I've been writing for Castanet since 2013 and I have written only about strategies for acquiring property.
But now that we are in the full throes of a boom cycle, my best advice to many will be to sell. Sell anything that isn't a cash-flow rock star and take the cash, ready to re deploy for the right opportunity.
Many of us, myself included, are sitting on properties that aren't serving us well. We have too much equity in them, they don’t have good cash flow or they don't fit our current model.
We would have sold these cash vampires years ago, but the market wasn't right. Well, here we are at the edge of summer 2016, in the busiest market we’ve ever had, with inventory at levels reminiscent of 2006/2007.
If ever there was a time to seriously consider selling, it's now.
Some might argue that there's more appreciation yet to come. I would agree, but the largest returns on property are when you add value to them.
Take the cash out, and sink it into something where you can get the full three-course meal — immediate value gains with renovation, strong positive cash flow, and the rest of the appreciation this boom has left in ’er.
Having cash back in the till during a boom and, even more important, during the slump that follows every boom is paramount. What would you have done during the last slump if you had been sitting on a large sum of liquidity?
Now, there’s selling a property, and then there’s selling a property. I’m talking about specific steps you can take to create a bidding war and get over list price on your terms. There’s a formula, and I’m going to share it with you free of charge.
This is divided into two sections. What to do in advance of listing to get the value as high as possible, and what to do to create a frenzy for the property when its time to go to market.
- Get a consultation on the most profitable renovations you can do before hitting the market. It’s not uncommon that $5,000-10,000 wisely spent will return 15,000-20,000 or more on the sale price. This consult is free from an investor-focused realtor.
- Bring in the stager – Now, it's time to get the decor right, from minimizing clutter to adding the right accents. A staged home will sell for up to five per cent more than an un-staged one. The cost is only a couple hundred dollars and it returns thousands.
- Get it inspected – It's common practice in the U.S. and Australia. A pre-listing inspection has a few not so obvious, but major benefits.
Buyers will negotiate a price before inspection and often attempt to re-negotiate once issues are uncovered. Dealing with them ahead of time prevents this often adversarial and costly renegotiation at the 11th hour.
It creates more trust and good will. Again, having the inspection open on the counter puts buyers at ease, allowing them to get out of defect-detection mode and back into deciding if their life fits in the space.
You get more for a home in great condition than one that comes with a list of deferred maintenance. Fixer-uppers appeal to only experienced buyers or ones looking for a deal. They often take longer to sell and are more likely to attract lowball offers.
By investing in an inspection, you greatly increase your chances for a multiple offer situation, of having a bidder come in without any conditions, because you made it safe for them to do so. You can even get a one-year warranty for around $300, like a certified pre-owned car. We know those go for more.
Now, to the actual launch of the listing.
- One week out, place a coming soon sign in the front yard to build demand and intrigue for the home, but don’t show it just yet.
- Next, get 35 plus architectural digest quality photos taken of the property for use in your marketing to get buyers.
- Create a video walk through because buyers in Vancouver and Calgary will often buy homes sight unseen because they know they don’t have the luxury of time to fly out when the market is this hot. A good video broadens who can bid on the home.
- Go Live on a Thursday afternoon. When you hit the MLS is a subtle nuance that can make a heap of difference. You are only on the hot sheets for 24 hours, so let's make the most of this small window. Realtors are far more likely to see your listing if its featured between 3 p.m. Thursday and 3 p.m. Friday than competing for their attention as the weekend hits.
Now, you should get a ton of showings for the weekend. Make it clear that you will be entertaining offers at 5 p.m. on Monday and then let the demand and competition build for the property until then.
Come Monday, if all goes as planned you will have your choice of offers some well above your asking price. Just remember, you don’t get what you deserve, you get what you negotiate.
Well there you have it, not my typical cash flow investment, real estate centric article, but one thing I’ve learned over the years is that part of being a good investor is knowing when to it’s time to cash out and look for the next deal.
If you would like a list of the service providers I’ve mentioned in this article including my trusted Inspectors, appraisers, stagers, contractors, photographers, videographers, please email [email protected] and I’ll send it to you.