Part 4 of a Five-Part Series with Professional Renovator, Caroline Vass
I have interviewed professional renovator, Caroline Vass, over the past few weeks in order to learn the basics of finding, buying and renovating an investment property.
One of her recent deals in the Geelong area serves as an object lesson as to exactly how she applies her ideas in the real world.
This week, we’ll continue with the next logical topic, which is how to sell a renovated property quickly. Every step of the process has this end in mind. The goal of all renovation is to increase the value of a property.
Although your bank will most likely be happy to re-value your property in order to estimate your unrealized gain, so you can you borrow against it, you won’t really know for sure what your property is worth in the market until you find a buyer.
Caroline has plenty of experience selling and presenting properties. In addition to selling her own deals, she consults other investors on how to renovate their properties, including the best ways to prepare them for sale to minimize the number of days they are on the market.
1. Caroline, Before We Get Into The Details Of Selling, I’ve Heard Some Debate Amongst Investors About Whether To Sell Or Refinance After Completing A Renovation. How Do You Decide Whether To Cash Out Of A Deal Or Tap Into The Equity You’ve Created?
Generally speaking, the equity we have created in our property deals has come through manufactured profit, rather than generic growth in the entire market.
Once we complete a subdivision or renovation, there is lending in place that has supported the purchase and completion of the project. This lending is incurring interest that is not being offset by any rental income.
Finding tenants and holding the property is one exit strategy if we can’t sell the property at our desired price. There are, however, some disadvantages to holding a newly renovated property.
The major problem is that once tenants live in the home, it’s no longer newly-renovated. The best time to sell is when it’s been freshly updated. I don’t really want tenants damaging what I’ve worked so hard to make beautiful.
Whether I sell or hold really comes down to what my strategy was from the beginning. If the property is cash flow positive, and there is enough equity to pull out to allow me to do the next deal, then I might hold onto it. But, I usually go into the deal planning to sell and reinvest the profit into a higher return on another project.
2. I’m Gathering From Our Previous Discussions That People Can Avoid Many Of The Common Problems When Selling A Property. Can You Summarize The Most Important Factors In Finding, Buying And Renovating A Property That Make It Easier To Sell When The Time Comes?
The key to success is being clear on my deal profile and target market. It is especially important to know which suburbs will allow me to achieve the highest profit in the shortest amount of time.
When I know there is a large, hungry market for what I’m renovating, it gives me confidence that I can sell quickly.
My purchase price, of course, has a huge impact on my final profit and where I must price my property to achieve my goal. Buying at a premium to secure the property will result in reduced profitablilty at the other end of the project.
It will also make it harder for me to accept a lower offer. If I am turning down offers, it means the property stays on the market longer.
3. Do You Always Use An Agent To Sell Your Property, Or Would You Consider Selling It Yourself To Save Some Money?
I have not sold a property privately yet; however, there are obvious cost savings associated with commission and advertising campaigns. The challenge is having a strategy to market the property that doesn’t consume too much of my time and attention.
I’m currently developing referral networks to help me sell properties myself in the future before the renovation is even completed.
That said, the benefits of using an agent are hard to replace. As long as there’s enough profit in the deal, I’m happy to leverage off an agent’s time and expertise, as well as pay them to get the job done.
For me, the cost of my time and the hassle of self-marketing has always led me to list my properties with an experienced agent.
4. Do You Step Away From The Deal At This Point And Give All Responsibility For Selling Over To The Agent, Or Do You Still Have A Part To Play?
I never step away from the deal. I expect my agent to provide regular updates after inspections and interactions with any potential buyers. I have multiple tactical discussions with the agent during the campaign. I talk to them about the timing of the opens, the writing of additional advertising for newspapers, the maintenance of the property during the campaign, and the staging and presentation of the property.
There are only three things you can influence during the campaign: price, presentation and promotion. You should also monitor the level of interest on the internet and at opens, adjusting your “3 P’s” as required.
