Renters spend about $485 billion on rent every year in the US.
Rental properties can be great investments. You can earn recurring income from tenants, and in most situations, properties gain value with time. Eventually, however, you might decide it’s time to sell – so how do you go about it?
In this guide, we’ll cover everything you need to know about selling a rental property. Keep reading for more.
Selling a rental property isn’t always easy. If you have a tenant, you’ll need to go through a process before you can sell. The only exception is if you have an early termination clause.
An ongoing lease means a tenant can’t simply be removed – they need to agree to it. As this makes things difficult for the tenant, they’ll likely need some convincing.
One of the easiest ways to do this is to negotiate a settlement. For this, you’ll typically offer to pay a part (or all) of their moving costs. They’ll then be more likely to agree to end their lease early, and you’ll be able to sell the property.
Your offer should be based on calculations of various fees, such as:
When combined, this can be quite a sizable amount, so you need to figure out how much you’re willing to offer and if it’s suitable.
This is the simplest option, but may not be ideal. Once the rental property lease agreement with your tenant has expired, you’ll be free to sell the property. The issue here is the length of the amount of time left on the lease.
This method requires the least effort and has the lowest costs, but will probably take the longest time. If you have several months left, and you want to sell quickly, this probably won’t be an ideal solution.
This option can save a lot of time and money if it works out. You might be able to find a buyer who’s happy to continue the lease with the current tenant. This won’t cause issues for the tenant, so things should go smoothly.
The downside here is that it can often take a lot of time and effort to find a buyer who’s interested. You’ll need to be able to show that it can be a great opportunity and you might be able to find the right buyer.
This can be a great option, but it’s also the least common method to use. This is only practical if the tenant is interested in buying the property, and they need to be in a financial position that makes it possible for them.
This can be beneficial for the tenant if they want to own a property as they won’t need to move. It also helps you as you won’t need to find a buyer.
Now that you know how to go about selling your rental property, you need to get prepared. There are several things you should do before you start advertising your property for sale.
This is an inspection carried out by a professional. They’ll take a look at your property and give you an estimated value so you know the kind of price you can expect. They’ll also highlight any repairs that you need to take care of before selling.
While this isn’t fully required, it’s a good idea to fix any issues before you have any viewings. Make sure all the rental property amenities are working properly and there are no major problems like roof leaks or electrical issues. Ensuring your property is in a good state will help you get a higher price and it will likely sell faster.
With the inspection completed and the repairs taken care of, you should have a good idea of the value of your property. If you want, you can ask for a bit more, but this may make it difficult to sell, so you could be waiting a while and might end up having to lower the price anyway.
If you’ve found a buyer that will continue the lease, you should be able to get a better rental property price. This is because they’ll be able to start collecting rent immediately which is a bonus for the buyer.
Whichever method you’re using, you need to make sure you’ve properly communicated this to your tenant. They need to know what’s happening, regardless of whether they will stay and have a new landlord, or if they’ll be moving out.
If they won’t be staying there, you’ll be showing the property to potential buyers, so you’ll need to organize suitable times to do this with the tenant. You’ll also need to discuss things like their security deposit and how the lease will transfer over if they’re staying with a new landlord.
Selling a rental property can be a long-winded process. Sometimes you may be able to use the method that best suits you, but for others, things can be more difficult.
In terms of the actual sale, finding a buyer can be one of the most difficult elements. You can speed things up significantly by going with First Choice Home Buyers. Provide us with some details through our website and we’ll be able to give you a quick cash offer for your property.
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