Q: What are the key points to highlight when selling to an investor?
A: There are potentially three different kinds of investors you will come across and each will have different needs and criteria when looking to buy an investment property. Here are some of the key points to emphasise for each type of buyer.
1. Long-term investors
With a long term investor the vital selling point is return on investment (ROI). If they are planning on holding on to the property for years to come they will want to be assured that its probable gross yield will be worth it in the long haul.
One good indicator of a property’s potential to have a high ROI is to calculate its gross rental yield to illustrate how much cash the property will produce annually as a percentage of its value. This provides an easy way for your investor to draw comparisons between the yield values of several investment properties they are considering [remember gross rental yield= annual rental income (weekly rental income x 52)/ property value x 100].
A second attribute to highlight for long-term investors is the key tax benefits available to property investors. Tax benefits property investors can claim as a deduction from their overall income include negative gearing, deductable costs and depreciation.
2. Short-term investors
A short-term investor is more likely to be interested in capital growth rates, where they are looking for a property that will put them in a better position financially in the short to medium term.
A purchase that provides a capital growth of between seven and ten per cent is key for an investor to build long-term wealth. So, when the time comes to sell they want to know that they are likely to be able to make a profit on what they originally paid for the property.
When selling to a short-term investor look in areas that are in demand and have a low price point. Vacancy rates and auction clearance rates are good indicators of whether a suburb is in demand or not.
When talking about the area and why the property has the potential to appreciate in value allude to the reasons good capital growth is likely down the track. Such as having access to important amenities like public transport, hospitals, shops, cafes, schools and an upward trend in land value over time.
3. The ‘Rentvestor’
This new generation of first homebuyers, aka ‘rentvestors’, are looking for affordable investment properties in growing outer suburbs or even in some cases interstate, and continuing to rent where they want to live due to lifestyle or financial factors.
This can be the best option for younger buyers to get their foot in the door of the property market and a wise way to build up equity for say two to three years that will help to build an investment portfolio and purchase a home where they want to live in the future.
These buyers will want to know about the general rental appeal of the area, whether it will be easy to rent out and find reliable tenants, and if it is close to public transport or if there are plans for future infrastructure to go in.
Also, remind a ‘rentvestor’ they are making a good choice in terms of the tax savings to be had, where the interest payments on their investment property are tax deductable along with any property related expenses incurred.
If you have any questions for Rocky and Rob please send them to email@example.com.
From the Homely Team.
Rocky Bartolotto is the National Sales Director at Homely.com.au and works closely with real estate groups in Australia, tasked with building strategic partnerships and growth. Connect with Rocky on Twitter and LinkedIn.