Selling your investment property – it's a big move, no doubt. After all, you have a high-value property on your hands, and after years of backbreaking work maintaining it, it’s time for your efforts to pay off. But how do we make sure you’re on the right track?
Whether you’re looking to make proceeds for another investment, take care of some financial needs, or just cash it all in, the most important thing is that you leave with the highest sale price your property is worth. This guide will walk you through the nitty-gritty of selling your investment property.
Selling Your Investment Property: When’s The Right Time?
The real estate market is always buzzing from January to December, so you can be sure you’ll close a sale whenever. However, in some seasons, you’re bound to make a more lucrative sale – it’s all about the timing.
The good news is that real estate has seen a rise in activity ever since the pandemic. So, while you may have had to put on your Einstein hat to determine the best period to sell before, 2023 is a seller’s market, and you don’t have to worry about dates and whatnot.
What matters most is why you want to sell. Typically, most people choose to sell off for the following reasons:
- Accessing tax exemptions
- Preparing for retirement
- Reinvesting in other opportunities
- Protecting themselves from further loss (in cases where the property does not perform well)
- Or just simply because it’s time to sell it off
Considering all of these logical and emotional factors is your best bet to answer the ‘when is the right time” question. Once you determine why you may want to put up your property for sale, then you’ll know when the time is right.
And if your mind’s all made up, here are the steps to take to sell your investment property.
Fay Alreeman II, Abu Dhabi, UAE
Assessing Your Investment Property
Now that we’ve identified the motivation for selling, it’s time to dive into the selling process.
You need to evaluate your property’s potential in the current market. This would involve considering factors such as amenities provided, location of the property, and market demand for that type of property. This analysis helps you paint a clearer picture of your property’s value and its attractiveness to potential buyers.
Beyond assessing your property’s value, you must also research the current property market. Why? Because it helps highlight the opportunities you may encounter in your sale. For instance, if the market is experiencing high demand but a low inventory, you may have an advantage as a seller.
Or, if the market is rife with properties similar to yours, you’re perfectly poised with the information to adjust your sales strategy and stand out better.
Market research also prepares you for any possible challenges. For example, if activities are slow or market prices are declining, it may be a call for more patience — so you can adjust your pricing strategy. You’d also avoid any market fluctuations that could result in you in uncomfortable situations.
All of this information is crucial in setting competitive prices and showcasing your property's unique selling points to potential buyers.
So, how do you get all this done?
- Stay updated on market trends
- Analyse comparable properties.
- Consult local experts if needed.
Preparing Your Investment Property for Sale
Once you have assessed the current market and clearly understood your property's value, it's time to focus on preparing your investment property for sale.
Home Improvements and Staging:
To attract potential high-value buyers, your property must stand out from the countless listings in the market. You can get that X-factor by investing in some home improvements and staging – a well-maintained and visually appealing property always has a higher chance of attracting buyers.
You do need to be careful with making improvements, though. There’s a tendency you may end up incurring some unnecessary expenses on improvements, so the best option is only to make cost-effective improvements.
Start with simple fixes, like a fresh coat of paint, thoroughly cleaning the property, and decluttering to remove items no one needs. Pay attention to fixtures and fittings (doors, electrical fittings, windows, etc) in both the interior and exterior, ensuring that your house looks its best.
Pro Tip: when repainting, you should consider using a neutral colour palette for walls and furnishings. Neutral colours (like White, Beige, Gray, and Taupe) create a blank canvas and help buyers envision their own style and decor in the space.
Staging plays a big part in how buyers perceive your property. You should aim to create a welcoming atmosphere with little but not-so-little details like adding tasteful decor or arranging furniture – anything that can place emphasis on the house’s best features.
This way, your potential buyers can picture themselves living in the space, increasing their interest and willingness to make you an offer.
Photo: Spacejoy (Unsplash)
Setting the Right Price
We’ve come to one of the most important aspects of a property sale: price.
Pricing your property competitively is the key to attracting potential buyers and maximising your profit. But to set the right price, you need careful consideration and a little bit of research.
Here’s your to-do list:
- Start by conducting a comparative market analysis
- Look for similar properties in your area that have just been sold or are still in the market.
- Take note of their features, their condition, and the precise location (neighbourhoods matter), and compare these factors to yours.
- You can always employ the services of an appraiser or real estate agent to dot your i’s and cross your t’s.
Before setting your price, you should consider the demand for properties like yours, what market conditions, and any features/ attributes that make your property unique and influence its value. Also, put yourself in the buyer’s shoes and remember some factors are more important than others.
Suppose you have a property in a market where similar properties are selling at an average price of $300,000. In that case, listing it at $500,000 may be unrealistic, even if it has some unique features like a historic facade or an outdoor entertaining area.
At the end of the day, to attract potential buyers and get the best possible price, you need to set a competitive price that aligns with market expectations while still accounting for the value your property offers.
Finding the Right Buyer
You’ve prepared your investment property for sale; now it’s time to find the right buyer. This section will explore different approaches to help you connect with potential buyers and navigate the process of selling your property successfully.
You can either opt to work with a real estate agent or choose to sell on your own. Let’s break it down:
Real Estate Agents vs. DIY:
Deciding whether to engage a real estate agent or sell on your own involves considering various factors. Real estate agents offer expertise, market knowledge, and wider exposure, but as with all services, there are costs involved.
Selling on your own gives you full control and takes out the element of paying for those services, but it requires more effort and knowledge of the selling process.
