When it comes to selling a property, there are many important factors to consider that will help you maximise your success.
(1) Presentation and improvements
Not presenting your property effectively is one of the biggest mistakes sellers can make. You only get one chance to make a great first impression.
By presenting your property well, you can reduce buyer objections, increase inspections, and ideally make buyers fall in love with your property emotionally. All these factors improve your chances of achieving a higher sale price.
While it’s important to keep costs down when selling, making small cosmetic improvements can significantly enhance your property’s appeal and marketability. Seeking advice from professionals other than your selling agent, such as a vendor advocate, can be beneficial – I’ll discuss this further below.
Property staging aims to enhance a property’s appeal to potential buyers. Staging companies can furnish a vacant property, rearrange existing furniture, highlight key areas or features, and neutralise décor. Investing in staging is often worthwhile as it can greatly impact how your property presents to buyers.
Before putting your property on the market, you must ascertain what steps you must take to ensure its presentation and appeal is maximised.
(2) Best time to sell
Spring is often seen as the prime season for selling a property, but it’s not always the best time to list. During spring, you’ll face more competition as property listings typically increase, which can lead to an oversupply. On the other hand, winter has less competition, and sometimes that can result in better prices.
Consider your property’s characteristics when choosing the best time to sell. If it lacks natural light, summer might showcase it better. Conversely, if your property is prone to overheating, winter could be a more favourable time.
Location matters too. Coastal properties often sell better in summer, while in northern Australia, late spring can be problematic due to the approaching rainy and cyclone seasons, along with higher humidity.
Don’t automatically assume that spring is the best time to sell. Evaluate your property’s unique features and location to determine the optimal timing.
(3) Who and how to sell it
Choosing the right real estate agent is crucial. In a perfect market with a perfect property, the agent might not make a huge difference – the property will sell itself. But since no property is perfect and markets can be unpredictable, the agent you select can have a significant impact on the outcome. Look for an agent with a strong reputation, extensive experience, a large database and network, excellent sales skills, and good character. When things don’t go according to plan, you’ll need to rely heavily on their expertise and skill.
Many buyer’s agent firms also offer vendor advocacy services, often at no additional cost. A vendor advocate helps with crucial decisions like when to sell, what sales method to use (e.g., auction, private sale, expression of interest campaign and so on), which agent to choose, and what improvements to make. They typically don’t charge a fee but instead share the commission with the selling agent. This service can be valuable because vendor advocates often have more independence than selling agents and can oversee the sales campaign to ensure all necessary steps are taken to maximise its success.
If your property is occupied by a tenant, consider whether they might be interested in buying it. You can ask your managing agent to discuss this with them. Selling directly to a tenant could be a quick and convenient solution, so it’s worth exploring.
(4) Taxation matters
If your property has been tenanted at any point during your ownership, you may be liable for Capital Gains Tax (CGT). Your CGT liability is calculated as the difference between the property’s cost base and the net sales proceeds, divided by two and then multiplied by your marginal income tax rate.
If you lived in the property as your main residence immediately after buying it, the cost base will be its market value when it first became available for rent. If the property was rented immediately after purchase, the cost base includes the purchase price plus costs like stamp duty minus any depreciation claimed in the past. If you lived in the property after initially renting it out, your main residence exemption will need to be prorated based on the days you lived in it versus the days it was rented out. Don’t forget the 6-year rule if you haven’t claimed another property as your main residence.
To minimise any potential CGT liability, consider strategies such as selling an investment that will crystalise a capital loss or maximising tax deductions, such as making additional concessional super contributions.
Consider which financial year you plan to sell in. Your CGT liability will be determined by the contract date, not the settlement date.
It’s always a good idea to consult your tax agent to ensure you fully understand any tax implications before selling.
(5) Mortgage secured by the property
You might be looking to sell your property to reinvest the funds elsewhere or to reduce your debt. To achieve these goals, it’s crucial that you have control over how the money is used, rather than the bank.
Before you sell, consider untangling any cross-securitised loans. Cross-securitisation occurs when a loan is secured by multiple properties. For example, your investment property loan might be secured by both your investment property and your home. The bank will require that any loans secured by the property you’re selling be repaid on settlement day. If the loan is secured by other properties that you will retain, the bank might also force you to reduce other loans. Therefore, make sure that the property you are selling is only used as security for loans you’re prepared to repay. This way, you’ll retain control over the remaining sales funds and decide how to use them.
Tax rules require you to use all sales proceeds to repay loans related to the asset. If the proceeds exceed the amount needed to repay these loans, you can use the surplus as you wish. However, if the sale proceeds don’t fully cover the related debt, any interest on that debt will likely remain tax-deductible, even though you no longer own the property.
(6) Tenancy agreement
If you’re planning to sell a property that’s currently tenanted, be aware that many states now require landlords to give tenants up to 90 days’ notice before selling. This means you need to plan well ahead.
If your tenant has a fixed-term lease, you can usually only sell the property if the buyer agrees to honour the existing tenancy agreement i.e., they cannot occupy the property until the tenant has moved out.
In general, it’s preferable to sell properties with vacant possession because around 60% to 70% of buyers are owner-occupiers. However, if you are confident that your property mainly attracts investors, selling it with a tenant in place might be acceptable.
Of course, there might be additional considerations
Depending on the property and your specific situation, there could be other factors to consider beyond this list.
In my experience, selecting the right agent is the most critical factor. To make this important decision, it’s often best to engage a vendor’s advocate, who has the expertise to guide you.
For other aspects, your financial advisor and tax agent can provide valuable advice.
I can understand the downside of living investment, which you mentioned is bank interest. Please also advise that the rent income loss is another one otherwise this substantial income will be received if investing a rental property.
Yes, but you’d also have a substantial rental expense i.e., to rent a property to live in. Liveinvesting is only worse off if you are willing to live and rent in a location that is very cheap. In that case, liveinvesting isn’t probably that attractive.