Sometimes selling an investment property is the most effective way to free up your cash and leverage into a bigger deal – but how can you ensure you’re making the most of the market to get the best price for your asset?
Sometimes selling an investment property is the most effective way to free up your cash and leverage into a bigger deal – but how can you ensure you’re making the most of the market to get the best price for your asset?
Research from the Commonwealth Bank reveals that almost half of aspiring homebuyers in Australia are looking to secure an investment property.
According to the survey of more than 1,000 homebuyers, 47 per cent recently purchased, or said they intend to purchase, an investment property. This underlines the fact investing in bricks and mortar is a hot topic right now – yet Raine & Horne agents across Australia are reporting that listings are still in short supply and well-located properties are being snapped up almost as soon as they hit the market.
With buyers thick on the ground, the next few months represent a good selling window, especially for those who have been weighing up a sale for some time. It also helps that auction clearance rates in some of our capital cities are consistently nudging above 80 per cent, although I prefer to look at average ‘days on market’ for an insight into the health of a local real estate market.
Agents and pricing
One thing I can con fidently share with you is how to choose the right real estate agent to help you sell an investment property – and indeed ensure you get the best price.
When choosing to sell an investment property, many landlords first make contact with their existing property manager and ask to be referred to a sales agent. This makes plenty of sense because the landlord has an existing relationship with the agency. Also, many landlords are time poor, meaning handing the reins over to a real estate agent with local market expertise and experience will take a lot of the stress out of the sale process.
The agent will be able to o ffer you current information about prices, financing, marketing and general information about the real estate market in your suburb or town. They will also act on your behalf when negotiating with potential buyers, and always provide you with advice and guidance to help you objectively evaluate o ffers. The agent should also discuss with you the merits of selling via private treaty or at auction.
When choosing an agent, consider the reputation of the agency that he or she works with, as well as the agent’s track record in sales and knowledge of the local area. On a personal level, consider how they present themselves and the rapport you have with them.
I’d also recommend checking the extent of their technolo gy support. An e ffcient and e ffective real estate website should facilitate trouble-free navigation and be consistently ranked as a top industry site.
Solving the pricing dilemma
Overpricing is a common reason properties fail to sell, even in strong markets like we’re currently experiencing in our capital cities and regional areas.
This is where your agent plays a crucial role in providing a market opinion when he or she first inspects your property, which will give you a good estimate of price. If they’re unable to provide this advice at the first meeting, then I’d look elsewhere.
The market opinion provided by a real estate agent will also be drawn from evidence provided by property data sources such as RP Data, Residex and Australian Property Monitors (APM). Also, current advertisements and recent sales negotiated by the agent, and his or her real estate o ffice, along with competitor sales, should all be considered in the determination of a selling price.
It is very important you agree on the final price and the agent feels it is realistic. If the price is unrealistically high, it’s fair to expect fewer buyer enquiries, which won’t help the property to sell.
Selling under the hammer
For many investors, marketing is another key factor that helps determine their choice of agent and method of sale. It is for this reason numerous investors use the auction process when selling aproperty.
The auction process has evolved to ensure homes are exchanged at a fair price, as dictated by the market at the time. In other words, an auction allows buyers and the owner to determine an investment property’s true market value. They achieve this by creating a sense of urgency – prospective purchasers must complete their enquiries within a limited timeframe because the auction date establishes a deadline, which helps accelerate the selling and buying process.
Likewise, a sale at auction is conclusive. The property is sold on the fall of the hammer. There is no cooling off period, as is the case with a private treaty sale, and properties marketed using the auction process usually deliver prices that more closely mirror the seller’s expectations.
Timing and tenants
The timing of the sale of an investment property becomes a more critical issue as we head into the cooler months of the year. Typically, the market will slow in July and August as some buyers (not all) take a break from the cold.
Likewise, there is the issue of selling a tenanted property – and the common view here is that selling a vacant home is the best option. However, as long as the tenants are given plenty of notice, legally they must allow your chosen real estate agent to show prospective buyers through the property. They are also obliged to allow photos of the property to be taken for advertising purposes.
There’s no doubt that having a tenant with a current lease can create a few extra hurdles when the time arrives to sell an investment property. As such, some experts will recommend a vacant sale, but this will require giving tenants 60 days’ notice to depart the property, which can hold up the sale – and mean running the risk of missing out on the traditionally strong autumn selling market.
In addition, even with days on market sitting at less than 40 days, a vacant property means there will also be a period of time when the owner is not earning an income, which may not be financially feasible. My advice is to keep the tenant in place and work closely with your agent to achieve the best sales outcome in the shortest time possible.
Angus Raine
Angus Raine is a leading real estate commentator and Executive Chairman and CEO of real estate group, Raine & Horne. He is also guest expert on the 2013 series of internationally-acclaimed Channel Seven property lifestyle program, Sandcastles.
A director of Raine & Horne Holdings Pty Limited since 1998, Angus commenced his real estate career in 1985. Determined to establish himself outside Raine & Horne, Angus secured appointments with three blue-chip international property firms.
Contact this Blogger Immediately
