Finally Selling My IP

I often talk about how I'm worried that property will see some moderate falls over the next few months and years, yet I personally own a IP so I always felt a little contradictory whenever I was pessimistic on the property markets future.

Well the mate I invested with has returned from his 2 months holiday and today we put the IP on the market. So my integrity is feeling a little better this evening, and I'm feeling a bit like I felt when we first bough the place - quite nervous. This is all new to me so I'm quite interested in the process of it all.

One thing I was confused by, was the inability of real estate agents to set commisions above a certain point. My mate and I were very keen to employ an commision rate which actually gave the agent a vested inteerst to acheive a maximum price by weighting the commision heavily towards the top end of the sale price (ie she get 10- 20% commision for every dollar over X) making it more of an incentive to get that extra 5, 10 or 20K. I just felt that the system in its current form pushed the quick sale rather than achiveing maximum price.

Speaking of price we ended up listing the place for $111,000 above what we original bought it for 3 months ago, which should be interest...



Does anyone have some good advice for a first time seller? Any tips and tricks are very welcome.

 

Chris

where is the IP and what are you asking for it if you don't mind telling

 

Impossible, RE is retracting not going up!!! That is what you told us, did you ?

 

Hi, Chris,
This is so true. The way the REIQ commission is worked out doesn't give the agent any incentive to push for a higher sale price. An agent is trying to sell one of my properties at the moment, and has advised me that the first offers received should be taken as 'market value', and any attempt to get a higher sale price might make the property go 'stale' in the market.
As an example, comparing the commission payable on a $500,000 sale compared to a $530,000 sale, the difference in agents' commission is $825.
Why would the agent try harder for a better price for the vendor?
Jayar

 

Brisbane, 2km from CBD, we are asking around the $650,000 mark, though we are obviously leaving a bit of wiggle room for negotiation. I'm personally think 640k is completely unreasonable in this market, but obviously we wanted to see what sort of offers we could get.

I agree that 650k is impossible, but I like to think we bought pretty well. We got the place for 540k, in November, though we managed to get tennants in it at $600/week until July, and body corp is only $600/year. So we feel that a sale price in excess of 600k shouldn't be too hard given low interest rates and high rental yeild. Plus we have already had verbal offers for $600k that we didn't pursue.

That said my mate and I have reisgned to the fact that if we can't get an offer at least of 615k we will more than likely just hold and ride out the downturn given that we are already positively geared with interest rates likely to go lower in teh short term.

Sounds like a lazy agent that just wants to turnover properties ASAP to get paid.

 

I have never said property WOULD fall up to 50%, I said it COULD fall by up to 50% (in real terms). My predictions have tended to center around range of 10 - 25% price fall. Though at the end of the falls I'm also not expecting strong growth again, because I believe the culture of speculative buying of property will be destroyed by the end of this crisis as the people learn the reality of money and economics in particular reference to the use of debt in ones purchases.

So in my mind with falls of 20% - 25% would leave our property would leave the place being worth somewhere between $450K - $500K at the bottom (assuming the market would presently value it around the $600K - $625K range), so the unrealised losses wouldn't be that great, and considering the place is more than likely to remain positively geared over the next year those losses would be partially offset.

The only reason we are tempted to hang onto it if we don't get a price high enough is that we have owned the place for less than 12 months which means we don't get a 50% discount on capital gains, plus needing to pay agent fees, bank fees etc are somewhat of a large disincentive. So even if we did sell the place for $100K above what we bought it for we'd probably only end up with $15K each in our pockets once all costs have been considered - which is a great example of how messed up the whole system is.

 

You got your place 3 months ago for 540K
You are placing it on market at 650K
You are telling us that RE is going to collapse and that we already had massive price reduction in past 12 months. Yet, you are telling us that your property went up almost 20% in 3 months? Which version of event do you want us to believe?
You are positively geared, young and I assume no kids and other serious financial commitments.
You asked for opinion. IMO you are making big decision based on your crystal ball or you aren’t telling the full story behind your move.

Just sale, get the money and live with your decision happy ever after. But please don't tell anyone anymore you can't make money in RE. Please.

 

Firstly, we settled 3 months ago, but we went under contract in August.

Secondly, placing it on the market for $650K and getting $650K is very different. I'll be the first to admit that I don't expect it to sell for $640K, let alone $650K.

We haven't had "massive" price reductions around Australia yet, with the exception of Perth. Thus the reason we are selling now before the FHOG runs out and the Australian recession really gets underway.

Plus we are in that little transitionary period where the RBA has acted preemptively and dropped rates before unemployment has really started to rises so a lot of people are sizing up investment properties right now.

Actually I didn't ask for opinions on whether I should sell. I was only asking for "advice" on the selling process and whether people had any good tips or tricks.

