Guide to Selling a Home in a Slow(er) Market
Real estate investing brings great opportunity. The opportunity to generate ongoing income, whether in the form of a rental property or a series of fix and flips, is very enticing, particularly as this kind of venture also helps to build financial stability for the future.
However, success in real estate investing is less challenging in a market that is going up. When buyers are eager for a home that’s ready to live in, they’re willing to pay top dollar – unless the market takes a dip and plenty of properties are available with similar features at a far more reasonable price point. For investors looking for a big ROI, this is a negative outcome, particularly for investors looking to fix and flip a property for more than they paid. When property prices drop, whether moderately or sharply, it may be hard to see any kind of advantage at all.
Normal fluctuations in the market may deter interested individuals from taking the plunge into property investing, but experienced investors know that working alongside the changes in the market is a part of playing the game. A slow market doesn’t mean no market, and there are always ways to adjust a strategy to accommodate a change in circumstances.
No matter what the market looks like, there are plenty of ways to see returns. With the right strategy, it’s possible to make the most of your investment without sacrificing the money, time, and effort you have already put into your property. This is what you need to know about selling in a slower market.
Make Repairs
When the market isn’t conducive to a sale – or if renters aren’t interested in the price point you need to achieve to turn a profit – it may be time to invest in your property so that you can get the ROI you require when the market turns around. How you approach this will largely depend on the current state of your property and your long-term goals, but when you have time to wait, it’s best to be productive.
If you have a fix and flip property, you are likely already making improvements as a part of your property renovations. However, with more time to devote to the process without the risk of losing money, you can put more energy into ensuring the choices you make are the right ones.
If you are competent in DIY home projects but choose to work with a contractor for the sake of a speedy result, now may be the time to put your own skills to the test. This isn’t to say that you should take on serious projects that could result in excess costs should things go wrong – for things like plumbing and electrical work, it’s best not to bypass the pros – but if you have successfully tackled things like countertop replacements, it’s possible to save money on your enhancements by doing the work yourself.
For those who own rental properties and are struggling to find tenants, making some upgrades that appeal heavily to renters, like adding a laundry room or in-unit washers and dryers, replacing aging flooring, or anything else that drives up rent in your area, can be a good way to get attention. While these kinds of upgrades can seem expensive, particularly if you’re not bringing in adequate cash flow, staying competitive is often the best thing you can do to ensure to bring in people with high expectation of them paying rent. With reasonable prices and the kinds of amenities that are going to attract tenants, even in a slow market, it’s possible to keep your units from sitting empty – which can save you cash in the long run.
Price Reasonably
Need to sell now, regardless of market conditions? It happens. From relocation to an increased need for liquidity, there are plenty of events that may necessitate a home sale, regardless of outside circumstances.
While this clearly isn’t ideal, it’s not impossible, either. However, rather than focusing on ROI, you need to price your property to accommodate the market – not the other way around. Even if you’re afraid of eventually losing money, pricing competitively at the start of the sales process will ensure a fast turnaround time, which is ideal in freeing up cash.
Far too many investment property owners believe that it’s not possible to get a competitive offer without starting high, and in some cases, this is true. However, a down market isn’t one of those times. While many properties that sit on the market for months or years are objectively fine, others are there because they have large issues that can’t be overlooked. Without taking a chance, many buyers will assume your fix and flip is the latter, resulting in a lack of movement and a drive to further lower prices.
In order to ensure a timely sale, start at a realistic price point. This means evaluating the local market as it relates to both neighborhood and home features, preferably starting with homes that have most recently sold versus homes that are still sitting on the market. Then, look at either expert projections or draw up your own based on your knowledge of the local real estate market to attempt to anticipate short-term trends that could guide your pricing strategy. If you are partnering with an agent, he can help you get an idea of what has been garnering the best results in the area.
The same is true for rent. If the average apartments in your area are going for $2,000 a month and yours is $2,700 without significantly better amenities to justify such a price jump, you’re unlikely to appeal to as wide of an audience.
Create a Pitch
There is no shortage of homes for sale. Many fit a wide range of homeowner needs, but the unique properties, the ones that boast opportunities others do not, are the ones that get the most attention, regardless of the state of the market.
Real estate investors are often highly motivated when purchasing a property and tend to look beyond the superficial or minor factors a residential buyer might consider. This can be a huge advantage as it allows you to create a sales plan that speaks specifically to the innate value of a property.
As experienced investors know, things like a large yard, preservation of original features in a historical home, or modern upgrades can all appeal to buyers in unique ways. However, to reap these kinds of benefits, you need to find the right spin to make potential buyers pay attention.
Instead of seeing your property as one single entity, consider it as the sum pieces of the whole. Ask yourself what drew yourself to this property in the first place. Was it the gorgeous foundation with minimal need for repairs? Was it the historic facade? Was it the spacious backyard with pool included? Something you saw made you take the plunge, so be sure to make this the focal point of your advertising.
This is true for rental properties as well. While buying with future sales in mind is less of a focus here, there is likely something interesting or unique you can play up when advertising the vacancies you have available.
Be Flexible
For those seeking a strong ROI, flexibility seems like the enemy of profit. However, when the market isn’t at its peak, flexibility can be the difference between a quick sale and too much time on the market.
When pricing your property, know what your lowest price you will accept is. This amount should drive your negotiations, serving as the basement regardless of what other aspects come into play. When determining this figure, be aware that in a slower market, you may have to accept a slighter lower ROI than you would normally. Finding your personal line will depend on your risk tolerance and the speed with which you would like to ultimately sell.
While it’s always possible to stay on the market and hold out for the perfect ROI, waiting does come with drawbacks. Attracting attention when your property has been listed for months or, worse, years, can be next to impossible, diminishing or potentially ruining your returns entirely.
Instead of sacrificing everything you’ve worked for, find your limits and work within them. A low-ball offer isn’t always an insult, and when you’re not seeing the same opportunities you encountered just several months ago, it’s important to take what you can get so long as you aren’t leaving money on the table. An offer that’s far too low shouldn’t be entertained, but when numbers start to approach your minimum target, it’s okay to play the game.
As a real estate investor, a good market is important to a great return on your investment. However, there’s no way to guarantee a strong ROI, particularly when the market isn’t performing at the top of its game. In slower periods, sticking to these tips can help you make a sale or secure tenants, regardless of the changing dynamics of the real estate market at large. From DIY repairs to being more flexible, there’s plenty you can do to see a successful sale or rental.
Scott Clift is a licensed real estate broker with Westpark Loans. He has been in the real estate industry since 1994. His team of seasoned professionals specialize in providing real estate loans for investors and other self-employed individuals. When you are ready to invest in real estate, call Westpark Loans to secure your financing at (844) 574-LOAN or by visiting westparkloans.com.
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