Living room after styling.
When managing the sale of a residential investment property, we are often asked 'should we sell with or without the tenant?
At the risk of sounding like a two-handed consultant, our answer is 'that depends'. On the one hand, selling the property with the tenant means marketing can start immediately and the prospect of receiving three or four months' rent up to settlement is attractive.
On the other hand, with a tenant in occupation, the property cannot be presented in the best condition or at its most appealing. This likely means fewer buyers interested in purchasing the property, and with lower competition, expect a lower price.
Our primary question is "Who is the most likely buyer for the property?" If it is a developer or investor, then they would want the tenant to remain. However, if it's a family or first home buyer, then they will want vacant possession at settlement.
Our experience has shown that good property presentation makes a big difference to the ultimate sale price. Therefore most properties (other than re-development sites) are best sold with vacant possession, as that allows for the property to have cosmetic improvements to enhance its buyer appeal. Also the agent is not constrained by the tenant when showing prospective buyers through the property.
Backyard before improvements.
And after.
If we are selling an investment property (and sold with the tenant), then our next question is, can the rent be increased? If it can, then this should automatically increase the value of the property.
Getting vacant possession from a tenant is not always straight forward.
If there is a fixed term lease, then the tenant cannot be required to vacate until the end of the lease, unless it is otherwise mutually agreed. If the lease has expired and the tenant is on a 'month-to-month' carryover, then in Victoria the minimum notice period of 60 days must be given.
We find the selling agent will be keen to assist the tenant in finding another rental property, not just for the rental business, but to expedite the property going to market.
We were recently engaged by an investor to sell their long-term investment property. The properties in the area were predominantly owner occupied. It was in our client's best interest to market and sell the property with vacant possession. The managing agent issued a Notice to Vacate, and soon found the tenant a suitable alternative rental property giving us possession within the 60 day period.
Main bedroom before styling.
And after.
As the property had been rented for a long time, it needed some minor repairs and maintenance before putting it on the market. After the tenant had carried out all their works required under the lease, we engaged contractors to complete the presentation. This included all fair wear and tear items such as minor repairs, carpet replacement, painting, and landscaping plus professional styling.
We further assisted our client by funding the cost of all presentation works.
We became aware of a number of similar properties about to come on to the market, so this work. was time critical in order to beat the others to market.
Marketing the property without the tenant was clearly the right decision. Interest in the property was only from owner occupiers. Despite a subdued market, three parties competed strongly at auction. The sale result was comfortably above the market feedback and our client's expectation, allowing her to put the investment funds to an alternative use.
Thinking about selling your property? Contact us today for an obligation free consultation.
Phil Hoopmann 0402 890 830 | Robert Allanadale 0418 517 643 | info@towerpa.com.au
Level 3, 277 Camberwell Rd, Camberwell VIC 3124 | www.towerpa.com.au