Cater to the correct audience.
• Communicate with tenants and coordinate showings.
• Pursue the repairs and updates with the greatest investor appeal.
• Collect the appropriate data highlighting your income and expenses.
• Present the listing photos that feature your property’s best qualities.

You can start your search with HomeLight’s Agent Finder. Plug your home details and let our concierges know that you’re looking for agents who specialize in selling multi-family properties. We’ll crunch transaction data to match you with the top three agents in your market. From there, we recommend that you interview each candidate over the phone to find the best match.

Header Image Source: (Susan Law Cain / Shutterstock)