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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

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

1. Identify the Audience

The first step is to consider who will read the statements

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

Although the core information stays consistent, the depth and format can vary

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

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

Purchase price history and significant capital improvements

Present and past 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 applicable

- Tax returns (both property and income) for 名古屋市東区 不動産売却 相談 the last few years

Insurance policies and any claims history

Pending litigation or zoning issues

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

3. Choose the Right Statement Types

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

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

- Balance Sheet – Provides a snapshot of assets, liabilities, and equity at a 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. Construct the Income Statement

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

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

3. Deduct operating expenses: utilities, taxes, insurance, maintenance, property management, marketing, and any other recurring costs

Determine 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)

Reach Net Income: the figure that reflects profitability after all costs

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

Insert footnotes for any unusual items or one‑time expenses

5. Build the Balance Sheet

Assets:

- Current assets: cash, accounts receivable, security deposits held in escrow

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

Other assets include intangible assets such as leasehold improvements

Liabilities:

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

Long‑term liabilities: mortgage balances and deferred tax liabilities

Equity:

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

Ensure that assets equal liabilities plus equity

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

6. Create 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. Build the Rent Roll Summary

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

Highlight:

The current occupancy rate

How close leases are to expiration

Rent growth trend over time

A clear rent roll can reassure buyers regarding income stream stability

8. Create 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.

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

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

9. Outline Tax Information

Offer a concise tax summary

Property tax assessments plus payment history

- Income tax returns (if the property is held in a corporate structure)

Any tax credits or incentives, for example low‑income housing credits or energy‑efficiency rebates

Should the property be sold at a gain, include an estimate of capital gains taxes

This allows buyers to incorporate potential tax liabilities into their offer

10. Check Accuracy and Consistency

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

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 demonstrate transparency

12. Format for Readability

Maintain a simple, professional layout