Shafiq Hirani shows how to clean up a property's financials in 90 days before selling. Separating personal expenses, fixing the rent roll, and reclassifying capital costs can add $350,000 in value at a 6% cap rate. Do this before calling a broker.
90 days of work inside your own books before you list is the highest paid work you will ever do as a building owner. Not because it changes the building. The roof is the same roof. The tenants are the same tenants. It changes what a buyer is willing to believe about the building, and belief is what he pays for. I am Shafiq Hirani, MBA, CCIM. Today, the 90-day financial cleanup and roughly what each piece is worth. Quick ask before we get into it. If these breakdowns help you think about your building more clearly, subscribe and leave a comment because the questions in the comments are what I build the next videos from. All right, let us get to work. Here is the core problem. And almost nobody says it out loud. Your financials were built for a tax return. They were designed correctly and legally to show the least income possible. Now you want to sell, and you need those same books to show the most income you can defend. Those are opposite jobs. Nobody ever built you a second set of books for the second job because until now, You did not need one. This is where set-and-forget ownership actually costs money—not in the building, in the paperwork nobody has looked at in years. Step one: Separate personal from property—the car, the phone, the family member on payroll, travel, meals, the home office. Every one of those is a legitimate tax position. Every one of those is also a direct reduction in your sale price, dollar for dollar divided by your cap rate. Unless you document it as an add-back, the buyer will accept. And here is the standard for an add-back: you can hand over an invoice and explain it in one sentence. That is it. Undocumented add-backs get treated as fiction. Worse, They make the buyer suspicious of everything else in the file. So do not just list them, document them. And one more thing, do not delete these from your books. That creates a mismatch with your tax returns, and the buyer will ask for those returns. Leave them where they are and present them as documented add-backs alongside the original statement. Transparency is what makes an add-back credible. Step 2: Rent roll integrity. 6 fields for every unit: current rent, lease start, lease end, deposit held, concessions, and a signed lease in the file that matches all 5. If your rent roll does not tie to your leases, you will lose credibility on day 10 of due diligence, and you will not get it back. Step 3: Move capital expenditures out of repairs. A roof is not a repair. A boiler is not a repair. If it extends the life of the asset, it is capital, and it does not belong in your operating expenses. Moving those out raises NOI legitimately, and it is one of the few adjustments a buyer's lender will accept without an argument because it is standard accounting, not spin, and pull your bank deposits while you are in there. They have to support the rent roll because that is the comparison his analyst runs first. Here is the line I get pushback on: 90 days inside your books is worth more than $90,000 of renovation, and almost every owner does it in the opposite order. They paint the lobby, they redo the entry, they spend real money on things a buyer glances at for 4 seconds during a walkthrough. Meanwhile, the document that actually sets the price, the one his analyst will spend 2 weeks inside, has not been touched. Fix the file first. Then paint the lobby if you still want to. Here's what the file work is worth. A typical small building cleanup surfaces about 6 add-backs. Personal expenses that were never separated. One-time legal or repair costs. A capital item sitting in the repairs line. Call it $3,500 each. 6 times $3,500 is $21,000 of NOI. At a 6% cap rate, $21,000 is $350,000 of value. And notice, you did not renovate anything. You recategorized and documented expenses you had already paid. So here's the sequence. Days 1 through 30: audit and separate. Pull 24 months of statements. Flag every personal expense, every one-time cost, every capital item sitting in the wrong line. Days 31 through 60: Recategorize and document. Every add-back gets an invoice and a one-sentence explanation. Days 61 through 90: Rebuild the trailing 12, then stress test it. Apply 5% vacancy, add a 4% management fee, add reserves. If it still works, You are ready to list. If it does not, you found out now instead of in week 3 of due diligence. And do all of this before you talk to a broker, not after. A broker pricing your building off unclean financials gives you a low opinion of value, and that number tends to anchor everything that follows. Here's what to do next. First, watch video 3, What buyers and their lenders look for, so you know exactly who you are preparing this for. Second, download the Pre-Listing Financial Cleanup Checklist. It is the 90-day sequence broken into weeks. Third, book a 15-minute NOI diagnostic, and I will go through your expense lines with you. And in the comments, this one matters to me. Tell me what you found in your own books that surprised you. Your words. I'm collecting these and they shape everything I build. Shafiq Hirani, MBA, CCIM. Keep navigating.
