If you’ve recently listed a rental property for sale, you may have noticed the unique challenges that come with selling this type of property. Using this list, you can learn how to sell a rental property and find out some great techniques to maximize your success.
1. Figure Out the Right Price
The first step to successfully selling a rental property is figuring out how to price a property. Pricing can be a particularly important factor to consider when selling your investment property; high prices may deter buyers and leave your property on the market for months on end, while a low price may cause you to lose out on significant capital gains.
In order to avoid these scenarios, a comparative market analysis should be part of every real estate seller’s strategy. A CMA simply refers to an analysis of the prices at which similar properties have been sold in the same area in recent months. Doing this will allow you to price your rental property adequately for maximum return on investment while ensuring its not on the market for several months.
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2. Study Your Local Housing Market
Looking into the health of your local rental market will allow you to better understand the value your property has to a real estate investor. In fact, this can be one of your strongest selling points. If you can advertise a strong real estate market, a strong local employment market, and high occupancy rates in your area, real estate investors will be lining up for a chance to capitalize on your rental property’s huge potential. It may also be useful to have knowledge of your area’s available land and upcoming construction projects, thereby giving you an idea of future trends in your area’s real estate prices. Selling a rental property that also offers investors peace of mind definitely comes with a premium.
3. Maximize Your Property’s Rental Income
For prospective buyers of rental properties, the expected capital gains are one of the primary factors to be taken into account. Making improvements to your investment property will allow you to charge a higher monthly rent, which in turn will allow you to sell your rental property at a higher overall cost. This doesn’t necessarily mean major construction and rehabilitation work; there are countless ways in which you can add value to your property to make it more attractive to tenants, and therefore to real estate investors. The sale of residential rental property is highly dependant on your property’s appeal to tenants.
4. Minimize Your Property’s Expenses
Along the same lines, minimizing your monthly operating costs will make your rental property more attractive to potential buyers. To improve positive cash flow, you can take steps such as installing high-grade insulation and modern appliances, which will significantly reduce the operating costs of your property. Your higher overall cash flow can be hugely attractive to potential buyers.
5. Learn the Relevant Tax Laws
The taxes on the sale of a rental property are much greater than those for the sale of residential units. Within this context, everyone considering the sale of a rental property should know about Section 1030 of the US tax code.
Utilizing this tax code effectively allows you to sell your investment property, acquire a similar property, and defer paying capital gains taxes at the time of the exchange. This can have a huge financial impact when you’re selling a rental property in lieu of another. Being knowledgeable of this tax code can help you avoid a loss on the sale of a rental property or a negative return on investment.
6. List on Free Websites
Free listing websites can be a valuable resource when selling your rental property. These websites provide you with the opportunity to land on the screens of hundreds, if not thousands, of potential buyers. Selling a rental property has become a lot easier with the advent of such online services.
One of the most prominent service providers is Mashvisor. Listing on Mashvisor will place your listing in front of thousands of potential buyers, making it one of the most useful online services you should look into.
7. Stage Your Property
Properly staging your property is a crucial step when selling a rental property. Staging will make your rental property look like a more attractive place for tenants — and therefore, for real estate investors. Staged properties tend to sell more quickly (and for higher prices!) than unstaged properties, making this step a no-brainer to anyone selling a rental property.
8. Take Professional Photos
Once staged, it is highly recommended that you hire a professional photographer to embellish your online listing and other marketing materials with high-quality photos. While this step is often skipped by many individuals selling a rental property, the level of professionalism in marketing materials can have a huge impact on how quickly you find the right buyer.
9. Market Your Property
Once your property has been properly staged and photographed, the next step in selling a rental property is marketing the property. This goes beyond simply marketing on online listing services. There are countless resources available to you including your local rental publications, newspapers, or some old-fashioned signage in front of your investment property.
However, to truly be efficient with your marketing, you need to understand your target audience and go after them directly. Real estate investor marketing will be much more useful to you than mass media outlets, as you’ll be placing yourself directly in front of your target audience.
10. Consider the Timing of Your Sale
If you’ve owned your rental property for less than a year, you may want to consider postponing listing your rental property for sale. By holding onto a property for more than one year, you will avoid short-term capital gains. The money made from that sale, if owned for less than a year, will be tagged onto to your overall income and you’ll be taxed according to whichever tax bracket that places you.
Long-term capital gains — applicable to properties owned for longer than one year — will be taxed at 0%, 15% or 20% (contingent on your tax bracket). Thus knowing when to sell your rental property can make a difference of thousands of dollars.
Selling a rental property can be a hugely lucrative decision. By keeping in mind some of these tips, you can ensure that your property isn’t on the market for too long and guarantee that you get the maximum benefit from your decision.