Here’s an overview of the pros and cons:
Real Estate Agent | Selling on Your Own | |
Pros | Expertise and market knowledge
| Cost savings |
Wide network and exposure | Full control over the selling process | |
Marketing and negotiation skills | Direct communication with buyers | |
Time and convenience | ||
Cons | Costs and commission fees | Time and effort required |
Potential lack of control over certain decisions | Limited exposure to potential buyers | |
Lack of expertise in pricing and marketing |
To make the best decision, you should consider your level of experience, how available you are, and how comfortable you are with marketing and negotiating. Real estate agents can handle the marketing, listing, and negotiating on your behalf, saving you time and potentially securing a better deal.
However, if you have experience in selling properties and feel confident in your abilities, you may not need them and can seal the deal on your own.
Kiara Beachfront, Bali
Marketing Your Property
Speaking of marketing, you have a better shot at a satisfactory deal if you can showcase your property in a way that generates interest. It’s not enough to just place your house up for sale; it needs to be compelling.
Craft a captivating listing description highlighting your property's unique features, location advantages, and recent improvements. With descriptive language, you get to tell/show potential buyers how amazing it’d be to live in your property.
Considering the fact that your property isn’t the only one buyers may be looking at, you need to make a strong first impression, and professional-quality photographs are just the thing to hook your buyers. You can choose to hire a professional photographer or take the pictures yourself with high-quality equipment.
For maximum exposure, you should leverage online platforms and networks. Get your property listed on reputable real estate websites, social media, or local classifieds. Excellent customer service comes into play here, as you must promptly engage with potential buyers, provide detailed information, and schedule property viewings efficiently.
You could also consider hosting open houses, allowing interested buyers to experience the property firsthand.
Negotiating and Closing the Deal
Now that you've attracted potential buyers and received offers, it's time to begin the negotiation process and move toward closing the deal. Let’s walk through the steps involved in negotiating with buyers and successfully finalising the sale of your investment property.
Handling Offers and Negotiations:
As the offers start rolling in, you should remember to handle them carefully. Evaluating each offer you receive without bias (it can be tough if you really like a particular buyer, but you should try) based on your desired outcome will help you make the best decision and negotiate effectively.
A great deal considers the offered price and any contingencies or additional terms. Assess the buyer's financial capability, the proposed closing timeline, and any requested repairs or concessions. Evaluate how each offer aligns with your goals and weigh its overall value. Don’t be in a hurry — even if you’re trying to sell off quickly.
Also, remember that negotiations are two-way and should end in a win-win outcome. Even though you’re the seller here, and it’s on you to make the property worth buying, you deserve an offer that benefits you. Maintain open communication with potential buyers and be responsive to their inquiries, concerns, and objections.
More importantly, make room for counteroffers. You never can tell what you might find!
The Closing Process
Once you've accepted an offer, the closing process begins. This is the final stage of the sale, where you finalise all legal and financial aspects, and ownership of the property is transferred from you to the buyer.
In the other steps, we could hire a professional or go solo. During this stage, it’s essential that you work closely with legal professionals and agents. They will ensure that all necessary paperwork, such as contracts and disclosures, is completed accurately and complies with local regulations.
Pro Tip: Don’t forget to provide all required information and disclose any known issues with the property to avoid any potential legal complications.
The closing process may also involve inspections, appraisals, and addressing any contingencies that may pop up. This part is vital in ensuring that your buyer is happy with the condition and value of the property before proceeding with the purchase.
Even though it’s the final stage of the sale process, and it feels like the work’s done, this is the part where you must pay the most attention to detail. Stay in close contact with all involved parties, from the buyer to the real estate agents and legal professionals, to facilitate a smooth and timely closing.
Respond promptly to any requests for information or documentation, and always be prepared to provide any necessary documentation throughout the process.
Aryom Koru, Izmir, Turkey
Post-Sale Considerations
There are a few important post-sale considerations to remember, like taxes and your plans for the proceeds. Let’s dive into the tax implications and financial planning.
Tax Implications
After selling your investment property, it is important to consider the tax implications and incorporate the sale into your overall financial planning. Because tax regulations vary across different countries and even states, it’s best that you consult with a tax professional or financial advisor to understand any capital gains taxes or other tax obligations resulting from the sale.
For instance, in the United States, you’d have to account for depreciation recapture tax and the standard obligations – while it’s a different ballgame in Canada or the UAE. A tax professional would be qualified to help you navigate through these differences and optimise your tax strategy, potentially minimising the tax burden.
Financial Planning
With the sale completed, you have more cash in hand. The smart thing to do is reassess your financial goals and determine how to utilise proceeds from the sale. Are you looking to reinvest the funds, pay off your debts, or allocate them to other investment opportunities?
You can make the most of your newfound financial resources by carefully evaluating your options and aligning them with your long-term financial objectives.
In a Nutshell
Selling an investment property is no walk in the park. Still, with proper planning and the steps outlined in this guide, you are well-equipped to tackle the process successfully.
From assessing the property market and preparing your property for sale to negotiating and closing the deal, each stage is essential for maximising your profit.
Remember to consider the tax implications in the post-sale phase, engage in careful financial planning, and evaluate your overall investment strategy. With all this, you can ensure that the sale of your investment property falls in line with your long-term financial goals and propels you towards greater financial freedom.
Cover photo: Platinum Bay, Phuket, Thailand
