If you’ve been planning to sell your rental property, it pays to do research first since it differs from putting up your residential home for sale. You would need another set of strategies to advertise the sale of a rental unit.
Reading through this article can help you optimize the income proceeds from the sale and prevent typical tax issues. Continue reading to learn more about selling a rental property!
Steps to Consider When Selling a Rental Property
We will walk you through some steps for maximizing your property sale to obtain the best price and avoid unsold rental properties.
1. Price Your Property Accurately
You may think this step goes without saying, but a lot of property or house sellers can commit this mistake. Assigning the right property price requires sufficient knowledge. This is an essential step before advertising the sale of your investment property.
If you set the price higher than what’s reasonable, you may find the interest from prospective real estate investors remains low. You might notice your property sitting for a long time, which can require more effort to maintain.
But this does not mean that you should price your rental low, since that option can also result in a financial loss for you. As much as possible, you should maximize the earnings from your investment property.
To prevent these scenarios when selling your rental, you must perform a comparative market analysis.
This means you need to take the time to check the prices of similar properties in your vicinity before real estate investing. This method ensures that you will be able to set the right price for your investment property, which leads to an optimal investment return. You also won’t get stuck with a property that’s sitting way too long on the market.
2. Find the Time To Assess the Local Housing Market
When selling a rental property, carve out time to analyze the real estate market in your area to help you determine the state of your local housing market. You will obtain a better property valuation, so you can successfully market your properties to potential real estate investors.
Marketing the high rental demand in your area and the rising occupancy rates increases the interest of property investors. They will want to make the most of the opportunity to optimize their returns from the investment.
Another way to market your investment property well is by acquiring useful information on land and planned construction projects in your area. Learning this allows you to forecast the future market rate and value of the rental unit you’re selling.
Sharing this information reassures the property buyers that the potential earnings are projected to be high given the planned projects in the area. They can make up their minds quicker and will avoid the buyer’s remorse from the rental property purchase.
3. Do Your Best To Optimize the Rental Property Income
Since this property won't be the primary residence of the real estate investor who purchases it, you should prioritize increasing the income they can get from the unit.
You will want to assure the buyers that they can expect to earn a solid income from the future tenants of the investment property. As a property seller, consider performing property upgrades that create an opportunity for the new property owner to collect a higher rental income from potential tenants.
If you can show that the rental charge can be higher, then the property can also be sold at a better price. Remember that renovating the rental space will not automatically translate to steep costs. You have the option of choosing minor updates that add value but won’t require huge expenses and vast efforts.
Property improvements can be done by enhancing the property’s curb appeal, replacing the kitchen and bathroom fixtures, painting the property exterior, or adding more storage areas. Doing this leads to more interest from tenants and prospective investment property buyers.
The sale of your rental property will be quicker if your unit attracts plenty of potential tenants, providing real estate capitalists with peace of mind in terms of the solid income they will be able to generate.
4. Keep Property Costs Low
To draw more interest from potential buyers of the rental property, keeping the property costs down and the cost of operation minimal is recommended. Focus on maintaining a solid income with limited costs and you will receive more inquiries from prospective investors.
When performing property upgrades, you can change the appliances to become more energy-efficient and change lighting fixtures. Both updates are reasonably priced and will result in a better living experience for the renters and existing tenants.
5. Brush Up on Your Knowledge of the Local Tax Laws
Rental property sale taxes are often higher than those collected from the sale of a residential unit. It is best to familiarize yourself with Section 1031 of the US tax code to benefit from it since taxes code prevents huge losses and negative investment returns.
We recommend consulting a professional accountant to help you manage the rental property selling and taxes.
6. Look for Free Websites for Your Property Listing
Your goal should be to reach a wide audience quickly. Rental listing websites can help you connect with potential real estate buyers. Free and popular websites can maximize views and make it easy to market the rental property.
7. Plan to Effectively Stage Your Property
To sell a rental property, conducting property staging is essential since it provides a mental image to potential tenants about their expected residential experience.
You want the investor to know that the rental space you are selling will attract the interest of potential tenants. This leads to investors making an optimal income and enjoying the returns from the purchased real estate.
8. Understand Capital Gains Tax
Capital gains tax is a tax imposed on the profit realized from the sale of a capital asset, such as real estate. The tax is calculated based on the difference between the sale price of the asset and its original purchase price. Generally, assets held for more than a year are subject to long-term capital gains taxes, which are typically lower than short-term rates. Understanding and planning for capital gains tax is crucial for effective financial management.
Bottom line
Successfully selling your rental property requires doing a market analysis, strategic advertising, assigning the right selling price, and showing prospective buyers that your property is attractive to future tenants to solidify their income and earn them quick returns from the investment. By following the tips outlined above, you can avoid property losses.
For further guidance and a trustworthy partner, contact Rockbridge Real Estate to get in touch with a real estate agent. Your dedicated real estate agent will make sure you make the most out of your sale.