Thought About Selling Your Rental Property? This Company Can Save You Thousands

There are many reasons to sell your rental property, but there are many costs to consider before you do. You know, buying a property costs money, but so does selling it. If you don’t do it right, you could cost yourself thousands of dollars in profit just to sell your home.

Before you sell your rental property, consider all the factors to keep the most money in your pocket and using Roofstock Marketplace to save you thousands of dollars on your cost.

4 Reasons You May Want To Sell Your Rental Property

First, let’s consider why you’d want to sell your rental property. There are many reasons, but here are the most common.

1. Rents Have Hit a Plateau
You may have invested in a hot area a few years ago, but all areas go through highs and lows. If your area is no longer on a ‘high,’ you may want to get out while you can. If the home appreciated, you could realize the profits while avoiding the stagnant rents and potential vacancies you may face as the area loses its appeal.

Slowing rents are often a sign of slowing growth too. If you want to make the most of your investment, you may want to get out while it’s still high. Selling your home quickly will allow you to invest in other areas, whether you change geographic areas or put your money in a completely different asset.

2. Excessive Vacancies
If you can’t keep the property occupied, it may be time to sell. The market may have moved from a rental to a homeownership area through the years. If you are coming up at a loss each year or even after a few months, you realize it’s not working. It may be time to sell.

A vacancy here or there isn’t an instant reason to sell, but if you consistently have trouble renting the home out, it may be time to cut your losses and invest elsewhere. Sometimes areas dry up as far as renting and are better off for first-time homebuyers to invest in their own home.

3. You’ve Changed Your Mind
Real estate investing is hard, and it’s not for everyone. If you try it and decide managing the property or even paying a company to manage it for you is too much, you may want out.

While real estate investments shouldn’t be too much trial and error, there is that period when you may wonder if it’s right for you. That’s okay. If you can hold off on selling the property for at least the first year, you’ll avoid short-term capital gains taxes, but if not, there are ways to sell it and avoid too much taxation.

Some people pull out of real estate and invest the money in the stock market or other investments. There’s no right or wrong; just make sure you watch your capital gains as they’ll affect your tax liability and your bottom line.

4. You Want to Level Up
If you bought a ‘starter’ home and want to level-up, you may need to sell your original investment property to free up the capital to buy another.

Many investors do this and use the ‘like-kind exchange’ tax benefit. In other words, you can avoid a tax liability on the home’s capital gains if you immediately (or within a few months) invest the money in another rental home. 

Suppose you earned a significant amount of equity. In that case, you can either tap into the equity with a cash-out refinance, keeping the home and using the money to buy other homes, or sell the home altogether and use the money on another property.

See also: Best Real Estate Investing Apps

5. You Need the Cash
Life happens, and sometimes you just need to sell your property, and that’s okay. Selling for what the home is worth is essential, though. You should keep as much of your profits as possible.

When you sell your home the traditional way, you could spend thousands of unnecessary dollars that you could have used for other purposes, especially if you’re in need of the cash. 

Selling Your Rental Property With Or Without Tenants

Selling a rental property creates different scenarios. If you have tenants, what do you do with them? If you don’t, you have less to consider. Here’s how both scenarios may play out.

Selling Your Investment Property With Tenants

You can sell your property with tenants - it’s not as overwhelming as it seems. Roofstock Marketplace makes this procedure simple. 

If you sell a property with an active lease and tenants in the home, you must consider some important factors.

Taking Care of the Tenants
First, consider your tenants’ needs. Let them know you’re selling the house, and they’ll have a new landlord, but also reassure them that their way of life won’t change. Their existing lease will stay in place, and they may not even have to show the home.

They may have to give an inspector and appraiser access during the listing process, so it’s important to let them know about this ahead of time.

Use your tenants’ knowledge to your advantage too. They live in the home, so they know better what the home needs. Ask about structural issues, maintenance problems, or any other ‘major’ areas of concern.

The type of tenants you have will determine your next steps. 

