When it comes to selling your investment property, it’s best to consider all of your options before deciding to go to market.
Blogger: Lauren Staley, managing director, Infolio
Taking everything into account – selling costs, property costs, potential vacancy periods, and sales taxes – the decision to sell can often be more trouble than it’s worth.
Even so, if you've reviewed your property portfolio and have made the decision to go to market, it’s important to consider the type of property in your folio as well as the current selling climate.
So, here are a few things to think about to determine if it’s time to sell.
1. Check the forecast
It may seem peculiar, but the time of year you go to auction could have an impact on the outcome of your deal. So, when is the ideal time to put up your 'for sale' sign? It all depends on the location of your property, and the type of home you have to offer. Where winter tends to feature less competition and the possibility of greater interest, spring provides brighter chances for period properties found in picturesque locations. Knowing how to sell your home is also important, but knowing when to sell is key.
2. Take a look around you
Nothing lasts forever, including that quiet neighbourhood you thought you had bought into. Over time, a suburb may attract impending developments that you weren't aware of at the time of your investment. Advances such as these have the potential to alter your property’s streetscape, resulting in issues such as more noise and less parking for your tenants. In time, you may struggle to rent out your home, resulting in a property that will not perform for you in future.
3. Assess your rental returns
Developments in the area of your property, as well as other contributing factors, could affect the rentability of your investment. If you are finding it difficult to rent out your home, it could be a sign that your property is not increasing in value, as it should. Ideally, a well-performing investment will attract tenants and deliver a healthy rental return.
Conversely, difficulty in finding tenants could lead to lower rental returns, increasing the amount you pay to cover the interest on your home loan. Other additional costs involved in owning an investment could also overwhelm you – such as increasing council rates and home insurance.
4. A house versus a hassle
When reviewing your portfolio, it’s important to consider the hidden costs in maintaining your investment long term. Rates, taxes and levies are fees paid to the authorities that service your property, such as a body corporate or local municipality.
But an investment property should be making you money, not causing you pain. If you are finding that municipal levies or owners corporation fees are increasing incrementally, the return on your investment could noticeably decrease.
The physical condition of your investment can also cause you grief. Have you found structural issues with the property that will be expensive to repair? Have a series of bad tenants caused ongoing maintenance concerns? A leaking tap is one thing, but more serious property wear and tear can become a nightmare. If upkeep costs are weighing you down, it may be time to cut your losses.
5. Knowing when to let go
Selling an investment property is more than just a financial decision; it’s an emotional one as well. Your personal circumstances will inevitably play a major role in your move to sell, perhaps to upsize your family home, or downsize for retirement. Alternate lifestyle factors can also contribute to your final decision, such as relocation for your career, or a desire to move abroad. Ideally, your personal and financial decisions should compliment, not conflict, one another.
6. Strike while the iron’s hot
Sometimes playing copycat is a tactic just as smart as any other. If the properties that surround your investment are selling at record prices, it could be time to get in on the action. The going prices of real estate in your suburb can provide an accurate idea of what to expect when it’s your turn to go to auction. What’s more, the speed at which surrounding properties are sold may give you a sense of the demand in your location. Given the fluctuation of the real estate game, it may be wise to get out while the going is good.
In the end, the decision to sell your investment property should not be taken lightly. Regardless of your reasons for going to market – be it personal or financial – it’s wise to seek professional advice before making your decision.