Selling Income Property Isn't Like Selling A House. You Can Paint A House, And Get A Little More Because It Looks Nice. Rental Property Is Different, Because It's Bought By Investors, Who Look At Income More Than New Paint. Raise Income, And You Increase Value.Let's Assume Investors In Your Area Expect A Capitalization Rate Of .08. That Means That They Want A Net Return (before Loan Payments And Taxes) Of 8 On The Purchase Price. If Your Three-plex Generates 12,000 Net Income Annually, They'll Value It Around 150,000 (12,000 Divided By .08). Make It Generate 16,000, And You Make It Worth 200,000. Get More Income From Your Income PropertyHigher Rents Is The Obvious Way To Boost Income, If You Can Justify It. Find Out What Similar Units Are Renting For. If You're 60 Below The Going Rate, You Can Raise Rents And Not Lose Your Renters. Raising The Rent 60 For Three Apartments Means 2160 More Net Income Annually. At A .08 Cap Rate, You Just Added 27,000 To The Value Of Your Property.Consider Other Ways To Raise Rents. Your Tenants May Agree To 30 More Per Month If You Have A Carport Built. That's 1080 More Net Income Annually, Meaning Roughly 13,500 More Value Added To Your Property. (30 X 3 Units X 12 Months 1080 Divided By A .08 Cap Rate 13,500) Build That Carport For 4,000, And That's A Good Return On Investment Right? What Else Do They Want?Consider Other Ways To Get More Income. Rent Storage Sheds To Tenants Or Put In A Coin-operated Washer And Dryer. If You Own A Larger Income Property, You Could Install Pop Machines.Reduce Rental Property ExpensesCan You Add Insulation To Reduce The Heating Costs? If You're Paying 80month For Lawn Care, Will One Of The Tenants Do It For 40? Can You Get Cheaper Insurance? Look For Any Ways You Can Reduce Expenses. A New 4,000 Furnace That Saves 800year On Heating Costs Means You Just Turned 4,000 Into A 10,000 Higher Sales Price.These Things Are Never An Exact Science, And Of Course Appearance And Other Factors Matter. Increasing That Net, Though, Is The Surest Way To Get More For Your Income Property. Just Make The Changes At Least Several Months Before You Try To Sell The Property. Also, Learn How Do The Math - It Really Does Matter.
