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 tidy, precise, and well‑organized set of statements can accelerate the sale, lessen negotiation friction, and enable the seller to secure the best possible price

Here is a practical guide to preparing those financial statements, covering what to include basics through the intricacies of tax and regulatory compliance

1. Understand the Audience

The first step involves determining who will view the statements

Potential buyers range 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

Adapt the presentation to satisfy the expectations of your target buyer group

2. Collect Essential Data

Collect the following key data sets, ensuring you have records that cover at least the last 12–24 months

Purchase price history along with 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 necessary

Tax returns, including property and income, for the past few years

Insurance policies and claim history

- Any pending litigation or zoning issues

A complete data set lowers the risk of surprises during due diligence

3. Select Appropriate Statement Types

You must create at least three essential statements for a property sale

Income Statement (Profit & Loss) demonstrates operating income, expenses, and net operating income (NOI)

Balance Sheet – Gives a snapshot of assets, liabilities, and equity at a single point in time

Cash Flow Statement – Shows cash inflows and outflows, especially valuable for buyers evaluating financing options

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

These additional documents enable buyers to explore further without overloading them with raw data

4. Build the Income Statement

Begin with gross rental income: total rent collected during the period

Remove vacancy and credit losses: 再建築不可 買取 名古屋市東区 estimate a realistic vacancy rate (typically 5–10% for commercial properties; 2–5% for residential) and any bad‑debt write‑offs

Subtract operating expenses: utilities, taxes, insurance, maintenance, property management, marketing, and other recurring costs

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

Deduct 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)

Reach Net Income: the figure that reflects 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 minus accumulated depreciation (display the depreciation schedule if the property is depreciable)

Other assets: intangible assets like leasehold improvements

Liabilities:

Current liabilities include accounts payable, accrued expenses, short‑term debt

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

Equity:

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

Make sure that assets equal liabilities plus equity

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

6. Build the Cash Flow Statement

Segment the cash flows into three categories

Operating activities involve cash from rents, minus 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. Draft the Rent Roll Summary

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

Highlights:

- Current occupancy rate

How close leases are to expiration

The rent growth trajectory over time

A clear rent roll can reassure buyers regarding income stream stability

8. Build the CapEx Log

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

For each entry, note the cost, date, and purpose

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

9. Provide a Tax Summary

Offer a concise tax summary

- Property tax assessments and 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 sale is expected to be a gain, add an estimate of capital gains taxes

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

10. Check Accuracy and Consistency

Check all figures across the statements

For example, the net cash inflow from the cash flow statement should match changes in the balance sheet’s cash account

Employ a spreadsheet to automate these checks and flag discrepancies

11. Provide Narrative Explanations

Although numbers convey part of the story, narrative context can add clarity

Details:

Reasons why expenses spiked (e.g., a costly roof replacement)

- Any lease renegotiations that altered rent schedules

- Market trends influencing rental rates

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

12. Ensure Readable Formatting

Use a simple, professional layout