We've all had that moment. The one where we're doing a development property feasibility and look at the amount of commission set aside to pay an agent to sell the finished product, and wondered if we'd be better off selling the property ourselves.
But it doesn't stop there. There's also the question of whether the agent you bought the development site through is the best agent to sell the end product through.
So many questions. It's tempting to grab a nice cool beverage and think about something else instead. That won't sell your property though!
Let's take a look at the basic things you need to decide when it comes to selling your development properties.
The simplest way to tackle this subject is to break it down into a number of questions you need to ask yourself. The answers will give you a clearer idea of which option is likely to be your best solution for selling.
What Sort of Stock?
Realistically, your development project will end up with one of two options - dwellings or vacant land. With dwellings, though, you can have a range of finish levels, which could affect your selling strategy.
How Much Stock?
Selling a lot that you've created out of someone's backyard is quite a different proposition to an 80 lot greenfields subdivision. Quantity also matters with dwellings - a single dwelling is quite simple, but an 80 unit apartment complex is not.
Target Demographic?
Who is going to buy your product? Smaller townhouses with durable finishes are great for investors wanting to rent them out, whereas big, fancy townhouses with all the bells and whistles are more likely to be in an affluent area and purchased by homeowners. Two different markets, two different approaches required.
When Do You Plan to Sell?
It could be that you haven't quite firmed up your exit strategy yet, but knowing when you plan to sell is important. To get construction finance for a bigger project might mean you need to sell part of the stock off-the-plan in order to secure finance. Selling something that hasn't even been built yet can be quite challenging unless you're experienced in that type of sale.
Now What?
Now you've answered the questions above, it will be much easier to decide how to sell your development stock. Let's start by looking at the main options - sell it yourself, sell through a local agent or use a specialist marketer.
Sell It Yourself
This is certainly much easier than it used to be, thanks to the internet. But there's still likely to be a lot of time and effort involved. It's probably not too much of a problem if you're selling off the backyard of your home, but if your development property is a substantial distance from where you live, this could become a real time drain.
And while you're busy selling the property yourself, you're not out there looking for your next deal. You might save yourself some cash in fees, but how do you measure that in opportunity cost? It's a question you need to answer.
In the end, if you only have a couple of properties to sell at the most, they're reasonably close by, and you love selling stuff to people, then give it a go. Probably not a good choice for a big project though.
Sell Through a Local Agent
This is the route most people take, and with good reason. Local agents know the market, they often have a list of buyers with specific needs they can match to your property, and they're trained to sell property.
But that doesn't mean every local agent is going to be a great choice! One thing I often see is people have a great buying experience with an agent, then turn around and sell through the same agent.
Sometimes, though, it's a good idea to stop and think about why you felt the experience you had with them as a buyer felt so positive. Did they spill a whole lot of inside information about the vendor which made it easier for you to get a better deal? You wouldn't want them selling property for you in that case!
Now, if they're a really good agent, they should be capable of doing both, and often the incentive of being able to resell the finished product from your development is a great way to get them working harder for you when you buy.
If you don't have a local agent already in mind, then do your research. Look at reviews on property sites, and read feedback and check rankings on sites that monitor real estate agents and their service. Another option is to check out any open houses they're holding on the weekend as anonymously as you can. What were they like with prospective buyers? Did they follow you up afterwards for feedback about the property?
Local agents are generally best at selling stock on the ground, rather than off the plan. But if you only have a small project, it may still make sense to use a local agent if you only need to sell a couple of the properties early. Which leads us into...
Specialist Marketers
Although specialist marketers are often a good choice when you have a large development project to sell, their big strength is in off-the-plan stock. They know all the ropes in terms of marketing something that doesn't exist yet. They also have a big database of potential buyers they can tap into, often marketing properties through accountants or financial advisers with clients interested in investing in property.
All of which means that for many of them, your 2 townhouse development project probably isn't of much interest. But a block of apartments? Different story. Their value comes from having plenty of stock available to sell.
If you have a large land subdivision to sell it can also be worth looking at using a specialist marketer. It's quite common for them to team up with one or more builders, for example, and offer house & land packages for your subdivision. So you get two sets of people selling your lots - the marketers and the builders.
