Some investors choose to buy a property, renovate it, and re-list it for sale with the aim of making a quick return. It’s known in the industry as ‘flipping’, but even if you take a buy-and-hold approach, at some stage you may want to sell. That’s when any capital growth becomes a reality, and as there’s a lot riding on the outcome, it’s worth taking steps to maximise the property’s sale price.
Renovate to sell
Carefully planned renovations can make a difference to the market appeal and value of your property. Aim for improvements that will appeal to a wide range of buyers, and get some quotes from builders on the likely cost of the project. Local real estate agents can offer estimates of what the place will be worth on completion.
One pitfall to avoid is over-capitalising. Money injected into renovations may not equal a higher selling price. This highlights the need to evaluate the cost versus the likely increase in the property’s market value to be confident you’re getting the best possible result.
Packaging your property for sale
As an investor, a key decision to make when selling a rental property is whether you sell with a tenant in place or wait until the lease has expired.
If the tenant stays on, you can earn rent right up until the place is sold. It can also be a point of appeal for buyers looking to invest, as they can start receiving rent from day one.
The downside is the need to arrange inspection times around the tenant, and less control over how well the property is presented. If the lease is yet to run its full term, buyers could be concerned about having to wait for the lease to expire before they can move in.
If the tenant stays on while the property is listed for sale, you might consider trimming the weekly rent in return for the tenant’s support in presenting the property to a high standard. Whatever course of action you decide, the tenant needs to be given ample notice in writing that the property is being sold.
Tips for Open Inspections
With or without a tenant, there are small improvements you can make to prepare the property for sale.
First impressions count, so take the time to spruce up exterior areas. Painting fences, cleaning the driveway and adding a new letterbox can all improve curb appeal.
Repainting the walls both inside and out is a quick and easy way to hide wear and tear marks. Stick to light but neutral tones – the new buyer can choose to repaint in their preferred shade but at sale time you’re likely aiming for broad appeal.
If the property is untenanted, you could consider home staging. It will add to the cost of your sale through furniture hire but it can create a more lived-in look, giving buyers a chance to see the property looking its best. Your selling agent should have contacts and ballpark pricing details for home staging consultants.
Speak with the agent about the best times for inspections. Ideally, aim for those times when the interior receives plenty of natural light.
Getting the most on auction day
Your selling agent can advise on the best method of sale for your property – usually either auction or private treaty, and it’s an important decision.
An auction doesn’t mean having to accept any price. You have the option to set a reserve price, which is the minimum price you’ll accept.
The upside of auctions is that when the hammer falls, the sale is normally unconditional and the buyer is committed to going ahead with the purchase. More to the point, depending on market conditions, the highest bid could far exceed your expectations, potentially giving you more of a capital gain than anticipated.
The risk is that the property could fail to sell at auction. If this happens, you’ll still need to pay costs associated with the auction – typically the auctioneer’s fee, and you’ll need to regroup with your agent to plan a sale through private treaty.
If you opt to run with an auction, be prepared to take your agent’s advice on board when it comes to deciding the reserve price. Setting the price too high could risk the place not selling, even if there are plenty of interested buyers.
Keep an eye on what’s happening in the local market too. If your property is one of many listed for sale, buyers can be spoilt for choice and may be less willing to actively compete at auction.
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- Chapter One : Things to consider before investing in property
- Chapter Two : Determining where to invest
- Chapter Three : Investment Properties by Dwelling Types
- Chapter Four : Finance for Your Investment Property Purchase
- Chapter Five : How to Invest in Property
- Chapter Six : Adding Value to Your Investment Property
- Chapter Seven : Positive and Negative Gearing
- Chapter Eight : Getting Your loan
- Chapter Nine : Selling your Investment Property