If you no longer want to deal with the challenges of managing tenants and rent issues, here’s how to sell your rental property fast and easy.
It’s a tough time for landlords. Eviction moratoriums have been put in place around the country. Demand for rentals might be declining in the wake of coronavirus shutdowns, as some renters aren’t eager to move amid a pandemic and a recession. Therefore, a lot of landlords are thinking about making a change — selling their rental property.
But selling a rental property can be challenging. Aside from how to handle current tenants, there’s the question of whether single-family rentals are going to fetch buyers’ attention on the open market. After all, there’s bound to be wear and tear, which likely will require small or big repairs.
Some selling options might be really unattractive. Listing your property with a real estate agent will lead to lots of prep work — not to mention the prospect of potential buyers regularly touring the property. Selling the property on your own is an even bigger hassle, since you’re solely responsible for preparing, marketing and showing the property.
This is where Sundae can help, enabling a landlord to skip the traditional process and sell fast, without having to promote the property or remodel. Here, we offer an overview of how to quickly go from rental property owner to rental property seller.
What to Do Before Selling
Ahead of selling your rental property, you must figure out:
- What will happen to your tenants.
- Whether you need to do any repairs or renovations.
- How marketable the property is.
- What the tax consequences will be.
1. How to deal with your tenant
So, you’ve decided to sell your single-family rental property. Congrats! But if the tenant is still living there, what should you do?
Some experts recommend waiting until the tenant’s lease expires before trying to sell your rental property. Why? For one thing, it can be uncomfortable for a potential buyer to look at a property while a tenant is still occupying it. Also, it can be tough to fix or renovate a lived-in property.
Working with an off-market cash buyer gets rid of those headaches, though. An off-market cash buyer will buy the property as is, meaning there’s no need to do repairs or renovations while someone is still living there.
If you’d like a tenant to vacate the property before their lease ends, you might extend a financial incentive for them to leave early. For instance, you could try offering “cash for keys.” This phrase means giving a tenant cash in hand equal to one month’s rent if the tenant vacates the property before the lease is up.
Keep in mind that you’ll need to review local and state laws related to giving proper notices to tenants about vacating your property. Some states, like California, give renters strict tenant rights that might make it harder for you to sell a property while they’re still living in it.
2. How to decide on repairs and renovations
Depending on the age of the structure, the amount of maintenance that’s been done over time and the behavior of your tenants, your rental property might be in tip-top shape or might need a lot of TLC.
If the property does need some presale work, you could be looking at spending thousands of dollars. For instance, what if the kitchen needs to be overhauled? A minor kitchen remodel costs an average of $23,452. And what if the air conditioner has seen better days? Installing a new one will set you back an average of $4,631, according to HomeGuide.com.
That’s not to mention possibly forking over thousands of dollars to spruce up the rental property by updating the landscaping, applying a fresh coat of interior paint, replacing the banged-up garage door, and tackling other improvement projects.
Working with Sundae lets you skip all the cost, labor, and hassle involved in making your property look picture perfect. How so? Sundae will help you sell your property in its current condition.
3. How to determine the property’s marketability
It’s one thing to decide to sell your rental property. It’s quite another thing to put it on the market.
Before the for-sale sign goes up, you must assess whether the property will sell for as much as you think it should. In most cases, this task falls to a real estate agent. The agent will explore the recent sale prices of nearby properties, also called comps, and look at the condition of the local home market. Then, the agent will work with you on setting an asking price. Be careful not to overprice. Overpricing can attach a stigma to your property that ends up costing you time and money.
Once that’s done, you’ve got to prepare the property to be staged, and prepare for potential buyers to stop by during open houses or one-off tours.
Teaming up with Sundae will allow you to avoid hiring a real estate agent, and to steer clear of staging, open houses, and tours.
4. How to approach the tax consequences
Before selling your rental property, it’s wise to consult your accountant or financial adviser about the tax implications.
You’ll wind up paying taxes on any profit (gain) you’ve earned on the sale. But if you’ve racked up a loss, you’ll likely qualify for a tax deduction.
For tax purposes, the profit or loss is calculated by subtracting your property’s adjusted basis on the date of sale from the final sale price.
The basis is not fixed. Rather, it changes over time to take into account the true value of your investment. That’s known as an adjusted basis.
With help from Nolo.com, here’s an example of how this works:
Viola bought a house and sold it six years later for $300,000. Her starting basis was $200,000. During the time she owned the rental property, she took $43,000 in depreciation deductions and paid $13,000 for a new roof (an improvement). Her depreciation deductions lowered the property’s basis, but the roof project increased it. Her basis at the time of the sale is $170,000. Viola computes the taxable gain on the rental property by subtracting her adjusted basis from the sales price: $300,000 – $170,000 = $130,000.
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