There are 50 million rental properties in the US with 41% of those belonging to independent landlords.
If you’ve got a rental property, we don’t need to tell you how much hard work it can be. Dealing with tenants is a full-time job on its own. When you throw in the maintenance required to hold a rental property’s value — rental properties go through an exceptional amount of wear and tear — the work involved often outweighs the reward.
Many landlords eventually decide they don’t want to deal with the work anymore. If this describes your situation, you may be wondering how to sell your rental property.
In today’s post, we’ll give you some tips for maximizing profit on a rental house sale. Believe it or not, you can still make good money on a residential home sale, so keep reading and we’ll talk you through the steps involved in doing so.
Understand Your Tax Liability
One of the tricky things about selling an investment property, such as a rental home, is the tax liability involved. These things can easily sneak up on you and throw a wrench in your profits if you’re not careful. If your tax liability is too great, it may not make financial sense to sell your rental property at this time.
The most likely scenario for rental property owners is that they’re liable for capital gains and depreciation recapture tax. If you’ve owned the property for less than a year, you’ll be liable for a lot of short-term capital gains tax.
Long-term capital gains tax liabilities apply to those who have owned their property for longer than a year. They’re usually lower than the short-term tax, but still something to think about.
Depreciation recapture taxes come into play when you’ve claimed depreciation deductions on your taxes as a landlord. When you make the sale, you’ll pay taxes on these deductions.
Know Who Your Buyers Are
Selling a property that’s been primarily used as a rental unit is a whole different animal than a normal single-family property. Even if your property has never been altered to accommodate more renters, the wear and tear and the possibility of existing renters make it a niche property for buyers.
For that reason, you should be specifically targeting a certain type of buyer. This is especially true if you’ve got a home that’s already split into multiple rental units or a multi-family dwelling.
Examples of your target buyers would be existing tenants who are interested in a rent-to-own arrangement, real estate investors, and cash buyers. Due to the nature of this type of transaction, it’s not always beneficial to use a real estate agent.
Most realtors are used to working in the traditional real estate market. They market single-family dwellings to traditional buyers, then take their commission after the sale goes through. Unique sales like these won’t necessarily appeal to their expertise.
Selling the property yourself can be daunting since you take on the marketing, showing, and negotiations. That said, it’s the best way to maximize your income from the sale.
Talk to Your Tenants
Your tenants can throw a wrench into your plans to sell your property if you’re not careful. Tenants rights are important and you’ll have to honor the lease agreement if they decide to hold you to it.
You can, however, try to work with the tenant to arrange a positive outcome for everyone. Depending on where you live, the lease is transferred to the new owner when the sale is complete. The only issue is that this can make it more difficult to find a buyer.
If you have a great tenant in your unit, you can use them as a selling point. If you’re selling because you’re tired of dealing with tenants, you’ll need a buyer who is okay with honoring the lease before doing what they want with the property.
Maintain Your Property
Regular maintenance is an important aspect of rental property management. If you’ve stayed on top of it, the property will be much easier to sell.
Before seeking out buyers, it’s a good idea to evaluate the property for repairs. As mentioned, rentals experience more wear and tear than other properties, so you may have leaky faucets, cracked windows, or mold that can hurt your sale price.
Going through and dealing with small repairs will help you find buyers. Anything major that needs to be done isn’t worth doing when you’re turning around and selling the property.
How to Sell Your Rental Property to a Cash Buyer
For most rental owners, the best possible transaction is going to be selling to a cash buyer. These types of investors will be any type of property in any condition, whether or not you have a tenant with a lease in place.
The process of selling to a cash buyer is easier than any other real estate transaction. For us at ibuyhomes.com, you simply fill out our secure online form to tell us more about your property and the reason for selling. Once we have the information we need, we’ll give you a no-obligation cash offer.
Accept the offer and you can turn over the keys at your earliest convenience. It’ll be important to inform your tenant of the transaction, but we’ve worked with countless landlords to arrange a positive outcome for their tenants.
The best part is that you don’t have to think about maintenance or repairs. Even rentals in poor condition are still valuable assets and you’ll be paid fair market value for your property.
Sell Your Rental Today
These are a few tips on how to sell your rental property in a way that maximizes your income. There’s a bit more red tape when it comes to selling a rental, but if you take some of these points into consideration, there’s no reason why you can’t make a significant profit on your investment.
If you want the easiest way out of your rental property, cash buyers are the way to go. At ibuyhomes.com, we’ve helped many rental property owners offload their rental properties for fair market value.
Contact us today or fill out our online form to get the transaction started.