To sell or not to sell your investment property

Some Landlords think that if their investment property becomes vacant, it is a good time to sell it. This view may result from a concern that it may take a long time to find a new tenant and thus there will be a loss of income.  Added to this concern is the fact that the rental market for apartments, units and townhouses has fallen. Note: that the rental market for houses has remained very strong.

In our almost 30 years of Agency Practice, we have seen rents go up as well as go down.  We know that although at the moment rents have gone down,  we will see increases in the future when immigration and overseas student intake resumes to previous levels. Rent prices are all on a cycle.

We realise that every situation is unique, and this is why it is important to speak with our Team if you are considering a sale – you are welcome to speak to Bec Reid (0410 541 866) or John Pye (0414 914 268) for the best advice.

The below advice is of a general nature; please note it may or may not apply in your circumstances.

If your investment property is VACANT:

  • It is not recommended to have a property listed on both the rental market as well as on the sale market, at the same time. It confuses the market and makes both instructions almost impossible to fulfil. It is recommended that you make your choice and move forward with that choice – decide to sell or rent, but not both.
  • If you choose to rent the property again, but still intend to sell as soon as the tenant is found, it is a breach of the Residential Tenancy Act (Section 26) if this fact is not disclosed to your new Tenant. Disclosure of this fact will frighten every prospective Tenant. So, it is not recommended.
  • If you offer a short-term rental of 6 months or less and you intend to sell the property as a vacant property, it is very difficult to find short term tenants who we would recommend to a Landlord. In our experience, the vast majority of good Tenants ask for 12-month tenancies.

 

If your investment property is on a FIXED TERM TENANCY:

  • If the best choice is to sell with an existing tenancy, list your property for sale within 2 or 4 months of the end of any 12-month lease. This then opens the market to both investors and owner-occupiers. The time period of 2 or 4 months is totally dependent on the sale market at the time of listing and the time it is likely to take to find the best buyer and most of all your needs. Speak to us and we can advise you of the best timing of your sale in relation to the supply and demand in the sale market.
  • The tenant may choose to stay to the end of the fixed term or can give us a 14 days’ notice of termination
  • A Landlord can give a Tenant 30 days’ notice of termination once contracts are exchanged, providing the date is beyond the end of the fixed term
  • If the best choice is to sell as a vacant property, a Landlord can give a Tenant 90 days’ notice of termination providing the date of termination is on or after the end of the fixed term. A tenant can then choose to end their tenancy at any time

If your investment property is on a PERIODIC or MONTH-TO-MONTH TENANCY:

  • You can list your property for sale at any time with the tenant still in occupation
  • You can terminate the tenancy with 90 days’ notice at any time if it is preferable to sell as a vacant property.

How to make the best decision – a sale WITH A TENANCY or WITHOUT A TENANCY?

  • Only terminate a tenant if the tenant is untidy or if the property requires painting or cleaning to achieve the best price
  • In our experience, vacant properties sell at their highest possible price if professionally styled
  • Tenants enhance a sale price if the tenant is ‘house proud’ and takes care of the property as if it is their own and they are co-operative in the sale. In these cases, it is highly likely that the sale will be to another investor who is looking for a good tenant
  • The market is always better if a property can be offered to both the investment market as well as the owner-occupier market, so be aware of the timing of the sale if currently tenanted.
  • There are many first home buyers who buy if they can rent the property to the existing tenant for a 6 month period before they move in.

Do tenants buy the property they rent?  It is very rare.  In our 29 years of Agency practice, it has happened no more than 2 or 3 times.

Our general advice to investors is to never sell, as the rents will generally increase over time (except for last year!) and the debt goes down and the sale values go up. Our many long-term investors who bought 15 years ago or more, are now receiving 10-25% return on an original investment which is now paid off. Many have now retired and find that their investment provides them with their daily living needs.

We are aware that there are circumstances which necessitate a sale irrespective of whether the market or tenancy situation is ideal. In this case, we will work hard to achieve the best result irrespective of the market or tenancy situation.

 

Contact us if you have further questions or if you would like to move forward with a sale.

Bec Reid – 0410 541 866 or John Pye – 0414 914 268

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