How do you go about getting the best price possible when the time comes to sell your investment property?
That is, one that will attract buyers and give you the return you seek.
Part of the answer lies in informing yourself about what the market is prepared to pay, remembering that more often than not your view and the market’s view on price can be quite different.
And let’s not forget that most purchasers need a mortgage with their lender, so what your lender’s valuer thinks the property is worth becomes central to getting the price you want.
As a rule of thumb, aim to get $5 return for every $2 you spend.
Where to start
Get your price expectations verified, or get help to set the price if you’re not sure what a reasonable asking price is.
Firstly, research your suburb on the Onthehouse Investor Centre site, and download the latest State Market Report to get an idea on how the property market is faring to give you an understanding of the current issues surrounding housing investment.
You can then engage a reputable selling agent to drawing on their local knowledge and recent completed sales data in your area.
Most selling agents can also provide you with comprehensive reports that provide useful insights for price setting and your marketing and sales strategies.
It’s important to remember that the selling agent’s price estimate is not a valuation, but more of a price guide. However, if the estimate is way below what you want, this indicates a problem and you may have to reassess your expectations.
The upside to this is that you can discuss any differences with your agent and work out what can be done to add value and improve your property’s appeal.
You can pay for your own independent valuation to give you that extra bit of comfort, but there are costs involved in doing so and you must ensure you ask for one that can be used for mortgage purposes so your valuer is thinking like the lender’s valuer.
Whichever approach you adopt, if there’s a match between the independent assessment of your property’s market value and what you’re after, then all is well and good.
Otherwise, you’ll have to start working on adding value as quickly and cheaply as possible to bridge the gap.
What can’t be fixed
Unfortunately there will be some things you won’t be able to fix when it comes to improving your property’s value. The main thing being location.
You could have a fantastic property with all the mod-cons, but something about the property’s position could be unattractive to buyers.
For instance, your property might be located next to a busy road, a power sub-station or an industrial park, or there could be other things that turn-off potential buyers.
Another location problem is lack of proximity to shops, schools and public transport. If these are desirable to your target buying market then you may not be able to generate the interest needed to get the price you want.
A further issue is the size, shape and slope of your land. If it has an unusual shape, has drainage problems or limits the ability to extend or improve the property (for instance as a result of Council restrictions) then buyers may perceive these as major limitations to the property’s development potential and hence their ability to make changes to meet their personal and lifestyle needs.
This will have a big impact on what buyers would be prepared to pay.
It’s important to identify and work out all of the aspects that take away value from your property and cannot be remedied easily or cost-effectively.
This way, you can focus on marketing the positive attributes of your property and directing your attention to highlighting the good points and make them even more appealing.
What can be fixed
A great deal of value can be generated through small and relatively inexpensive improvements to your property. Feedback from your selling agent and/or valuer will give you useful insights into the areas you should focus on.
Typically, this will be the bathroom, kitchen, floor coverings, garden and general decoration. It’s also a good idea to sort out the small and annoying maintenance issues like leaking taps, broken roof tiles and apply a lick of paint where it’s needed.
Occasionally, a major renovation will be required, such as a new kitchen, adding a second bathroom or a major garden overhaul.
In doing this, it important that you don’t overcapitalise. Be sure that any work done is consistent with the period, style and decoration of your property and the neighbourhood.
As a rule of thumb, you should aim for a $5 return for every $2 you spend. To put this into perspective, if you spent $25,000 on renovations you’d want your property to go up in value by around $62,500.
A return above this value would be an added bonus.
Use this measure to determine whether it is worth spending the time, effort and money fixing up your property, or whether it’s better to accept a lower price and let someone else take on any property upgrades.
This comes town to a judgement call and depends on how confident you and your agent are that the planned improvements to your property will deliver the increase in the market value you seek.