Tony Brazier

www.braziers.co.nz

Tony Brazier

The Press - Wednesday 16 December 2009

Preparing Investment Property for Sale

Any lengthy holiday period is an ideal time to decide what you are doing with your investment portfolio. Should I buy, sell or renovate? It is also the ideal time for you to catch up on those much needed little jobs that all properties have pop up from time to time. I’m sure some readers have their lists compiled already for the holiday break.

For those who do decide to sell in the new year it is the perfect opportunity to view your property through the eyes of a purchaser to determine what it is that could possibly put them off your property when compared to another owners’ offerings.

Most vendors will claim their property is the best in the street, best of its kind, should be rented for more, etc etc. Truth be known it is just another choice that the purchasers have to consider if it is put on the market poorly prepared. For the vendors who belong to the “I wouldn’t put a tenant in anything I wouldn’t live in myself” brigade, there generally won’t be much to do, but for others, it is a case of asking “Where do I stop?” rather than “Where do I start?”

This is not a silly question as preparing a property for market becomes a case of equivalences. Many a time I’ve seen a vendor proudly paint the gables and barge boards of their property which only goes to accentuate that the window sills needed painting as well. Or in a more extreme case where $15,000 was spent on a bathroom, they kept the old toilet and heater in place. They may as well have left it alone.

All this does is make it easier for the purchaser to see what needs to be done rather than what has already been achieved, i.e. to pick holes.

When the vendor looks at his/her property they need to ask “Is there anything glaringly obvious above all else that needs to be fixed?” If so, set about fixing those items. But if the answer is “No, they’re all equivalent” then the decision becomes whether to do all, or nothing.

Usually with investment property our advice, when in this predicament, is to do nothing. A huge sigh of relief is released from the vendor’s lips momentarily when told this. The reason we say this is that they may spend a lot of time and money, repainting, carpeting and draping, only to have the buyer make the judgement on the property based on the choice of drapes which they are now being expected to pay for. It is best to let the next buyer put their own personality into it. This is why I say momentarily, for the vendor then has to stomach “leaving enough in for the next guy” as we put it. His/her price must reflect the fact that there is work to do and also the effort to do it must be recompensed for.

This won’t sit well with a vendor who wants to charge for “potential”. The purchaser hears “Oh, but the rent should/could easily be higher”. This argument is negated with just four words, “So why isn’t it?” If the decision is made to do nothing about deferred maintenance a vendor can’t expect the same price as one who has kept it up diligently.

The choice then comes down to whether it is cost efficient to do the property up to the maximum, to re-rent it at a much healthier market level and then ascertain whether the increase in value makes the cost, effort and time worth their while. Funnily enough when some vendors have done this, they start to enjoy the renovated property, the new calibre of tenant and the extra rent to pay the mortgage so much, that they decide to hold onto the property after all.

If they do carry on and sell, they at least now know how much effort, time and money they saved the end purchaser who otherwise would have to have done that for themselves. For the vendors who don’t decide to renovate and leave the work for the next guy the only way that they know whether they are expecting too much in price, (or whether they’ve priced it correctly) is whether the property sits, gathering even more cobwebs, on the market.

e practical about the work you do to prepare an investment property for market. There is a fine balance between what is necessary, and not, in order to achieve the most cost efficient price.