Before any of my properties go to market, I stage them with furniture. Anyone can outsource this service to a property staging company. I choose to stage my own properties because it saves me money, and also because I love it. I have a passion for furniture staging and interior design.
Staging a property is crucial, because it allows me to convey the emotion of what it will feel like to live there. When a house is empty, people often spend time thinking about where their furniture will go or fit. When you stage a property, people focus more on the feeling and presence of the house. They start imagining themselves living there.
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.
5. Essentially, You Compete With All Other Sellers Of Similar Properties In Your Area. What Do You Do To Set Your Property Apart From The Rest?
If you can’t attract potential buyers and retain their interest, then you will be at a disadvantage from day one. I put a lot of effort into presenting my properties, giving me a distinct advantage.
This also improves my marketing photographs, which will maximise the number of visitors I can get through the home. I make sure the outside of the property has a modern feel and compliments the street scape, too.
As I’ve mentioned previously, I make the interior look modern and use the property footprint to create a second bathroom where possible.
I keep my colour pallet neutral, which allows me to create a point of difference with furniture and soft furnishings. This is how I set my properties apart.
Using my collection of furniture, I stage my own properties at a fraction of the cost that a company would charge. I show up at the property to supervise the photo shoot, andto make sure we get twilight photographs, which leads to the most attractive images.
6. Who Are The Other Members Of Your Team You Rely On During The Sales Phase?
As I just mentioned, my agent has a major role to play. My legal team is also important in ensuring contracts of sale and the “Section 32” are ready in a timely manner.
There have been cases where we’ve sold property when the title was not yet issued. A good land surveyor and a lawyer/conveyancer is crucial to lodging documents correctly. They also make sure that to use the proper wording of clauses in the contracts with respect to settlement.
I also recommend having someone handle the garden maintenance while the property is on the market. We’d all love for our properties to sell in the first week, but sometimes it just doesn’t happen. I have the view that every week my property is on the market, it should look as good as it did on day one. It’s amazing how fast the grass and weeds can grow, and they will negatively impact the presentation of the property.
7. How Did You Go Selling The Geelong Renovation Properties We’ve Been Discussing? What Were Your Take-Away Lessons From That Deal?
Selling these properties took longer than we had originally planned – about seven weeks. While some may see this as a good result, we can see now why it didn’t sell sooner.
First of all, we listed the property straight after the New Year when the market was still slow from the holiday season. In hindsight, we should have planned the timing of the sale better.
Second, the property backed onto a railway line, which was a primary buyer objection. Other prospects complained that one of the units had small bedrooms and no built in robes. We’ve learned some valuable lessons on this deal.
When searching for a renovation property, it’s crucial that you purchase based on facts, not emotions or assumptions. Whenever I’m doing a project now, I think of Steve’s comment about property purchase due diligence, “You don’t know what you don’t know.” This always helps me to keep asking questions of myself and others. When selling a property, the most important question I ask is, “What are the potential buyer objections that could be a big factor for this property not selling?
8. If You Could Boil Down All That You Know, What Is The One Secret To Selling A Renovated Property Fast?
It all comes down to presentation. This includes not only the styling and staging of the property, but also choosing the right agent who will represent you and your property. You should also have a marketing campaign aimed directly at your target market.
Whenever I am renovating, I base all of my decisions on what will appeal to the majority of my target market. The more people I can get through my property during my first inspections, the greater the opportunity I will have to choose between multiple buyer offers.
Once you’ve made it to the selling phase of your renovation deal, you should have already done a number of key things to lead to a smoother exit. Your purchase price, your renovating budget and your sale price all impact your profit, which is the goal of the sale.
But your potential buyer cares nothing about these figures. They simply want a nice environment to call home. Therefore, you must put yourself in the place of your target market. You should be proactive in provoking positive emotion when people visit your property.
In our final interview next week with Caroline, we’ll crunch the numbers on her Geelong deal, and find out how this one stacked up in the end.
You can learn more about Caroline and request some free training videos at her website: http://www.smartchoicepropertydevelopment.com.au.