Preparing for and completing a closing are the most detailed and frustrating parts of the self-storage real estate sales process. The best way to make this tedious task easier and more efficient is to start early and work with a qualified team of experts.
The preparation for a closing should begin before you list your property for sale. Deal points don’t usually become problems at the closing. Many are recognized earlier, but simply postponed or ignored. Any issues that might arise at the closing should be addressed long before the parties get to the table. If you’re able to identify them early, you’ll be able to come up with complete and well-planned solutions you can share with prospective buyers. This will increase the probability of a closing and also allow you to sleep better during the transaction.
Get your “closing team” together even before you list the property and ask them to help with the entire selling process, not just the closing. People who should be on your team include your facility manager, accountant, banker, broker and lawyer. You’ll also want to use an escrow agent. When you first think about selling, assemble this group and identify all the functions necessary to get the property sold. The accompanying “value realization process” chart outlines a general plan of attack and helps determine who needs to be involved in each step of the process.
Once you have your team in place, assign priorities, responsibilities and appropriate deadlines for each of the detailed functions. Monitor your schedule and plan for issues that will arise every two weeks throughout the selling process.
There’s a massive amount of information, especially financial, required to persuade a buyer, convince the buyer’s lender and complete the due-diligence process. Your manager and accountant are going to be very busy, so get them started early. Attorneys should be invited to the party early as well; not only will they prepare the documents for the contract and closing, but they can give you some good ideas and balance during the negotiations.
Make sure you meet with your accountant prior to listing the property for sale. It’s important to understand the tax implications of selling your facility, especially if you have 1031-exchanged into that property. It’s easy to lose track of your basis in the investment, and that will have a major impact on your tax situation when you sell it.
The IRS changes the tax laws on a yearly basis, so it’s imperative to have a clear understanding of you situation and any time frames that must be met. It’s every investor’s objective to put as much money as possible in his bank account and as little as possible in Uncle Sam’s.