Hi guys
I am wondering if you can help me out with some marketing suggestions. We have an investment property in Hobart Tasmania which we need to sell. We have listed it with an agent, but retained the right to sell it privately. The agent has now had the property on the market for 6 weeks and hasn’t even had a buyer look through the property.
To fill in the details a bit, the property is 10 minutes walk from the main University of Tasmania campus and 10 minutes from the Hobart CBD. It has six 12 month leases in place which renew on 30 January 2016 and return $56,940 /year approx. The outgoings (body corp, rates, water, land tax, gas & internet) are $6746 approx, and the house is fully furnished (furnishings & bedding included in sale).
Our agent originally advised us to put it for sale “by offer”, and then after a few weeks decided we needed to put a price on it so we put “offers over $670K” – however there was still no interest so we dropped it to $597,000. At this price the yields work out at 9.54% gross & 8.41% net approx.
So even if a buyer financed the 100% of the asking price of $597,000 and stamp duty then they would still be making a significant positive cash flow income each year. To me this seems a pretty good deal, so I am struggling to understand why our agent hasn’t managed to find any serious interest. Do we just need to wait out the remainder of the contract and replace our agent, or do you guys have some suggestions on how we could sell it privately.
Thanks in advance for all your help.
StephenHi Stephen,
If there has been no interest maybe it’s not the marketing but the price. Whether it’s a good deal is not just about the yield. What have been comparable SALES in the area – same number of bedrooms, age, condition etc. etc. Is your price at, above, or below other properties that have been sold recently?
I’m guessing it’s rented to Uni students and some investors like this while others don’t. If it’s a house are the appropriate council approvals in place for the individual tenancies ie. boarding house arrangements?
Are there many properties on the market? Are the others selling? Is it difficult for the agent to get access to the property to show prospective purchasers?
Sorry, so many questions but without further information it’s difficult to make useful suggestions.
Tracey
Hi Tracey
Thanks for your response. Getting information on comparable sales has been a little tricky – the property is technically in the Dynnyrne however it is only 20m from the boundary with Sandy Bay. The majority of Dynnyrne is on the other side of a highway and does not really give good representation of the area where the property is located. Sandy Bay on the other hand incorporates both the University and many of the wealthiest homes in Hobart. So getting representative numbers is a bit more difficult than usual.
That said there is a 3 bedroom property in the same street currently advertised for mid to high $500,000’s. So while our price (or initial lack thereof when putting “by offer”) might have initially been to high, I think we are now in the right ballpark.
People in the real estate game I have spoken to seem to indicate that other properties are selling at the moment, and it is not that difficult for the agent to get access to the property. We have a mix of Uni students and people working in the house currently.
Is it advertised as Sandy Bay or Dynnyrne?
It’s advertised as Dynnynre.
Hey Stephen,
Hopefully you don’t need help anymore and its been sold.
Who is it with??
I deal with commercial property in Hobart, but a quick check with a couple of mates working in resi sales and they reckon your agent is either incompetent, your overpriced or buyers see something wrong with the property.
As previously mentioned, yield isn’t the only factor. If comparables are well below yours it’s not going to be an easy sale.
~9.5% for a fully furnished student accom isn’t necessarily screaming a great deal, more an accurate pricing of the risk involved.
Best of luck!
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Ian, unfortunately the property still hasn’t sold. I’d prefer not to name the agent publicly.
Corey, risk has been mitigated by using 12 month leases that end in the peak period for new students, and rent payments 4 weeks in advance.
Ian, unfortunately the property still hasn’t sold. I’d prefer not to name the agent publicly.
Corey, risk has been mitigated by using 12 month leases that end in the peak period for new students, and rent payments 4 weeks in advance.
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Vacancy is just one of the risks. Other factors include increased wear and tear, potential downturns in student accommodation requirements (similar happened in Newcastle, where the campus built their own accommodation facilities for students and wiped out the private market), increased churn in tenancies compared to a standard residential lease etc. All these factors play into the pricing, compared to a single freestanding property with a single lease generating a similar ~9% gross rental.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
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