• Month-to-month tenants - Typically, month-to-month tenants move out before you sell the home, at least before closing day. But, if you want to keep your tenants in their home, you can sell the property with a month-to-month lease on Roofstock Marketplace.
• Lease tenants - If you have long-term lease tenants, you have two options. You can wait until the lease expires and sell traditionally or sell the property with a lease on Roofstock. Investors on Roofstock often look for homes already outfitted with tenants. 
• Sell to your tenants - Another option is to sell the property to your tenants. Even if you didn’t set up a lease-to-own agreement, you could give your tenants the first option to buy the home before you list it.

Taking Care of the Property
Next, you must consider the property. You’ll have a different audience than if you were selling to owner-occupied buyers. Investors don’t care as much about the home’s cosmetics as they do its structure and integrity.

In other words, they want to know the roof is in good condition, the foundation isn’t cracked, and the basement and crawl spaces don’t have mold or pest issues. Think of the ‘big’ issues that an investor would care about, just like you did when you bought the home.

Investors buying a home with tenants in it usually don’t see the inside of the house. They don’t care as much about the paint color or even the type of countertops. They are more concerned about the property’s value and the upkeep it will need immediately if they invest.

Investors have great success using Roofstock Marketplace to buy and sell homes with tenants in it. The marketplace brings together investors and sellers interested in buying or selling a home already outfitted with tenants with an active lease. 

Selling Your Investment Property Without Tenants

Sometimes it pays to wait until your tenant’s lease expires. In a market with falling rents or a lack of a rental market, you may want to wait it out.

Once your tenants are gone, you can market the house as an owner-occupied property or rental property - widening your market. 

Roofstock Marketplace is a great place to sell your property without tenants as it’s a marketplace for investors and often where they look first. If you have a home to sell without tenants, you may want to focus slightly more on the home’s cosmetics, but if you sell with Roofstock, you will save money on selling costs and be able to focus more on prepping the property to sell.

How To Save The Most Money Selling Your Rental Property

Selling a home can cost as much as 15% of the selling price, which may come as a shock to you because it sounds like more than the cost of buying a home.

Selling a home incurs many costs depending on how you sell it. If you sell with a real estate agent, for example, you’ll pay as much as 6% of the sales price. That’s $6,000 for every $100,000.

Other costs you may incur includes:

• Home repairs and maintenance - If you sell the home to owner-occupied buyers, you’ll likely be on the hook for many more repairs and renovations. Owner-occupied buyers want the home in perfect condition and often negotiate to get the items fixed or have a closing credit.
• Staging - Professional staging can cost $1,000 - $1,500 but helps you sell your home faster. Buyers don’t want to see your personal items in the home or clutter. A professional stager can stage the home, making it look how buyers in the area want.
• Closing costs - Sellers, like buyers, pay closing costs that could range from $5,000 - $10,000 depending on the area’s taxes and fees.

These costs take away from your profits. Instead of going the traditional route, you could sell your home on Roofstock Marketplace. 

Roofstock charges only 2.5% of the sales price to list and sell the home. Sellers don’t have to worry about any other costs except any local charges, including taxes or transfer fees the city or county charges.

This means sellers pay only $2,500 per $100,000 to list their home, and they have the benefit of possibly selling their home faster. When you don’t have to wait until a lease expires or to ask your month-to-month tenants to move, you can sell your home faster and for a much lower cost.

Other Considerations

One other major consideration when selling an investment property is the tax liability. At the very least, wait until you own the property for at least a year. If you sell a home for a profit that you held for less than a year, you’ll pay short-term capital gains, which is at a much higher rate than long-term capital gains.

If you want to avoid capital gains taxes, you could consider a ‘like-kind exchange’ when you sell a home but use the money to invest in another. The guidelines are tricky, so make sure you work closely with your tax advisor and/or accountant before deciding.

Bottom Line

To save the most money when selling your investment property, use Roofstock Marketplace to your advantage. You’ll have the largest audience, have higher chances of getting the price you want, and have the help you need to sell your investment home.
 

Read more about Roofstock: Roofstock Review

Photo by Tierra Mallorca on Unsplash