What To Do With A Property You Can’t Sell? (Ep219)
When you can’t sell a property what do you do? You can lower your price, sell with vendor finance, rent it out or a variety of other things.
Hey guys Ryan from onproperty.com.au and today I’m answering your questions and we are talking about, what to do with a property that you can’t sell? Alright I’ve got an email here from Wayne. Wayne thank you so much for emailing me. I really appreciate this email and this concept of what do you do with a property that doesn’t sell. It’s such a great idea, so I’m really stoked that I can create a video on it. The question is, “Hi Ryan, I have a two year old property in Blackwater, Queensland, a mining town that was great for a short time but now it’s dead and I can’t sell it. What would you do?”
So what I am going to do is approach this in a more overarching aspect. So what would you do if you couldn’t sell a property? Now Wayne, I’m not a financial advisor, I can’t give you financial advice about exactly what you should do to sell your property, so I’m going to give you some ideas that can only be considered as general education. Alright that’s my #disclaimer to throw out there just to make sure you guys know that I’m talking generally and not specifically. So having a property that you can’t sell is a difficult situation, especially if it’s in an area like a mining town that was once booming and now it’s not. The problem in most circumstances is not that your property won’t sell but it’s that your property won’t sell for the price that you want to sell it for.
Every property in Australia can be sold but would need to be sold for the right price unit. If you had a property that you couldn’t sell, you could always offer it for $1 and I’m sure someone is going to buy it. But I’m guessing you’re in a situation where you don’t want to sell your property for $1, you don’t want to sell under what you paid for it. The biggest thing I think to look at, a lot of people are so afraid to take a loss with the property that if the property won’t sell for more than what they paid for it, then they’re really hesitant to sell and they just want to wait it out. Now in some circumstances, that may be the right thing to do, maybe you can’t afford to take a loss on a property, but waiting it out isn’t always the best circumstance because waiting it out means you’re missing out on opportunities to invest in other areas, so just something to think about there.
If I couldn’t sell a property what would I do? Firstly I would explore all the options of selling for a cheaper price. Now that’s not an option for me. The next thing I would look up, because I would want to offload this property is selling via owner finance, and so this is great because it appeals to people that wouldn’t necessarily buy in your area or people that couldn’t necessarily afford to buy your property the standard way. What this means is you, when selling via owner finance because you’re appealing to people who can’t afford to buy property themselves often you can charge a higher price and you can charge a higher interest rate.
One of the first posts I did way back when my website was still cold cash flow investor was I did a repost of someone’s story that I found on the forum propertyinvesting.com. Now they had a property in Sydney, that they couldn’t sell, that was negatively geared and they were losing money on. They then decided to sell their property via owner financing and rather than trying to get more than what they paid for it, they settled for what they sold the property for. But because they had put down a deposit and because they were charging a higher interest rate than what they were paying the banks then this negatively geared property became positively geared and now actually generating income each and every month until the person finally got their own loan and bought them out. So they flipped this situation from a dud property that was negatively geared to a property that was positively geared and actually making the money until it finally completely sold and they basically broke even or lost a little bit of money on that situation.
So first thing I would do, would be to look at selling it cheaper, potentially getting a better real estate agent if your real estate agent’s not very good or selling it yourself if the real estate agents not very good. The next thing I would look at would be to sell via owner financing and again and even some of our owner financing, you’re not going through an agent so you’re going to need to sell the property yourself and there is a bunch of information that’s out there on what you can do. The next thing that I would look at doing if I couldn’t do either of the two above is insuring that the property is rented so that I’m not losing money or not losing as much money as I could be. And what I would do in this situation is, when renting out a property if you want to get the best price you want to ensure that it is suitable for the largest amount of people.
Now you’re in Blackwater, I don’t know the area well but let’s say everyone wants to live in three bedroom units. Well if you’ve only got a two bedroom unit then you might be out of that bracket because not many people in the area want to live in two bedroom units when for a little bit more they can get a three bedroom unit. Or if you’ve got something that’s a five bedroom unit, then people may not want to pay that much because they only need a three bedroom unit. So what I would do is try the best of my ability to make an appeal to the most people in the market so maybe that would be with a two bedroom converting the garage into living space. No it’s not another bedroom but creating that extra space could be very helpful. All you would need to do is carpet it. Maybe it’s doing a cosmetic renovation on the property making it with new flooring, paint the walls, maybe put in a cheap IKEA kitchen or paint the tiles in the bathroom white. You know just spruce it up a bit, make it more desirable to the market so that you can get it rented and that people are going to live there.
