Preparing Financial Statements for Property Sale > 자유게시판

When a property owner decides to sell, the financial statements that accompany the offering are often the bridge between the seller’s intentions and the buyer’s confidence

A clean, accurate, and well‑structured set of statements can speed up the sale, reduce negotiation friction, and help the seller claim the best possible price

Below is a practical guide to preparing those financial statements, from the basics of what to include to the nuances of tax and regulatory compliance

1. Know Your Audience

The first step involves determining who will view the statements

Potential buyers span from individual investors and homebuyers to institutional lenders and real‑estate investment trusts (REITs)

Even though the core information is unchanged, the depth and format might differ

For instance, a real‑estate developer seeks detailed cash‑flow projections, while a private buyer may concentrate on historic rent rolls and maintenance costs

Tailor the presentation to meet the expectations of your target buyer group

2. Collect Essential Data

Gather the following key data sets, ensuring you have records covering at least the last 12–24 months

- Purchase price history and any major capital improvements

Current and historic rent rolls, including tenant names, lease start

- Operating expense records: utilities, property taxes, insurance, property management fees, repairs, and capital reserve contributions

Mortgage statements and loan amortization schedules, if relevant

- Tax returns (both property and income) for the last few years

Insurance policies and claim history

- Any pending litigation or zoning issues

A full data set mitigates the risk of surprises during due diligence

3. Choose the Right Statement Types

You’ll need to produce at least three essential statements for a property sale

Profit & Loss Statement – Displays operating income, expenses, and net operating income (NOI)

Balance Sheet – Gives a snapshot of assets, liabilities, 再建築不可 買取 名古屋市東区 and equity at a single point in time

- Cash Flow Statement – Illustrates the inflow and outflow of cash, especially useful for buyers evaluating financing options

Also, think about adding a Rent Roll Summary, a Capital Expenditure (CapEx) Log, and a Tax Summary

These supplemental documents help buyers dig deeper without overwhelming them with raw data

4. Create the Income Statement

First, start with gross rental income: total rent collected for the period

2. Subtract vacancy and credit losses: estimate a realistic vacancy rate (often 5–10% for commercial properties; 2–5% for residential) and any bad‑debt write‑offs

Remove operating expenses: utilities, taxes, insurance, maintenance, property management, marketing, and any additional recurring costs

4. Calculate Net Operating Income (NOI): the amount left after operating expenses but before debt service and taxes

5. Subtract any debt service (principal and interest payments)

Add or subtract any non‑operating income or expenses (e.g., sale of equipment, one‑time legal fees)

7. Arrive at Net Income: the figure that indicates profitability after all costs

Display the income statement in a clear, columnar format with amounts in the primary currency

Include footnotes for any unusual items or one‑time expenses

5. Construct the Balance Sheet

Assets:

Current assets include cash, accounts receivable, security deposits held in escrow

- Fixed assets: property's fair market value, less accumulated depreciation (show the depreciation schedule if the property is depreciable)

Other assets: intangible assets like leasehold improvements

Liabilities:

- Current liabilities: accounts payable, accrued expenses, short‑term debt

- Long‑term liabilities: mortgage balances, deferred tax liabilities

Equity:

Owner’s equity includes purchase price, retained earnings, and any capital contributions

Ensure that assets equal liabilities plus equity

Provide a brief narrative explaining significant items, such as pending appraisals or lease renewals

6. Draft the Cash Flow Statement

Divide the cash flows into three categories

- Operating activities: cash from rents, less operating cash outflows

Investing activities include cash spent on capital improvements, purchase or sale of ancillary assets

Financing activities: mortgage payments, new debt issuance, or equity injections

Show how cash balances change over the reporting period and highlight any periods of negative cash flow that could be a red flag for buyers

7. Create the Rent Roll Summary

Detail each tenant, lease start and end dates, rent amount, escalation terms, security deposit, and any other special clauses

Highlight:

The current occupancy rate

- Proximity to lease expirations

The rent growth trajectory over time

A clear rent roll can reassure buyers regarding income stream stability

8. Prepare the CapEx Log

Provide a chronological list of all major capital expenditures in recent years: roof replacements, HVAC upgrades, parking lot resurfacing, etc.

Record the cost, date, and purpose for each entry

Buyers frequently use this to evaluate future maintenance needs and compute the replacement reserve

9. Summarize Tax Information

Deliver a concise tax summary

Property tax assessments plus payment history

Income tax returns, if the property is held in a corporate structure

Tax credits or incentives like low‑income housing credits or energy‑efficiency rebates

If the property is expected to be sold at a gain, include an estimate of capital gains taxes

This assists buyers in accounting for potential tax liabilities in their offer

10. Ensure Accuracy and Consistency

Cross‑check all figures across the statements

For instance, the net cash inflow from the cash flow statement ought to reconcile with changes in the balance sheet’s cash account

Use a spreadsheet to automate these checks and flag discrepancies

11. Add Narrative Explanations

While figures represent part of the story, narrative context can offer clarity

Explanation:

Explanation of why certain expenses spiked, such as a costly roof replacement

- Any lease renegotiations that altered rent schedules

Market trends that affect rental rates

A well‑written narrative can pre‑empt buyer questions and exhibit transparency

12. Format for Readability

Maintain a simple, professional layout