PORTFOLIO POINT: Social media can be a useful tool for selling property, but it will only ever be one element of a successful sales campaign.
Can social media help vendors secure a better price for their home? Well, apparently so, according to the commentary last week around the successful sale of social media expert Kurt Opray’s three-bedroom house in Northcote in Melbourne’s inner north-east.
Opray set up a blog, a YouTube page and a Twitter account to promote the virtues of his house. He also engaged Hocking Stuart Northcote to market the property by traditional means.
A number of statistics were used to support the claim that the social media campaign made a big difference to the sale: the fact that more than 80 people turned up at the auction when the agents only expected 50; that there were four bidders; that the property sold for more than 33% above the suburb’s median price; and that the auction result of $1,055,000 was $135,000 above the reserve.
Opray’s project was undoubtedly an incredible media relations success, judging by the extensive print and broadcast media interest he garnered, and he deserves congratulations for the design and execution of a novel marketing campaign.
But through his blog and tweets he also demonstrated an excellent understanding of what buyers are looking for. He highlighted in detail through words and images the array of nearby amenities such as the local parks, coffee shops, bars, restaurants and swimming pool. He also sought to create a strong attachment between prospective buyers and the house by posting beautiful and intimate pictures of the garden, including the veggie patch. It could have come across as schlock, but in his hands it was authentic and heartfelt.
There are lessons – and challenges – here for a real estate industry that often struggles to say anything fresh about the properties it is marketing. Too often, property advertisements are cramped and their descriptions full of clichÃ©s. Competition, a tough market and high advertising costs have made property marketing increasingly a costly, high-volume, low-margin business. Will vendors pay even more for professional copy writers? Unlikely.
Also to Mr Opray’s credit, he hasn’t claimed that his agent, Hocking Stuart Northcote, had nothing to do with the success of the sale.
Notwithstanding the positive impact of the social media campaign, it’s worth dissecting some of the claims around how it made a difference. The assertion that the property sold 33% above the suburb’s median price is irrelevant. Unless the property was representative of Northcote’s median property, that point is meaningless.
The property sold $135,000 above the reserve – that’s around 15% above the quote price. It’s a great outcome, but not particularly remarkable for an inner city property; neither is 80 people turning up to watch. It was also positive that the house secured four bidders, but that is also not unusual. Realistically, those four bidders probably already knew that Northcote is a lovely suburb to live in and that good property like this is tightly held and in scarce supply.
I don’t mean to rain on Mr Opray’s parade, but I would be concerned if vendors attributed the strong result to social media alone and did not consider well-entrenched market factors – and traditional marketing techniques – as equally significant.
I suspect that it will be neither feasible nor effective for vendors around Australia to set up a suite of social media tools, in isolation, to sell houses. Firstly, such a job will be highly time-consuming. Mr Opray said he spent somewhere between 30 and 40 hours working on his campaign. Mr Opray clearly has the skills for this sort of role; most of us do not. There is a great risk that our efforts will look shoddy and amateurish, and actually hinder the sale campaign. And I suspect that hiring a social media specialist would be very expensive, unless this kind of marketing became utterly mainstream and replaced all print advertisements.
Even if that happens, one of the key reasons people engage a real estate agent is to have an expert negotiator on their team. Once vendors start injecting themselves back into the process, they risk dealing directly with buyers and risking their rational decision-making. There are countless examples of people being indiscreet on social media, so it is almost certain that some vendors using social media will give away personal or price-sensitive information. For example, if a vendor discloses their true minimum asking price online, it will give a prospective buyer the upper hand in negotiations. This could see the buyer secure the property for thousands of dollars less than the sum they would pay if the vendor had allowed an experienced negotiator to handle the process.
More generally, I expect the impact of social media campaigns would diminish rapidly if they were to become mainstream. After much fanfare and a honeymoon period, buyers will heavily discount edited show reels and story books about a suburb or property they may see on a blog.
The biggest mistake vendors could make would be to think they could sell a property for the highest possible price using only social media, and dispense with professional assistance altogether. I have been a tough critic of some estate agents from time to time, but I do know that securing an agent who is a top negotiator will give you the best chance of a selling a property for the highest price the market will bear.
