Are you thinking about selling your rental property sometime in the next year or two?
If the answer is yes, then you'll want to start preparing for the sale well in advance by following these essential home selling tips. Selling a rental isn't quite as straightforward as selling a regular home you live in.
There are a number of key tasks you need to take care of to ensure a smooth and profitable sale. One crucial dilemma many rental owners face is whether to sell the house or continue renting it out.
Regardless of which route you choose, proper preparation is key.
Selling a rental property that you've owned and managed for years is a big decision with lots of implications. You've got money tied up in the property, you need to handle tenant situations properly, there are tax considerations, and you want to maximize your sale profits.
The absolute best way to sell your rental seamlessly is to plan ahead and properly prepare your house for sale by checking tasks off your checklist methodically over the 12 months leading up to listing. Doing so will let you sell strategically, avoid costly hang-ups, and ultimately get the highest price possible.
To help make the process easier, I've put together this handy checklist that outlines 5 crucial things you need to do roughly 1 year out from listing your rental property for sale.
Let's dive in!
How to Sell Your Rental Property (The 1-Year Countdown Checklist)
1. Decide Whether to Sell with Tenants or Vacant
About a year from your target sale date, you need to determine if you will sell your rental with tenants still occupying it or vacant. There are pros and cons to each approach. Selling with tenants can provide consistent income right up until closing and make life easier for you.
However, it can turn some buyers off, and selling vacant allows you to make updates and repairs before listing. Weigh your specific situation carefully.
My two cents: Assuming this is a duplex or single family, selling vacant will garner a higher return as long as you are able to make it clean and little work for a new owner to takeover. Time and time again, investors will sell with tenants included and the tenants don’t like the sale process and either hurt the sale or find a way to cancel it in general.
Obviously, you’ll need to follow the law with whatever lease you have in place with the tenants, but if you can find a way to sell them vacant, you’ll bank more money in the end.
2. Start Getting Repair Quotes
No matter which route you take in number 1, you'll likely need to make some repairs and updates to get top dollar for your rental when you sell. Perhaps you need to replace old appliances, windows, flooring, the roof, or other components.
Get quotes from contractors for all likely repairs roughly a year out so you have cost estimates for your pre-sale budget. This is also a good time to consider which upgrades may pay off in a higher sale price.
My two cents: Do the hard work up front to make these rent ready as you list them for sale. Although real estate investors typically can see through the crap and will buy even the most run down property, you will not be garnering the highest sale price if you don’t tidy up before selling.
3. Research the Local Market
Just like selling any other type of property, timing is key when selling a rental. You need to get a solid grasp of where the market is headed in your area in the next 6-12 months. Are prices rising, flattening, or declining? What is the competition like from other rental properties being listed? How long are rental homes sitting on the market currently?
The earlier you start looking into these factors, the better positioned you'll be to list at an ideal time.
My two cents: You DON’T need to become an expert but you should have a grasp on what your competition is before you decide to sell. Meaning, what are other properties like your selling for and what amenities & updates do they have that yours does or doesn't have. Compare their sale price to what you think your property is worth. This will help you get a grasp on the level of renovations needed.
4. Get Your Finances in Order
There are a number of potential tax and financial implications when selling a rental property that you'll need to prepare for. Roughly a year out is a good time to start calculating your expected capital gains tax, hire an accountant to look at ways to reduce your taxes, get pre-approved for your next mortgage if buying again, and simply get your financial ducks in a row.
You'll want to consult with professionals on the best way to handle issues like your rental's depreciation and ways to potentially do a 1031 exchange.
My two cents: This can be a last minute burden that only can be shared from those who have experienced it. I, for example, sold two rentals in 2022, assuming I'd taken out the right amount of taxes, but when it came down to it, I was left with a hefty tax bill that I was not expecting. This could have all been avoided if I would have planned a little differently.
5. Find a Seasoned Real Estate Pro
Last but certainly not least, about a year out from listing your rental is the prime time to find a top real estate agent who specializes in investment properties and rental home sales. An experienced agent can guide you through all of the unique aspects of selling a rental instead of a regular home.
They can also provide invaluable insights on anything from accurately pricing your rental to marketing it properly to investors and other amenities that buyers desire in rental properties. Don't try to go it alone - a knowledgeable agent is worth their weight in gold.
You can also get more insights on how to find the best local real estate agent to help you sell your property (or your home) in this post.
It’s Time to Take an Action
By keeping this checklist for selling a house in mind and tackling these 5 key tasks early on, you'll vastly increase your odds of getting your rental property sold profitably and headache-free when you're ready to list it. Of course, there are many more details and nuances involved in the rental home selling process, which is where I can lend a hand.
As a seasoned real estate professional who has helped countless rental property owners in the area sell successfully, I’d love to be of service to you. I'd be happy to schedule a free, no-obligation consultation with you to explain all of the other tips and strategies you need to employ over the next 12 months before selling your rental.
Simply book a free consultation with me or send a message to our business email and let's get the process started on the right foot together!
Comentarios