There is plenty of thought put into preparing your family home for sale, however very few sellers think about preparing their investment property for sale. When selling an investment there are additional considerations including tenants, leases, the property manager and the properties condition. Should a property be sold vacant or with a tenant? How does a possible sale affect the tenancy? Can the tenant be asked to leave? These are just a few of the questions we are constantly asked.
With spring selling season only a few months away many people are considering options of selling their homes or investment properties. Spring selling season traditionally is the busiest time of year for agents, as more properties come to market at this time. The increase in the number of properties for sale, in my opinion, is not due to the beautiful weather & the blooming flowers, though these may play a part. The reason buyers want to buy in the months of spring September, October and November is they want to be able to buy and move into their new home before Christmas and start the new year in their new home.
In Queensland the standard settlement period is 30 days, which means the last opportunity to buy, settle and move into a new home is the middle of November.
Selling an Investment Property
When considering selling an investment property, the first consideration should be the lease term. A property can be sold vacant or with a tenancy in place. A lease is bound to a property, not the landlord or the property manager. This means the property could sell and change agents and the lease is still bound to the property. Being that we sell West End property, a high percentage of these properties are investments and are sold with tenants in place. Most properties we sell, we do not manage. We actively work with the third-party property manager or onsite manager to facilitate the sale.
There is no reason a property can not be sold with a tenancy in place. It can be an advantage if the buyer is an investor.
The most important consideration when selling an investment property, is the lease term. Ideally the lease should expire in less than six months. Having six or more months to run on a tenancy can be an obstacle to buyers who may want to move in.
Stamp Duty on Property Investment
When buying a property to move into that has a lease longer than six months to run, can have additional stamp duty considerations, as the property can be seen as an investment purchase instead of an owner occupier purchase. Stamp duty on investment property purchases is generally higher than when purchasing your principal place of residence. When a buyer has to pay additional stamp duty and is not able to move into their new home, this can reduce the value of the property in that buyer’s eye.
Selling Property on Leased
Flexibility is key. With a lease that has less than 6 months to run, the buyer could be an investor who then renews the lease, on terms suitable to them. Or the buyer could be an owner occupier, who would like to issue the appropriate notice to end the lease and move in, in due course.
Our rule is we will sell the property to the buyer who will pay the most. Removing roadblocks, such as extended leases, makes the property more attractive to more buyers, creating competition, which drives the sale price higher.
What if you have a long lease in place? A tenant can not be forced to vacate nor can their lease be terminated without mutual agreement. The best option if you are looking to end the lease early is to enter into negotiations with the tenant to come to an arrangement to end the lease. Who knows, maybe the tenant is looking to move and ending the lease early works for all parties.
If the tenant is not open to ending the lease early, the property can still be sold on the basis the lease terms are binding on to the new owner. I.e a focus on selling to an investor or owner occupier that may not want to move into the property, in the short term.
Keep the Property Presentable to Buyers
Presenting a property for sale at its best is important, regardless of the property being a tenanted property, vacant or owner occupier.
If a property is vacant, styling may be appropriate to ensure the home presents at its best. When a buyer walks into a property and feels at home, they just know. Buyers will pay more for a property they emotionally engage with. On the contrary, when a buyer walks into a property that is cluttered and dirty, they are less engaged and less likely to pay the best price
When selling a tenanted property styling is rarely an option, however most tenants are house proud, keep a beautiful home and are willing to work with the agent to ensure the property presents well to potential buyers.
We actively work with tenants to assist with presenting their homes to prospective buyers and if assistance is needed in providing a cleaning service prior to open homes or with items being stored, then we assist accordingly.
Hiring A Property Manager or Agent
Tenants understand that if they work with the agent to present the home at its best, it will sell quickly and for a high price. If a tenant is obstructive or uncooperative then the sale process is delayed and this is an inconvenience to all. Working together towards a common goal is always the best option.
Tenants must be engaged during the sale process. We must remember that the property is their home and the sale will be an inconvenience to them. Professional photos and open homes are a core part of selling any property. Tenants must agree to both professional photography and open homes. When you engage with tenants in a respectful and professional manner, advise them that if they work with you to facilitate the sale, the sale will be a success and we will be out of their way sooner. If we can not conduct open homes, and are required to only show buyers on a one on one basis, then the sale process will be protracted.
With our focus on selling West End property, largely investment property, we find most tenants are cooperative, engaged in the process and happy to cooperate with open homes and the sale process in general.
Property Manager or Agent Responsibilities
Sometimes a quick repair or paint may also assist with presenting a property at its best to prospective buyers. When a buyer walks in, the discussions must be positive. As an agent we don’t want to be discussing negatives, as this leads to lower price offers. If a buyer is talking about the poor condition of a property or that items need to be replaced or repaired, then these costs are often subtracted from the buyers estimate of value and usually at a multiplier of the real cost to repair or replace. For example if there is a minor crack or mark on the wall, which may only cost $500 to repair, the buyer may think the cost is really twice or three times that and reduce their offer accordingly.
Tenants must keep the property in a clean and tidy condition and not cause damage, however wear and tear over many years of tenancy can start to show. A quick internal paint may freshen up the property and give it that new feel & smell. An investment in a higher sale price.
Increase Property Value
We only recommend completing work, if the repairs & maintenance are going to be an obstacle to sale. Again removing obstacles leads to a higher sale price.
We rarely recommend renovating to sell. We have seen it many times before, when a seller renovates a kitchen or installs new carpet, to only have it removed by the buyer as it is not their dream kitchen or the carpet is ripped up to have timber floor laid. You don’t want to spend money to find that buyers are detracted from the property, as a result.
When painting or completing work to sell, it is important that the work is completed in a way that is natural and broadly attractive to buyers, not polarising.
If you are renovating for yourself then that is a different discussion. If you are completing repairs, repainting or considering renovating, speak to your local agent to get their advice on what will add value and attract buyers and what may not.
Planning to sell your property requires planning. Speak to us about who we can plan the sale of your property and ensure the best sale price in the market.