In today’s wild real estate market, properties are changing hands fast, and property values are still climbing almost everywhere nationwide.
If you’re a real estate investor looking to offload one of your rental properties in this seller’s market, we will give you some guidance on how to sell it in a smart, respectful way.
Reasons for Selling
There are several reasons it might be time to sell your rental property:
- You’re ready to trade up for a bigger property with more units.
- The property taxes have gotten too high and are cutting into your cash flow.
- You don’t like being a landlord anymore.
- You’re moving away and want to offload the property before you go.
- Rental income from your rental property isn’t enough and you can’t raise it any higher right now.
The list goes on and on. Whatever your reason, let’s discuss a few of the things rental property owners should keep in mind when going about selling rental property. These tips will help you avoid stress and sell your property quickly.
What Should I Do About My Current Renters?
If you’ve got tenants living in your rental, there are a few things to consider.
How Much Longer Is There Lease Term Agreement?
First, you will need to find out how much time is left on their lease agreement.
Depending on what state you’re located in, there are different rules to follow if the current tenant has a lease agreement versus if they are month-to-month.
Generally, you’ll have to sell the property to a buyer who is willing to continue the existing lease agreement. That doesn’t have to be the case, though.
Are Your Renters Willing to Move Out Early?
If you communicate openly, honestly, and respectfully, hopefully, your renters may agree to move out before the finalization of the sale.
Communication is key here. If you plan on asking them to leave before their lease agreement is up, you must empathize with your renters, and be as helpful to them as possible.
Give them plenty of notice that you’re planning to sell, and make it clear you understand the inconvenience.
It even helps to provide incentives for them to move out, like a discount on their rent or offering to pay for moving services.
Check the Laws in Your State
Make sure you understand you understand the rules when you go to approach your renters about selling the property. Your renters likely have protections against moving that you may be forced to abide by, greatly affecting your timeline for selling.
Good communication can often avoid struggling over when you can sell, but it’s always good to know where you and your tenants stand in the eyes of the law. It’s not what you do know, it’s often what you don’t know that bites you in the end.
So, before you do anything, check the laws and regulations in your state. If you’re an investor, it’s best to play by the rules. Housing laws can be very strict, and you don’t want to be on the other side of the law.
When Tenants Become a Problem
If you kindly ask your renters to leave, and they begin to pose a major problem for you, you may need to hire an eviction company.
Hopefully, it never comes to that, but sometimes it’s unavoidable. If you’re in Las Vegas and need assistance removing a difficult renter from your property, contact Rocket Eviction today. They are the Las Vegas evictions experts and can help you confidently deal with uncomfortable eviction situations.
How to Show Your Occupied Rental Property
Even if your renters agree to move before the time of sale, they’ll likely still reside in the home when you start showing the property to potential buyers.
This puts you in the middle of trying to show buyers the home and also appease the renters who will have to vacate the property every time there’s a prospective buyer.
Here are a few ways to successfully deal with both parties the showing process:
- Offer to buy your tenants dinner, sponsor a date night or family outing, or buy them event or movie tickets so they feel less inconvenienced by having to leave the house.
- If you hold an open house, advertise aggressively and host the open house on Saturday and Sunday in the same weekend to get as much traffic through the house as possible.
- Pay for your tenants to stay in a hotel for the weekend if you want them to vacate for your open house.
- The house will need to be clean and decluttered for showings. Offer to pay for a cleaning service and temporary storage unit for your tenants’ excess belongings. Be gentle about the storage unit though. You don’t want to imply to your tenants that you think they are untidy or are hoarders.
Find a Good Real Estate Agent
Another key to the successful sale of your rental property is to hire a good realtor. Not all real estate agents are alike, and they can make or break your transaction.
If you want to sell rental property at or above fair market value, you need to find a realtor who meets a few key criteria:
- They must have experience working with investors and investment property.
- There are a lot of moving parts in selling an investment property with renters. Your realtor must be a fast, open, and respectful communicator.
- They should have a wide network of home services at their disposal. If they seem like they’re always scrambling, they might not have a good system.
As an investor, you want your sale to be as quick and painless as possible. Having a quality realtor who understands investment sales will get you further faster. You want them to be a good deal facilitator, not another person to worry about.
Avoid Capital Gains Tax
If you’re worried about incurring capital gains taxes upon the sale of your rental property, consider doing a 1031 exchange.
Under the United States Internal Revenue Code 1031, investors can basically “trade-up” their lower value investment properties for bigger and better properties while delaying capital gains taxes.
Many real estate investors benefit from doing 1031 exchanges. They are a strategic way to keep rental property cash flow high and capital gains taxes at bay. It only works if you’re exchanging rental properties for other rental properties, though. You cannot sell your rental property and purchase your primary residence using a 1031 exchange.
So, if you’re looking to sell a rental property and you find a replacement property that can provide potentially higher rental income, you can try to avoid hefty capital gains taxes by doing a 1031 exchange.
To learn more, and to execute the sale of an investment property by employing this method, make sure you consult a tax professional first. They will be able to guide you properly.
If it’s time to sell your investment property, make sure you prepare yourself to work with your current renters before you sign any contracts.
Open communication with all parties is key. Make sure you approach your renters in plenty of time and show empathy when asking them to cut their lease short.
Offer incentives for moving assistance and during showings.
If you kindly and respectfully ask renters to leave, and you have the laws on your side but they still won’t go, employ the services of a reputable eviction company like Rocket Eviction instead of handling it yourself. No one wants it to come to that, but if it does, you want someone knowledgeable and experienced on your side.
Find a good realtor who has worked with investors in the past and has a wide network of home services they can rely on.