If a property owner chooses to sell, the financial statements provided with the listing frequently serve as the link between the seller’s goals and the buyer’s trust

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

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. 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

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

2. Assemble Core Information

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

Purchase price history and significant capital improvements

end dates, escalation clauses, and security deposit balances

Operating expense records, such as 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 concerns

Having a complete data set reduces the risk of surprises during due diligence

3. Pick the Correct 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 – Offers a snapshot of assets, liabilities, and equity at a specific moment

- 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 ancillary documents assist buyers in probing deeper without inundating 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

Remove operating expenses: utilities, taxes, insurance, maintenance, property management, 名古屋市東区 不動産売却 相談 marketing, and any additional 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)

6. 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

Show 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. Create 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: accounts payable, accrued expenses, and short‑term debt

Long‑term liabilities: mortgage balances and deferred tax liabilities

Equity:

- Owner’s equity: purchase price, retained earnings, 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: cash from rents less operating cash outflows

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

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

Illustrate how cash balances evolve over the reporting period and emphasize any periods of negative cash flow that could be a warning 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

Highlights:

Current occupancy rate

How close leases are to expiration

- Rent growth trajectory over time

A tidy rent roll can assure buyers of 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.

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

Offer a concise tax summary

Property tax assessments and history of payments

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 helps buyers factor potential tax liabilities into their offer

10. Verify Accuracy and Consistency

Cross‑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

Use 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

Explanation:

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

- Any lease renegotiations that altered rent schedules

Trends in the market that influence rental rates

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

12. Format for Readability

Maintain a simple, professional layout