After a few years of owning a stabilized property, ie. the space is renovated and rented, it might be time to sell and scale. But how do you know what to list your property at? Run a market analysis showing recent comps in your area. We have found that reasonably priced properties demand more foot traffic generally bringing in more offers.
Before listing your space, see what extra projects can be done to increase your return on investment. When listing our single family home last summer, we had our realtor walk the space and give suggestions on how to make our property stand apart from other homes on the market. Her suggestions included: paint all interior doors white, install can lights in the living room, update the lighting fixtures in the kitchen and install a modern ceiling fan in a bedrooms. We also cleaned up the landscaping ourselves by laying fresh mulch. The total cost for this project was under $5,000. Let’s calculate ROI to see if we got the most bang for our buck.
We listed the house at $500,000. We could have listed it a bit higher, but our strategy was to price the home competitively to create the largest buyer pool possible. After a week on the market and one open house, we were under contract for $580,000. Our return on these small projects equaled 1600%. $80,000/$5,000 x 100= 1600%. Fair enough, I agree: the over asking offer had as much to do with 2021’s market conditions as sprucing the place up, but you get the idea of how to get the most out of your money!
So how do you know when it’s the right time to sell? We calculate our return on equity for each property. Could your money be working harder for you on another project? With the proceeds from this home, we purchased a fourplex that currently cash flows $3,500/month, or an 8x increase compared to the single family’s cash flow of $300/month. Read next month’s Exchange for a deep dive into return on equity.
