You may not know this, but selling your real estate rental investment can be a fast endeavor. With the right information, you can close a successful rental estate property deal within no time. Of course, there’s a procedure you need to follow and some crucial matters you need to take care of first.
What are these matters? How do you find the right buyers for your rental real estate properties? In this post, we’ll take you through a step-by-step guide on selling rental properties and how to do it successfully.
Vacate the Property and Do Repairs
Selling rental properties, while still occupied, can be a never-ending nightmare. It’ll cost you thousands of dollars, and too much trouble so ask any tenants to move out first. You have no idea what the buyer wants to do with the property and whether they’d want it occupied, and this is something you don’t want to leave to chance.
If you must, then you can wait until the lease expires. This way, showing off the rental to potential buyers will be much easier and closing deals much faster. It makes it easier to do repairs and repainting if you deem it necessary. Painting and repairing the property makes it more appealing to potential buyers, so it’s always a good idea to do it.
Still, you need to understand that having a vacant property means you’ll still pay for the mortgage, utilities, taxes, and insurance until you close a deal. Consider the upkeep and security of the rental while it’s vacant as well.
Figure out the Right Price
This is a significant aspect of selling rental properties as you need to be both realistic and competitive. Overpricing rental properties, or any property for that matter, only discourages some serious buyers and delays the sale. This could leave the property in the markets for months.
Of course, you can’t offer a low price either as you would lose significant capital gains, so you need to learn how to price a property right. You can also carry out a comparative market analysis, which will allow you to price the rental property appropriately.
Gather Any Related Documents and Information
Before putting rental real estate properties up for sale, you need several documents, one of them being the income and expense report. Get the statements from the previous year including utility bills, maintenance costs, insurance statements, rent payments, property taxes, mortgage payments, etcetera.
It’s also advisable to add a list of all the improvements you have made to the property. For instance, you may have installed a new roof. Beyond that, ensure you have no open permits on the investment real estate property.
Forego Fancy Improvements
Selling rental properties and residential properties are not the same. There is a considerable difference between homeowner quality and rental quality and you don’t need to make fancy improvements when selling rental properties.
If there’s something you should ensure is that the property is clean and up to date. Wooden floors or granite countertops are unlikely to provide you with any return on investment.
Prepare the Accounting
Your accounting should be in order before selling investment real estate rental properties. You may hire a professional accountant or use an accounting system to ensure the income and expenses spreadsheets are seamless.
The thing is, any potential real estate investor looking to purchase rental properties will want to weigh the risks and returns before closing the deal. When you offer them accounting in order, you’ll show them what the challenges are, what the risks are, and what potential returns they are looking at, helping them make an informed decision.
Be on an Investor Mindset
Investors are more interested in what they’ll gain from the property and not whether it’s aesthetically appealing. An investor will ask you for the rental agreements and proof of rental payments from tenants.
They’ll want to know whether you have increased the rent recently and by how much. They may also ask whether you use an agent to manage the property so be open-minded to answer these questions.
Ensure Buyers Have Proper Financing
You’ll encounter beginners in the real estate industry who may not fully understand the workings of rental properties.
Most investment property loans may require as much as 25% down payment. To save time, ensure that the potential buyers you spend most of your time on actually have the right finances in place to purchase the property.
Consider a 1031 Exchange
If you have the intention of reinvesting the proceeds into another property, you may want to consider the 1031 exchange.
This will make the process easier and allows you to defer capital gains tax. You need to reinvest that money into a similar property of either equal or greater value within a given time.
Learn About the Tax Laws
It’s vital for you to understand the tax laws of selling a rental property, especially if the idea of paying a huge portion of the proceeds as taxes is not appealing.
With this information, you can follow the smartest route you have. Calculating taxes involves the value of the land, the value of the property, and the depreciation. You can ask your accountant to help with this.
Marketing the Property
There is so much that goes into marketing a property, and you can decide which methods are most effective for you. To begin with, you need to hire a professional photographer to take excellent shots of the property. This is what you’ll use on your online listings.
Consider staging the property, which will expedite the sale, and start listing the property online. You can list your property on Facebook or free websites as well. Alternatively, you could hire a real estate agent to help out with all this and save you all the trouble.
Selling Rental Properties: Bottom Line
Selling rental properties doesn’t have to be hard, but you need to have all your cards right to close a successful deal. Keep these tips in mind while selling your investment real estate property so you can find the right buyers, and fast.
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