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When a property owner opts to sell, the financial statements included with the sale typically act as the conduit connecting the seller’s aims with 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

Presented below is a practical guide for preparing those financial statements, from essential inclusions to the subtleties of tax and regulatory compliance

1. Understand the Audience

The initial step is to think about who will review the statements

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

While the core information remains the same, the depth and format may differ

As an example, a real‑estate developer desires detailed cash‑flow projections, whereas a private buyer may prioritize historic rent rolls and maintenance costs

Customize the presentation to align with 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 and significant capital improvements

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

Operating expense records: utilities, 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 any claims history

Pending litigation or zoning issues

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

3. Select Appropriate 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, 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

In addition, consider 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. Create the Income Statement

1. Start with gross rental income: total rent collected over the period

Deduct vacancy and credit losses: estimate a realistic vacancy rate (usually 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

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

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)

Conclude with Net Income: the figure that shows profitability after all costs

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

Add footnotes for any unusual items or one‑time expenses

5. Construct the Balance Sheet

Assets:

- Current assets: 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 include intangible assets such as leasehold improvements

Liabilities:

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

Long‑term liabilities include mortgage balances, deferred tax liabilities

Equity:

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

Make sure that assets equal liabilities plus equity

Add a short narrative explaining significant items, like pending appraisals or lease renewals

6. Build the Cash Flow Statement

Segment 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

Display how cash balances shift over the reporting period and spotlight any periods of negative cash flow that could alarm buyers

7. Build the Rent Roll Summary

Detail each tenant, lease start and end dates, 再建築不可 買取 名古屋市東区 rent amount, escalation terms, security deposit, and any other special clauses

Highlights:

The current occupancy rate

Distance to lease expirations

Rent growth trend over time

A clean rent roll can reassure buyers about the stability of income streams

8. Prepare the CapEx Log

Include a chronological list of all major capital expenditures in the past few years: roof replacements, HVAC upgrades, parking lot resurfacing, etc.

List the cost, date, and purpose for every entry

Buyers typically use this to gauge future maintenance needs and determine the replacement reserve

9. Outline Tax Information

Provide a concise tax summary

Property tax assessments plus payment history

Income tax returns when 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 helps buyers factor potential tax liabilities into their offer

10. Verify Accuracy and Consistency

Verify all figures across the statements

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

Employ a spreadsheet to automate these checks and flag discrepancies

11. Provide Narrative Explanations

While numbers tell one part of the story, narrative context can provide clarity

Explain:

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

Any lease renegotiations that changed rent schedules

- Market trends influencing rental rates

A clear narrative can anticipate buyer questions and show transparency

12. Format for Readability

Maintain a simple, professional layout