As for my crystal ball, I have learned in the last few months that if you do the research and get as much relevant information as possible you eventually reach a point where you need to make a decision. Information minus decisive action is useless - so I decided I needed to trust my instincts on this one.

I regards to not not telling you all "the full story behind my move" I don't even understand what other reasons there could be for my decision other than I feel its a bad investment in the medium term.

I have never implied that people can't make money in falling markets. I am sure I have said on multiple occasions that there are always properties that will beat the mean/median and there are always opportunities in falling markets.

When I refer to RE being a bad medium term investment I'm only making a general statement, my comments aren't relevant to individual cases, and you shouldn't interpret them as completely applicable to your individual properties. Though with that said there is also scope for people to under perform the mean/median.

To be completely honest I think my friend and I got the place for a steal given the sellers desire to quickly sell and relocate to Sydney. We were both actually willing to pay to $560K for it based on our conservative estimates of it's rental income, which ended up being far higher than we'd projected for, but having spoken with our rental agent in that last few days he said that he wouldn't be able to get $600/week in the current market, and that if we listed it today he expect somewhere between $550 - $570/week. We also signed the contract back in August when the cash rate was at 7.25%, it has more than halved since then!

So I'll be the first to admit we also had some dumb luck come our way when it came to timing of both the purchase and listing. So that will be were we "might" turn a profit.

Why? These are a forum for "discussion" these aren't a forum for "agreement". I may come across a bit arrogant, and strong in my opinions, but that doesn't mean people shouldn't interpret them as anything other than what they are - just opinions.

 

"Which version of event do you want us to believe?"

Good question dudek!
Sometimes confused persons are good entertainers.

 

One thing is to have an opinion but to stick to your own words is another story. You have long history of changing your own words just to get on another site of the spectrum. In other words I doubt you believe what you’re writing today because you will change it tomorrow.

 

In addition to my arrogance I have a love of playing devils advocate.



But in all seriousness, the reality is I'm not perfect, I don't have perfect information or insight, I will be wrong from time to time. The real truth is this is still a learning experience for me, my views of the world and Australia have changed dramatically in the last 6 months, not because I flip flop around my opinion, but rather because I'm greatly more informed today than I was 6 months ago.

So in that sense, in my past comments I was wrong, or at bare minimum ignorant in comparison to what I know today. My hope is that in 6 - 12 months times, my comments today will be ignorant in comparison to my comments then.

Moving on, just on the point of me sticking to my words, surely me putting my only IP up for sale and how I sold all my shares last year and reinvested in gold is reflective that I'm not just talking about this stuff, I'm actually positioning myself based on my own advice.

In regards to my opinions changing, I know I have changed them, but that was quite a long process spanning months, it wasn't like I say something one week then something completely different the next. Please feel free to try and prove me wrong (you only have to look through my post archives).

 

So when you bought it, what did the bank valuation come in at?

What's the break fee on your bank loan going to be?

 

I don't know off the top of my head, all I know is that when I spoke to my loan manager about it they said the valuation came through fine.

$2100, total. Though that includes the fact that two of us are breaking two seperate loans.

 

Well, unless someone is paying cash for the property, there is no way a bank will grant a loan for the amount you are asking. The valuer will kill the sale guaranteed.

But I'm happy for you to prove me wrong by selling it for or close to your asking price

 

Hi Chris

When you first came onto this forum your posts were a lot more optimistic than they are now and I wonder if you haven't been spending too much time focussing on the current D & G environment, as is now evidenced by your lengthy posts full of opinionated pessimism and little else. It seems to me that, with virtually every discussion that you participate in, you take the defensive position and end up back-winding as well. Just my observations...

Sure, we're coming into what appears to be a recession. No news there. But let's not forget that Australians have been through them before (remember Keating's one that "we had to have"?) and we'll come out the other side- as will our jobs, assets and attitudes

I well recall the negative mood around property investing in the late 80's and early 90's when interest rates soared to highs of 18% for some, and it was all D & G back then too. News stories were full of greedy banks foreclosing on owners, property prices falling and remaining stagnant, auctions going nowhere, investors moaning that the good times were over and property wasn't the way to go etc etc

Property shouldn't be a speculative investment- in my opinion it's a medium to long term event. Sure, yields and growth will vary over the typical cycle and what you may consider a great time to buy/sell may not necessarily be right. But I digress...

If you really HAVE to sell, after such a short period of holding time, then be sure your agent tells you all the tips and tricks; after all, they're the ones you're paying the big bucks to But, if it were me, I'd ensure the place is tip-top presentation wise and your tenants can be trusted to maintain it this way. If not, then seriously consider a vacant house for the sales campaign period and dressing it with tasteful furniture instead. It costs but it may well be worth it for a possibly higher price.

