Wealth accumulation is one of the most exciting reasons to invest in property. By nature, investors work hard over the course of their ‘career’ to grow their portfolio, which in turn sets them up for a better lifestyle. Many investors spend time and resources learning about the best ways to purchase properties… but the question is, what happens when you need to sell one?
Not all investment properties are created equal. Sometimes a property doesn’t provide capital growth as expected. Sometimes your personal conditions change. Or sometimes you realise that you must sell an existing investment property to free up cash or equity to purchase another, better-performing property (in other words, you need to cut your losses). Regardless of the reason, selling a property requires a unique set of skills, strategies and tactics. And the sharper your skills, the better the result will be for your short-term sale and long-term wealth creation.
Tips For Selling An Investment Property
1. Understand your legal and tax obligations
The first things most investors should consider are your legal and taxation obligations.
Firstly, if your property is tenanted, there may be rules you must follow when placing a property on the market (and changing owners etc.). These differ from state to state and call upon different procedures and obligations. It pays to be well-versed in the legislation governing your property and tenancy, including the rights of your tenant.
Additionally, you may need to pay capital gains tax (CGT) when you sell an investment property. The amount of CGT you pay may depend on several factors, including the profit you make when you sell the property and the length of time you’ve had it. Please note, this isn’t tax advice, and you should refer to your accountant for more information.
In short, having a comprehensive understanding of your tenancy and taxation requirements will enable a smoother transaction when your property eventually sells.
2. Get an accurate understanding of your property’s value
Before placing your investment property on the market, you must have a clear understanding of its market value. To achieve this, consider the following strategies:
- Get your property valued. An agent may do this for you, or you may wish to organise this independently.
- Research your property’s surrounding area (streets/suburb) for comparative sales. Many property valuations will include this research for you as part of their service.
- Closely examine surrounding suburb metrics like inventory levels and months’ supply to determine the performance of your suburb. This may help you set a higher, but still competitive price.
3. Find an experienced agent who has a wide network of potential buyers
The process for finding the most ideal real estate agent is both an art and a science. You’ll benefit from using both data/research and your gut feel to choose the right agent for your property. The agent you choose to sell your property should have:
- Experience in your local area
- Experience selling your type of property
- A network/database of potential buyers
- Suitable motivation to sell your property
Listed below are places to search for potential real estate agents:
- Internet/Google/Bing search
- Facebook/social media search
- Real Estate blogs/websites
- Asking industry bodies in your local area
- Asking other investors for referrals (this is often the best way—consider joining a property investor networking group to tap into their experiences)
Questions to ask shortlisted agents include:
- What similar properties have you sold recently in this area, and what are their sale prices etc.?
- How will you market my property? Is your service different to your competitors? If so, what are the unique benefits of partnering with you?
- Do you have any testimonials or reviews I can read?
- Can I speak to a few of your current clients, as references?
- Is your company director involved in the day-to-day running of the agency?
- What is your fee/commission structure?
- Do you understand my tenant’s rights?
4. Set a competitive asking price
Using your research from step two, work with your agent to set a competitive asking price.
Your pricing strategy should take into consideration the unique features and benefits of your property, when viewed by both potential investors and owner-occupiers. For example, a great rental yield will attract investors… whereby a home’s décor or design may attract potential owner-occupiers.
5. Choose your sale method
Choosing between private sale or auction could add significant upside to your home’s sale price. An auction may create a bidding frenzy on the day… however a private sale campaign may give you access to a wider network of potential buyers.
Choosing the correct method depends on unique market conditions surrounding your property. Your agent will advise the best pathway for your property’s sale.
6. Ensure your property is both maintained and dressed accordingly
You will need to ensure that your property looks and feels fantastic throughout the duration of your sale campaign. This includes:
- Ensuring the property is in good working order and well-maintained
- Ensuring the property is clean and tidy
- Ensuring the property has plenty of sunlight and ventilation (with no unwelcoming odours)
If you don’t have a current tenant, and/or the property is vacant, you may benefit from having your property professionally ‘dressed’. This will increase the perceived value of your home.
Can We Help With Your Property Investment Strategy?
The quickest and easiest way to prepare finance for your next property is to request a Free 30-Minute Finance Strategy Session during which you will…
- Get an up-to-date picture of the lending landscape including rates, conditions, and how to structure loans for cashflow positive investors
- Gain greater clarity over where you want to be in terms of owning investment properties (and how to structure your loans to get there the fastest, safest way)
- Discover how to unlock the equity in your current properties, so you can build your portfolio – and your wealth – faster (and enjoy a better lifestyle now and in retirement)
- Discover clever, no-cost ways to save money on interest, fees, and charges — immediately
- Learn about our process to find you a better loan that will save you thousands.
This no-obligation session will be held with one of our experienced mortgage brokers.
Please be assured this will not be a thinly disguised sales presentation. On the contrary, you’ll receive our best strategic advice, specific to your situation, so you too can accumulate multiple properties without sacrificing your current lifestyle and accelerate your progress towards wealth.
Please note, the numbers and assumptions listed in this article are for educational purposes only. Individuals should seek specific advice pertaining to their unique situation and the real estate market before making any decisions.
Trilogy Funding Two is a corporate credit representative (Representative Number 506131) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237)