Most rental property owning landlords consider selling from time-to-time for various reasons. However, there is a trade-off for every decision in life and it is crucial to understand helpful options while being mindful of future finances.
IPS suggests answering five questions before moving forward in the selling process:
If you find that the market currently favors buyers, you would be wise to anticipate less of a net profit on your investment. A seller's market, however, could be advantageous if your rental is currently vacant. Tenant occupied properties can be trickier to unload as you will have to maneuver showings around your tenant's schedule. Unfortunately, many prospective buyers view tenants as a hassle and are more likely to forfeit the viewing of a great property if they know it is tenant occupied. They also understand that they might inherit certain wear and tear maintenance responsibilities and are often "scared off" rather than compelled to look beyond the tenant to the actual quality of the property. Also, take note that home shopping seems to be less popular in cooler months, so factor this into your decision making process, too.
Know the comparables in the neighborhoods and surrounding areas revolving around the property which you are thinking of selling. Learn the average selling prices for homes in that zip code, the average day homes rested on the market and what made one home sell faster than the next. Remember: the same house hunters that will view your property will statistically be viewing at least twenty additional properties as well. What will set yours apart from the rest? If you discover that the competition is high, it might be wise to wait it out until you known there is less inventory on the market from which to choose.
As an investor, you need to ask yourself if there are some simple updates, landscaping or cosmetic changes that could be made to increase a possible listing price for your rental. Would a few low-budget renos be prudent? How much could you lend to the overall appeal of the home? Minor adjustments such as fresh paint, brighter lighting and potted flowers can do wonders to attract buyers. Such changes create a sense of freshness, or newness and send a strong message to buyers that you, as the owner, have cared for the property. Suspicion of neglected repairs is reduced and worth is increased because you have positively affected the perception buyers have regarding your listing. As the saying goes, you only get one chance to make a first impression. Make it charming and memorable.
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As stated above, that first impression is everything! Buyers have been known to drive by properties prior to scheduling showings. If they see signs of wildlife in your front lawn, which is now a field, they are more likely to be turned off by your home rather than proceed with the scheduling of a showing. The same is true for the interior, which will be more difficult to make "show-ready" when it is occupied. You cannot make a tenant care about the tidiness of the property the way that you do.
The key is to apply the word "fresh" as you survey every nook and cranny of your property. Fresh paint, freshly cut grass, fresh mulch, fresh lighting, etc. all go a very long way in making your listing desirable and competitive. You are presenting a product to the market. It needs to be well packaged and of supreme quality.
There is a bottom line to every deal. How low are you willing to go? What are you willing to fix? What is set in stone? These questions will help to determine how quickly you would like to sell your rental. Write down the items you would be willing to address versus sacrifice. Perhaps the property needs new windows or some roof repair. Are you willing to build financial concessions into your selling price? Sit down with your experienced realtor and list the items in need of attention. Know which repairs will add to your net profit versus the ones which would best serve as concessions. Be smart about moving forward and do the homework!