Ensure the copy ad is proofed by yourself before it goes on the net, as it may not accurately reflect the main selling points of the house, as you'd like. I don't know which suburb you're in, but consider the merits of the house from both an owners and an investors perspective. If possible, include house plans, lots of pictures, distance to attractive amenities like cafes, schools, shops, parks, transport etc unique selling points (if any) such as largest in complex, north facing living areas/backyard etc

For investors, include rental appraisal (current and capacity to improve, if applicable) potential to value add (if app) again distance to transport, shops etc.

Be as flexible as possible with terms to allow for more buyers making offers ie: longer/shorter settlement periods, inclusions (eg garden furniture, appliances) smaller deposit etc.

Ensure your agent KEEPS SHOWING PROSPECTIVE BUYERS up until exchange of contracts. Most important, as some get lazy and you end up losing 1-2 weeks of market time.

Best of luck with the sale- I look forward to hearing good news hopefully very soon

 

Give Chris C a break.com

Jacque et al

Give Chris C a break! His posts are extremely informative, thought provoking, often well considered, long (great - as opposed to most of the short, irrelevant back slapping exchanges most of this site consists of!).

Jacque as a 'Team Invested' person - what is the point of the following:

"as is now evidenced by your lengthy posts full of opinionated pessimism and little else. It seems to me that, with virtually every discussion that you participate in, you take the defensive position and end up back-winding as well."

We're all opinionated (you, me, BV, dudek, Tropo etc etc all have relatively firm thoughts and opinions). Most of us are either pessimistic or bullish. If we werent this would be a sad forum to read.

I'll admit there was a bit of a bad patch for Chris, particularly the whole 'i'm studying eco and ive read more books that Good Will Hunting....etc' But my tip is that he's passionate (and we know he's young) and has probably learned a big lesson from all this in how to communicate.

However, Chris, keep the opinions and the pessimisism (if thats what your consideration of the available info warrants), and keep trying to substantiate your thoughts with stats and rigourous eco analysis (most of the time you're not too far off the mark). Sometimes you'll be wrong, but most of the time your adding to the wealth of info/expertise on this site.

Just dont get frustrated when people dont believe/agree with you...remember 'grace under fire/pressure'.

By the way, no need for anyone to respond to this - i dont want to create another digression, but just thought that Jacque's stab was a bit pointless, and should mark the tipping point on all this.

shasta (B Ec Honours, 10 yrs as professional economist = crappy trader, ****-scared investor with 1 IP, but find Chris C the to be the most interesting poster (when not focused on personal issues!)).

 

Shasta

With all due respect, at least my observations were accompanied by some responses (hopefully somewhat helpful) to Chris's post about selling tips for his Brissy IP. After all, that's what we're here for - to both generate discussion and share our knowledge to help one another, if able.

I have no issue with people sprouting their opinion here on IE. Of course it would be boring if we were all the same , however, I see little point in some members harping on endlessly like Chicken Little when we're all here to move forward. As Sim says, let's have active discussions about how we can do this rather than focus on all the doom and gloom out there.

 

I dont take all this too seriously, but i do have a lazy day today which is why i'm defending Chris a bit. One solution is to not read his posts if you dont like them.

Anyway, you said:

"Running around crying "the sky is falling, the sky is falling", is neither productive nor endearing.

We know the world economy is in a bad way. We're more interested in what we, individually, can do to generate wealth here and now. Don't tell me what can't be done - tell me what can. "

If Chris believes that the sky is falling in then he should articulate that as the basis for his position. His position has been well articulated as getting out of property and possibly into GOLD so many times its not funny.

So, what are you talking about? He is into GOLD!!!!!! What more do you want from the man? He has described what he believes the issues are, he has described what he has a preference for, he has described that he is willing to sell his IP to better his position etc etc. This is him telling us what he thinks he CAN DO NOW........he's not dwelling, he's taking action.

He's not dwelling, he's supporting his position. This is a critical point. In the 90's recession it was easy to understand the mechanics (IR up, agg demand down). Now its incredibly more complex and getting worse by the minute (gee if we could get some CBD commercial property-type guys ie people on the cutting edge on here - i bet we'd all use the symbol a lot more!!). Chris needs to revisit what is happening to monitor and help forcast the best next move for him and us (in his opinion) in a changing environment. He gets the complexities and the seriousness of what we're facing. Keynesian policies might save us, but its still a bit of an experiment...

As i said he probably made some mistakes in the past but maybe leave him alone publicly now. Maybe any issues you have with him (or me) as of now should be handled via private messaging, not the public forum. Public slayings are not 'endearing' either, and quite frankly give the site a bad taste.

Just a thought

shasta