While rental properties are considered an excellent investment, there may come a time when you wish to sell a particular property. You might be looking to upgrade your investment and need some capital. You may be moving out of the area and don’t want to deal with owning and managing a property too far away. Or you may simply be done with the property game.
Whatever your reason, correctly unloading a rental property can be tricky. You have to navigate sometimes-complicated tax rules, lease issues and manage the general wear-and-tear any rental property may experience.
Fortunately, if you plan and prepare, you can sell your rental property with minimal hassle for you, your tenants, and your realtor.
Selling a rental property will not allow you to claim the same generous tax breaks you’d receive if you were selling a home you’ve used as your primary residence.
The chances are high that your rental property has increased in value over the years, and because of this, you’ll be making some profit when you sell it off. This is your capital gain.
In cases when you’ve owned the rental property for one year or less, the profits will be considered short-term capital gains. These are taxed at the same rate as your income. Should you have owned the property for more than a year, the profit from the sale will be considered a long-term capital gain and be taxed at a lower rate.
Other things to remember:
You may wish to sell your rental property quickly and not be too concerned with existing repair issues. It’s within the realm of possibility that you might even find a buyer.
On the one hand, you’ll attract better, higher-paying buyers if you slow things down a bit and take a look at handling repairs and upgrades before listing your property. On the other hand, if you’re selling an empty property, restorations can take time, and the combined cost of repairs and the absence of rental income may not be worth it.
Other factors to consider:
Depending on how you want your rental property sale to go, the presence of tenants is going to be a factor.
In many cases, having good tenants could be a significant selling point as it shows the property is earning income and can be a viable investment opportunity for your buyer. When listing the property, be prepared to provide some information on the tenants, such as:
You may want to take care of any pre-existing issues before listing and perhaps work to get the tenants on your side. Offer incentives or rewards for establishing good rent payment history, taking care of the property, and being cooperative and helpful when it comes time to conduct showings.
Another option to consider would be encouraging tenants to vacate prior to the property being listed or made available for showings. This will require some good negotiation on your part and an understanding it may not be successful under the terms of their lease.
In most cases, lease agreements get transferred to the new owners with the sale, and they cannot change the terms of the lease until after the existing one expires. Depending on how good the tenants are, this can work for or against you when selling the rental property. In all cases, however, it’s always better for you to work from a position of reasonable accommodation.
If your tenants live on your rental property on a more short-term basis, you may have other options for serving notice to vacate. Again, check your state laws for more details.
While it’s possible to sell your rental property all on your own, you might do better by hiring a professional real estate management firm to help out. While they’ll take a commission, that commission will be significantly less than the more significant sale profit they can deliver.
Reach out to the experienced professionals at Henderson Properties when you’ve decided to sell your rental property. They can examine your situation and advise and guide you on making the most of your sale.