Selling your development stock is an important piece of the property development puzzle, so take the time to understand what you're selling, when you're selling it, and who you're selling it to, and the decision about the best way to sell is much easier to make.
But it doesn't stop there. There's also the question of whether the agent you bought the development site through is the best agent to sell the end product through.
So many questions. It's tempting to grab a nice cool beverage and think about something else instead. That won't sell your property though!
Let's take a look at the basic things you need to decide when it comes to selling your development properties.
The simplest way to tackle this subject is to break it down into a number of questions you need to ask yourself. The answers will give you a clearer idea of which option is likely to be your best solution for selling.
What Sort of Stock?
Realistically, your development project will end up with one of two options - dwellings or vacant land. With dwellings, though, you can have a range of finish levels, which could affect your selling strategy.
How Much Stock?
Selling a lot that you've created out of someone's backyard is quite a different proposition to an 80 lot greenfields subdivision. Quantity also matters with dwellings - a single dwelling is quite simple, but an 80 unit apartment complex is not.
Target Demographic?
Who is going to buy your product? Smaller townhouses with durable finishes are great for investors wanting to rent them out, whereas big, fancy townhouses with all the bells and whistles are more likely to be in an affluent area and purchased by homeowners. Two different markets, two different approaches required.
When Do You Plan to Sell?
It could be that you haven't quite firmed up your exit strategy yet, but knowing when you plan to sell is important. To get construction finance for a bigger project might mean you need to sell part of the stock off-the-plan in order to secure finance. Selling something that hasn't even been built yet can be quite challenging unless you're experienced in that type of sale.
Now What?
Now you've answered the questions above, it will be much easier to decide how to sell your development stock. Let's start by looking at the main options - sell it yourself, sell through a local agent or use a specialist marketer.
Sell It Yourself
This is certainly much easier than it used to be, thanks to the internet. But there's still likely to be a lot of time and effort involved. It's probably not too much of a problem if you're selling off the backyard of your home, but if your development property is a substantial distance from where you live, this could become a real time drain.
And while you're busy selling the property yourself, you're not out there looking for your next deal. You might save yourself some cash in fees, but how do you measure that in opportunity cost? It's a question you need to answer.
In the end, if you only have a couple of properties to sell at the most, they're reasonably close by, and you love selling stuff to people, then give it a go. Probably not a good choice for a big project though.
Sell Through a Local Agent
This is the route most people take, and with good reason. Local agents know the market, they often have a list of buyers with specific needs they can match to your property, and they're trained to sell property.
But that doesn't mean every local agent is going to be a great choice! One thing I often see is people have a great buying experience with an agent, then turn around and sell through the same agent.
Sometimes, though, it's a good idea to stop and think about why you felt the experience you had with them as a buyer felt so positive. Did they spill a whole lot of inside information about the vendor which made it easier for you to get a better deal? You wouldn't want them selling property for you in that case!
Now, if they're a really good agent, they should be capable of doing both, and often the incentive of being able to resell the finished product from your development is a great way to get them working harder for you when you buy.
If you don't have a local agent already in mind, then do your research. Look at reviews on property sites, and read feedback and check rankings on sites that monitor real estate agents and their service. Another option is to check out any open houses they're holding on the weekend as anonymously as you can. What were they like with prospective buyers? Did they follow you up afterwards for feedback about the property?
Local agents are generally best at selling stock on the ground, rather than off the plan. But if you only have a small project, it may still make sense to use a local agent if you only need to sell a couple of the properties early. Which leads us into...
Specialist Marketers
Although specialist marketers are often a good choice when you have a large development project to sell, their big strength is in off-the-plan stock. They know all the ropes in terms of marketing something that doesn't exist yet. They also have a big database of potential buyers they can tap into, often marketing properties through accountants or financial advisers with clients interested in investing in property.
All of which means that for many of them, your 2 townhouse development project probably isn't of much interest. But a block of apartments? Different story. Their value comes from having plenty of stock available to sell.
If you have a large land subdivision to sell it can also be worth looking at using a specialist marketer. It's quite common for them to team up with one or more builders, for example, and offer house & land packages for your subdivision. So you get two sets of people selling your lots - the marketers and the builders.
Selling your development stock is an important piece of the property development puzzle, so take the time to understand what you're selling, when you're selling it, and who you're selling it to, and the decision about the best way to sell is much easier to make.
