5 Things to Do Before Listing Your Investment Property for Sale
The first investment property I ever sold was easy for me. It was a small unit that I developed in a joint venture with a builder.
The market was strong, and even though I had no idea what I was doing, the property sold quickly, and at a good price. It was a seller’s market, so it was okay for me to learn from my mistakes, and still come out ahead despite them.
Fast-forward a few years to 2008. I listed a second investment property for sale, but this time, we were just about to experience a global financial collapse. This home sat on the market for 12 months.
At the eleventh hour, just when I was about to put a tenant in the property, a hungry buyer snatched it up. Thankfully, I broke even on this deal, even though my holding costs and a price reduction put a serious dent in my projected profit.
Had I known then what I know now, I probably would have sold that second property much sooner by being far more proactive in the process. To save you the same fate, here are five things I wish I knew then that I know now – actions that would have provided me with a much better outcome:
1. Assess The Realistic Value Of Your Property
Step one is to assess what your property is truly worth. We all think we know what someone should be willing to pay, but sometimes there’s a difference between our wishful thinking and reality.
The market was telling me that I had overpriced my property, but I wasn’t listening. I thought all the potential buyers were the ones with the issue, not me.
We don’t actually know what a property is worth until someone pays for it in the open market. However, we can arrive at an estimated theoretical price of what someone will likely be willing to pay.
Unless you’re an area expert and have access to recent comparable sales data, you’ll need to use the services of a third-party professional to help you arrive at an estimated value. The simplest option is to contact a real estate agent to carry out an informal valuation on your property. Alternatively, you could pay an independent accredited valuer to suggest a more precise figure.
My experience has been that independent valuers are not always ideal for this purpose because they tend to undervalue. They can be held legally liable for negligent valuations, but they most often represent bankers who prefer them to be conservative. If you do choose this route, it’s wise to supply your valuer with as much relevant information and data as possible to help direct their outcome.
2. Interview At Least Three Different Agents
The greatest need of any real estate agent is to gain new listings. In Australia, they can’t sell what they don’t have listed, so your agent needs you more than you need them. This will help you to remain discerning. You can take your time to find a quality agent.
You might choose to wait to assess the value of your property until this phase, as potential selling agents will gladly offer their valuations.
First, visit a few agency offices to get a feel for the type of services they offer. Ask other investors in your area who they’ve worked with and who they prefer, too.
After you’ve chosen a few agents to interview, invite them to visit your property at different times for a home inspection. They will likely provide you with a sales proposal within a few days that includes the important details of the following:
- Expected Sales Prices
- Comparative Sales
- A Sales and Marketing Plan
- Sales Costs and Fees.
The sales proposal should give you plenty to work with to make a well thought-out decision about who will represent you. I wish I had done this in 2008. I literally went with the first agent that someone recommended. After six months he proved to be slack, so I ended up changing agents, going with another recommendation without interviewing them first.
3. Know Your Target Market
A target market is a group of people that have shown a demand for properties that are comparable to yours.
These are the people you and your agent will be directing the bulk of your marketing and advertising efforts towards. In order to determine who your target market is, just ask yourself the following key questions:
- What type of people will want my property, and why?
- Am I marketing to owner-occupiers or investors?
- How old are they, and what are the needs of their age group?
- Are they young families, single professionals or retirees?
- Where do these people currently live?
- How much money do they earn?
- What do they care about most?
I never thought about precisely who I should direct my advertising efforts toward, not even once. I suppose I was just hoping for the best. If I knew who my target market was, I could have worked with my agent to build a plan that would provoke emotion and desire in potential buyers. A few hours of intelligent thought could have saved me thousands of dollars in holding costs.
4. Create An Advertising And Marketing Plan
My biggest mistake in 2008 was that I gave complete control and responsibility for selling my property over to my agent. I thought since he was the expert, he had it all under control.
I made the mistake of believing that my agent was more capable and as passionate as I was about the sale of my property. How wrong I was.
No agent should ever know your property better than you do. While most agents tend to be experts in working a proven sales system, few agencies have an expert whose forte is creative marketing.
What this means is that most real estate marketing is generic, and few campaigns offer that personal touch.
As the property owner, it’s your job to help the agent see the unique selling points of your property, in light of your target market. If I did this, and helped my agent craft a marketing strategy, I could have shaved months off the time it took to finally sell.
5. Prepare Your Investment Property For Sale
To use a fishing illustration, if advertising and marketing is like the bait that attracts the fish to bite, the presentation of your property is the hook that lands them.
While your first goal is to entice people to walk through your property, that alone will not get the sale. Your most important concern is to provoke emotion and desire in the hearts of every visitor.
Again, I completely dropped the ball on this one in 2008. I literally did nothing to stage the interior of the property. In fact, I didn’t even properly landscape the exterior. It’s no wonder the property sat empty for 12 months.
Preparing your property for sale is not rocket science. At the very least, you must keep your property clean and tidy. Weeds in the garden beds or grime in the shower impresses no one. Add a fresh coat of paint, and perhaps some new floor coverings
If someone is already living in the property, a good presentation can be even more challenging. Try to keep the appearance as uncluttered and minimal as possible. Make sure all the little things, like holes in walls and broken tiles are fixed.
Finally, if you want to go the extra mile, stage your property with furniture to give your home a warmer and more inviting feel. I recently interviewed my friend and professional renovator, Caroline Vass, who is a staging expert. Here’s three points she makes about preparing your property for sale:
- Convey Emotion: “Before any of my properties go to market, I stage them with furniture. Staging a property is crucial because it allows me to convey the emotion of what it will feel like to live there.”
- Spark Imagination. “When a house is empty, people often spend time thinking about where their furniture will go or fit. When a property is staged, people focus more on the feeling and presence of the house, and they start imagining themselves living there.”
- Remove Mental Hurdles. “In some houses, the room shape makes it difficult for people to imagine what they could use the space for. When I stage the property, I’m removing this mental hurdle.”
Some Key Takeaways For You
Your job as project manager of the sales process is not finished until you’ve exchanged all of the contracts. You must remain involved in the process, even after delegating to your agent.
You should receive regular updates from your agent after property inspections and interactions with any potential buyers. Strategize with the agent about the timing of your open houses, as well as the creation of advertising.
Talk to them about the maintenance of the property during the campaign, and the staging and presentation of the property. Ask for regular feedback from your agent about what prospects like and dislike. This way you can make adjustments along the way, if necessary.
We have only begun to scratch the surface on how to oversee the sale of your investment property. Steve McKnight devotes an entire module to this topic, Investment Evaluation and Selling, in his Property Apprenticeship course. If you’ve made some of the same mistakes that I’ve made, do yourself a favor and enquire further into how Steve can educate you to be a better property investor.
In this article, Jason shares his biggest property sales mistakes and the five things he could have done to ensure a better outcome.