I would also look at the options of renting in a different way. So let’s say I can’t rent the property as a three bedroom house because no one in the area really wants to live in a three bedroom house. Well let’s say that there are miners going into the area, they’re doing fifo’s, they’re flying in flying out or they’re driving in and driving out. You know maybe they just want somewhere that they can stay for two weeks; it could be a one bedroom, could be a share house or something like that. So I would look at the potential of splitting the house into a dual occupancy by creating a multiple one bedroom self contained and then have them fully furnished and rent them out fully furnished for short periods of time for people who need them.
You would also look at if you didn’t want to go to that level of work, converting that, getting all the approvals for dual occupancy, you could look at renting it out room by room. Again I would do that fully furnished or maybe have the house fully furnished but not the bedrooms and so that way people can come in, they can stay in a room. A lot of people are happy to share with other people that they don’t know so I would consider renting out room by room. Now obviously this is a more active was of investing and you’re not getting a rental manager to do it for you so it does take more work. But hey if you can’t sell it and you can’t rent it, you’re going to have to do something to make sure that this isn’t a complete dud.
The last thing that I’m going to say is that’s really all the options that I would consider. I can’t think of anything else at the moment. The last thing I want to say is something that a concept that I learnt from Tim Ferris who’s the author of “The Four Hour Work Week.” Now if you haven’t read that, you’re crazy. You need to read it, this is such a mindset shifting book. You can get it from fishpond, the affiliate link is onproperty.com.au/4hour and that will direct you to fishpond where you can buy it. You can always go on Amazon, get it for your kindle device or on iBooks. Do people use iBooks? I don’t know. Anyways this book and this author gave me this awesome concept which was the fact that if you’re losing money in one area of your life you don’t need to make up for that in the same area. Focus your attention on other areas of your life to make up for that loss.
Maybe this property was a bad investment and you’re not in the position where you can sell it for the amount of money that it would actually sell for. It’s losing a certain amount of money, let’s say its losing $5,000 a year and you’re pissed. You don’t want to be losing $5,000 a year but let’s say that it is, alright we can do everything we can to make that property earn $5,000 a year more so we’re not losing money on that property or we can settle for what that property is, understand that we’re not going to get a great return there, we made a mistake, damn it but let’s move on.
Now let’s go over to another area of our lives now this maybe investing in another property, maybe investing in a business or creating a side income or something like that. How are we going to make $5,000 to make up for that loss over here? So just because you’ve got a loss going on one side doesn’t mean you need to make up for it in that property. You can do something else in another part of your life to make up and offset that loss. So that is a great concept I learnt from Tim Ferris. You don’t need to make up the money there you can do it somewhere else and maybe that might be the best thing for you. It might be going out taking what you’ve learnt, investing in another property generating a passive income through there which offsets your loss and that buys you time for Blackwater to come good again or for you to find a suitable buyer or for you to decide what you want to do.
So Wayne, I hope that has been helpful to you. I don’t know a lot about the Blackwater area so I can’t offer specific advice there but I thought that was some interesting advice for anyone that has a property they can’t sell. Now if you have any questions that you want to ask me, I guarantee that I will answer every question that I get asked on video so you know you’re going to get an answer to your question. Simply email me [email protected] or you can go to onproperty.com.au/contact.
Now if you want to rent out your own property, you got the same situation as Wayne and you can’t sell your property, the rental managers not doing anything for you and you want to rent it out yourself, well I’ve actually just launched or will be launching a product that is the complete self leasing kit. Now you can get that for a menial price, pre-launch its only $14.95. Once I launch it, it will be $29.95 to start with and as it grows in value it will probably go up to $50 or something like that but you can check that out by going to leaser.com.au. Now that’s L E A S E R.com.au like a lease and with a r at the end not like Lisa from The Simpsons. Lisa it’s your birthday, happy birthday Lisa, anyways leaser.com.au there you can get my self leasing kit. Alright, I hope that has been helpful, until tomorrow remember that your long term success is only achieved one day at a time.