If you are looking to sell your first investment property you want to make sure you are across all the steps in the process. There are a few differences between selling a private home and an investment property, so it’s a good idea to know what to expect. After choosing an experienced local real estate agent and having your property appraised, there are a host of other practicalities and considerations you need to be aware of, including:
- Sale price, sale method and listing agreements
- Renovating and repairing your investment property for sale
- Marketing your investment property for sale
- Selling your investment property remotely
- Selling your investment property if it is tenanted
- The final sale process
Sale price, sale method and listing agreements
One of the first tasks is to talk to your agent and agree on a sale price. They will have sold numerous properties in your area and be able to advise you based on their market knowledge and recent sales in your local area. The next step is to choose a sale method, depending on the current local market, your type of property.
Each - private sale/auction - has its pros and cons, so be sure you select the one that is likely to achieve the highest sale price. You also need to sign a listing agreement with your agent, which defines if they do/don’t have exclusive right to sell your property.
“An agent will be able to help you agree on a sale price based on their market knowledge and recent sales in your area”
Renovating and repairing your investment property for sale
After your agent has appraised your property they may recommend some minor works or repairs are done. Buyers are likely to pay more for a property that looks well maintained and ready to move into.If your property has been tenanted it could be showing showing signs of wear and tear.
A handyman can help to fix minor items that need some TLC, like a sagging fence or broken insect screens. It could also need a cosmetic renovation to make sure it makes the right impression on prospective buyers. Here a new coat of paint, new floors and a tidy up of your outdoor area could be all that is needed. Many agents have a network of contractors who they can call on to help with your jobs.
Buyers are likely to pay more for a property that looks well maintained and ready to move into
Read: Budget renovating 101
Marketing your investment property for sale
Your agent will advise on a marketing and advertising plan suited to your property and the local market. The objective is to get an many eyeballs on your property as possible. Without adequate advertising, no one will know that your home is up for sale. More competition for your property will ensure you get the highest price possible.
More competition for your property will ensure you get the highest price possible.
Most agents will use a variety of channels to market your listing, which also determines the final cost they charge you. Besides physical signage outside your property here’s a selection of channels you can expect your agent to use:
- Online real estate sites such such as Domain and realestate.com.au only allow advertising by licensed real estate agents, and give you access to a huge pool of interested buyers nationwide.
- Print advertising, in national and local newspapers, is still relevant and most agents recommend using it alongside an online listing.
- Real estate agents also have databases of their own, which can be an important resource especially if they know of buyers looking for a property like yours.
- Most agents also use social media sites like Facebook, Instagram and Twitter, as well as pay per click advertising on search engines.
- If your property is likely to appeal to overseas investors, your agents should be tapping into offshore markets like China or Hong Kong via social media sites like WeChat and listing in local foreign language newspapers.
Expect to spend anywhere from $4,000 to $6,000 plus GST for advertising, depending on the scope of your plan. This should ideally be timed to coincide with your property listing on the market and run for at least 21 days.
Selling your investment property remotely
If you’re in another state or country it can be hard to keep tabs on a sale. Having an experienced real estate agent will definitely help ensure the process goes smoothly. As your representative you need to ensure you have set a clear expectation regarding when and how they communicate with you. That way you can avoid any misunderstandings and keep everything on track.
Not living in your property also presents a number of logistical challenges. In these situations your real estate agent can take care of practicalities like arranging a local conveyancer, getting repairs and renovations done, conducting viewings, liaising with tenants and generally give you the peace of mind everything is on track.
An agent can take care of all the practicalities of your sale and generally give you the peace of mind everything is on track.
Selling your investment property with tenants
If your investment property is tenanted you need to negotiate with them to ensure you have access for inspections, open houses and pre-sale repair works. Your estate agent could do this, or you might need to liaise with them via your property manager or propperng agency.
Look to respect their privacy and work with them to find a time that suits all parties, rather than making unreasonable requests. You also need to give them adequate notice in writing 14 days prior to the first showing. Thereafter you need to give them at least 48 hours notice, and not have more than two open house inspections a week. Tenants are obliged to keep your property in a reasonable state, but nothing more.
If you do ask them to do more than this then consider negotiating a rent reduction to compensate them for the inconvenience. In all states, the tenant has the right to remain in the property during an inspection or open house. Any last minute viewings should be arranged with your tenant directly, and you should give them time to stow away any personal belongings before prospective buyers arrive
Consider negotiating a rent reduction for your tenants to compensate them for the inconvenience.
Giving your tenants notice to vacate
You want your property vacant well in time for settlement, so the new owner can take possession. There are statutory requirements in each State and territory for such requests and these are as follows:
- New South Wales – Under a Notice to Terminate Tenancy Agreement, you need to give tenants 30 days’ notice in writing, or 90 days for periodic agreements
- Victoria – You need to give 60 days’ notice in writing under a Notice to Vacate to Tenants of Rented Premises
- Queensland – A Notice to Leave needs to be given in writing 4 weeks in advance
- South Australia – A Notice of Termination by Landlord needs to be give tenants 60 days’ notice in writing
- Western Australia – A Notice of Termination gives tenants 30 days’ notice, and must be made in writing
- Tasmania – A Notice to Leave, must be given in writing giving tenants 28 days’ notice
- Northern Territory – A Notice by Landlord to Terminate, gives tenants 42 days’ notice in writing
Understanding the final sale process
Prospective buyers will channel their offers via your real estate agent, who will negotiate with them on your behalf. If you are selling at auction buyers need to have exceeded your reserve price. Once you have accepted an offer your solicitor or conveyancer can begin preparing final contract documents. This is the point where you enter the settlement period, which is typically 30 - 90 days, and is when the buyer also pays a deposit.
Be aware that you are responsible all rates and council fees up to and including the day of settlement. The final settlement date is is the day when the buyer receives the keys, takes legal ownership of your property and pays the balance of the sale price. You have now completed the sale process and will need to consider the Capital Gains Tax (CGT) implications of the transaction.