Not only do the really good ones know a lot about the art of negotiation and the condition of the property market in their local area, but they understand all the nuances of how to orchestrate a sales campaign: when and how to sell; the volume and appropriate mix of print and internet advertising media to buy; and the use of photography, brochures and other content. Increasingly, social media is becoming a defining element of today’s zeitgeist but, for ultimate success, it’s unwise to rely on just one element of what will always be a multifaceted process.
- Should I invest for yield?
- What to buy with $800,000.
- Buying in flood-prone areas.
- My tenants have made an offer – should I take it?
Yield vs Growth
Australian residential property has experienced a dozen years or so of strong capital growth. But realistically, nothing can grow rapidly indefinitely. Do you think property is destined to be a low-growth asset and, if so, does investing for yield become a valid approach?
To consider your question more closely, let’s assume for argument’s sake that we are entering a period when the level of capital growth will be lower than we have become used to in recent times.
If this were the case, lower capital growth would see the number of property investors fall. This would lead to a reduced supply of rental properties in the market, which would precipitate higher rents, so higher percentage rental yields would eventuate by default.
But while overall market growth may be lower than in the past, for a year or two, there will always be quality assets that outperform the wider market, and that’s what investors must try to identify and buy. Just because capital growth is more modest in this scenario than in the past, don’t start looking for properties with high yields as you’ll end up with low-quality assets that will underperform (i.e. lose you money). Even if the capital growth you achieve is not what you saw in yesteryear, investing for capital growth is still the better strategy.
Between savings and borrowing capacity, I have $800,000 to invest in property and I’m wondering if I should invest the full amount. To do so will stretch me financially a little and I’ll have to forgo some of my social life until my earnings from work improve in a couple of years. Should I buy an $800,000 property or, say, a $600,000 property?
This is one where you really need to do your sums and stress test your cash flow against scenarios where interest rates go up by 150 basis points from today, or you lose your job for three months. You should only consider investing $800,000 if your finances can comfortably withstand these stresses.
More generally, you probably have three options: buy an $800,000 property, buy a $600,000 property or buy two $400,000 properties.
Each of the options above has its advantages. Spending $800,000 on one property will allow you to buy a gem of a two-bedroom house in inner city Sydney, Melbourne or Brisbane. By splitting the budget into two lots, you could buy two one-bedroom apartments, each in different parts of the same city or in different cities. This gives you some diversity, but unless you are very fortunate, you may find that a $400,000 budget requires you to make some compromises in asset selection, which is undesirable and certainly unnecessary in this softer market.
The happy medium may be to buy a $600,000 quality two-bedroom apartment in one of our major capital cities. You won’t need to make any investment compromises and you’ll sit comfortably within your budget. Ensure the apartment has allocated parking.
I’m thinking of buying an investment property in Brisbane. Other than avoiding all dwellings situated in valleys, how do I find out if a property is flood-prone?
In a perfect world, pre-sale documentation should include a certificate from the relevant council about flooding and some form of declaration.
However, it may be unwise to rely on this, according to Jason Hetherington of Brisbane-based Property Pursuit. Instead, prospective buyers in Queensland should contact their local council which can provide this information at no cost. You can also use the free service Near Map (www.nearmap.com) to view areas of Brisbane city prone to flooding.
My tenants have made a speculative offer to buy my investment property. It seems a reasonable offer and is a timely one as I had been weighing up whether it was time to sell. I like the idea of avoiding paying an estate agent’s fee. Should I proceed?
If the property is in a rural area and you think there aren’t a lot of buyers around, it might be worth negotiating with the tenants. But more generally, I’ve heard and seen this situation unfold countless times and rarely has the offer been anywhere near the price achieved through engaging the services of a good selling agent. It is almost certain that the agent will more than earn their fee if they can secure a selling price of $20,000 or more than you could for the property yourself – which isn’t a particularly high bar for an expert to reach.
Also consider whether you really do want to sell. How has the property performed since you bought it? Does it have the characteristics that will see it perform in the future? If so, do you want to forgo the future benefit of continued capital growth and equity build-up which will give you more financial independence as time goes on? You may want to seek independent advice to evaluate the property’s value and growth prospects so you can make a considered decision, rather than responding to a speculative offer.
Note: We make every attempt to provide answers to readers’ questions, however, answers are of a general nature only. Subscribers should seek independent professional advice for more in-depth information that is specific to their situation.
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