When selling the investment property, it’s frighteningly easy to lose thousands of dollars. Agents often suggest to landlords that the tenants are moved out and furniture is hired in. The logic is that a better presentation results in a better price. And in some instances, this is so.
However, it’s imperative that investors realise that they lose money before they (hopefully) make money when they boot the tenants out on the agent’s advice. When a landlord moves the tenants out and hires furniture, the income stops and the expenses accelerate.Before moving the tenants out for the sales campaign, run the numbers to see if it makes sense.A lot of investors accept they will forgo rent for the duration of the selling campaign. It is the unaccounted vacancy period where the real financial pain can kick in.
The average campaign is currently running at about 28 days, and this is in an extremely buoyant market. In a normal market, the average campaign is more like 50 to 60 days.Add another 7 to 14 days in vacancy whilst the property is prepared for the market and the lost income meter begins to rack up an uncomfortable deficit.
The average settlement period once the property has sold is about 56 to 70 days. The fact the property is vacant during settlement is often overlooked by landlords when selling. The total lost income escalates to between 80 and 100 days rent (11 & 14 weeks) once everything is done and dusted.
This lost income needs to result in a higher sale price by at least 11 to 14 weeks income to have justified moving the tenant out. The decision to then lease furniture means the selling price must be even higher again.
Hiring furniture can cost anywhere between $5,000 and $10,000 for a sales campaign. Add this cost to the income that has been forfeited and the selling landlord is down $10,000 to $20,000.
In many instances, moving the tenants out and doing works prior to marketing is the best commercial outcome for the landlord. In just as many instances, the landlord’s costs and commitment is rising for a negligible benefit. Knowing which solution applies to your circumstance can be the key to making, saving or losing $20,000.
Agents love a ‘committed’ vendor. In times gone by, agents encouraged vendors to spend thousands of dollars on unnecessary print advertising as a tactic to increase ‘vendor motivation’.
Now that the internet has decimated print, there has been an explosion in agents pushing the ‘benefits’ of hiring furniture. Coincidence or not? You decide.