Owners come to me all the time ready to dump a building because it’s not cash flowing. Higher taxes, soft rents, a problem tenant or two, and they just want out. I understand the instinct. But selling a distressed building is how you leave the most money on the table.
Why distressed buildings sell cheap
When a buyer looks at your building, they pull the rent roll, the payment history, the expenses. If they see soft rents, vacancy, and tenant problems, they price every bit of that risk into their offer. You end up practically giving the building away, and the buyer captures the upside you could have captured yourself.
The better order of operations
Flip the sequence. Before you list, get the building performing. That means placing the right tenants, getting rents to where the market actually is, tightening up collections, and looking hard at whether the property taxes can be appealed. A building that cash flows sells for real money. A distressed one sells at a discount, if it sells at all.
This is the part most owners can’t do alone from out of state, and it’s exactly what we do. We step in, review the leases and ledgers and tenant balances, fix what’s broken, and get both the building and the numbers into shape. Then, when it’s actually performing, you have a real decision to make: keep collecting the stronger cash flow, or sell from a position of strength. As a licensed Illinois broker, I can handle that sale too if you decide to go that way.
If you’re staring at a building you’re tempted to unload, talk to me first. There may be a lot more value in it than the current numbers show.
Mike Fisher, Licensed Illinois Real Estate Broker, M Property Group LLC (New Lenox, IL). Call 708 719 0977.
