When is the right time to sell your investment property?
Diversification, timing and marketing are major considerations when looking to capitalise on real estate investments
The pandemic has accelerated the need for real estate investors to diversify. Wariness around being burdened by a single poorly performing property, or a portfolio of similar assets, is becoming a key influencer in decision making.
Though diversification is one of many factors to consider for investors before putting their asset up for sale, including understanding current purchasing trends, value, the interest rate environment and tax obligations, it is front of mind.
“Everyone is becoming a little bit risk averse post-COVID-19,” says Tim Mutton, senior director, investment sales – Canberra. “Buyers are still following the fundamentals but instead of only looking to buy in Sydney, for example, they’re now extending their reach to Melbourne. And where once they would have chosen to only look at properties in the financial sector now they are also considering extending their reach into other sectors, like life sciences.”
There are also a number of overseas investors setting up outposts in Asia Pacific to help diversify operations, improve yield and ignite growth opportunities. Investment groups are also looking to expand their existing offerings into alternative sectors such as logistics.
“Diversification post-COVID is a big trend among investors who are looking to diversify by geographical location, sector and by tenant segment to source fresh opportunities and new deals,” says Mutton.
“We’re still achieving big prices for sellers but encouraging them to understand that before they look to dispose of their commercial assets, they need to understand what’s in most demand and position their offering accordingly.”
Timing is everything
There are crucial timing factors that also support achieving the best possible return on property investments.
With most commercial properties sold based on yield, a low interest rate environment can only serve to make a property more attractive to potential investors.
For owners of an investment, a low interest environment usually means there is more disposable income available to ready an asset for sale. A recently refurbished building or new long-term tenancy improves the value of a property and gives buyers a feeling of added security when making an offer.
Whether you are looking to sell a $30 million or a $130 million asset, understanding the value of your commercial assets is key. Speaking with owners of similar assets can also help identify the most qualified buyer for your property, says Mutton.
Receiving unsolicited offers from potential purchasers is a solid indicator of a good time to sell, but researching current market conditions is usually the best way to determine the optimum time to sell, he adds.
“Go to an auction yourself or get your agent to do it on your behalf to see the spirit of the bidding,” says Mutton. “Keep a note of expressions of interest and ask your agent to supply you with a list of assets in the market so you can gain an understanding of what assets buyers are bidding on.”
Another way to entice a suitability qualified buyer to pay a premium for an asset is to do much of the legwork yourself so your potential purchaser doesn’t have to.
This could include preparing a due diligence report, ensuring all compliance checks are up to date and all leases are in order before listing your property.
Marketing the property
Smart vendors looking to maximise their returns when selling their commercial asset also need to be open to the idea of investing adequately in an agent and marketing to ensure the right audience sees the property.
“A lot of people confuse an agent’s ability to influence price with their ability to control process,” says Mutton. “Achieving a premium on an asset is about getting eyeballs on it. This comes down to a mixture of inter-personal relationships and marketing. If you want the best agent, look at their track record. Talk to them about what they have sold in a similar space recently, ask them what methods they used to market the relevant properties and attract suitably qualified buyers and enquire whether the same will work for you.”