Our tenants just gave us notice on a property we’ve owned for almost three years. The original plan was to turn it into a rent to own but we weren’t able to find a good tenant buyer for it, so we just rented it out.
Our investment partners were mostly interested in doing this deal for the cashflow that a rent to own can generate so they have expressed a desire to get their capital back (see things that can suck about doing rent to own deals). When the tenants gave notice, we pulled market comps and brought our realtor in to see what homes were selling for this year in that area.
The current market is not ideal for selling as things are just starting to improve, but we feel comfortable that there is enough value in the property for our investment partners to exit and get their money out plus hopefully a little bit of additional profit. We won’t make much money when we sell, but cashing in on a giant profit is only one of the many reasons you will sell a rental property. There are other situations where selling really is the best option, even when you thought you would hold the property for the rest of your life or you’re not maximizing profit to exit right now. An investment partner that wants out can be one situation where you’ll sell.
Selling a property is a huge subject. Are you selling it yourself or hiring a realtor? Do you stage the property or do you save money and sell as is? What is the right price to list at? Is the current market at the right phase in the cycle to list the property or is it really better to wait it out with whatever options you have to do that?
I’m not going to get into all the considerations around selling, but here are a few quick and lower cost ideas to help you prepare a rental property for getting maximum possible value in a reasonably quick time frame.
My biggest piece of advice is that it is usually better to have the property vacant.
I know you don’t want to be out a few months of mortgage payments so it’s really tempting to list your property while you have tenants living in it, but it’s much harder to set up times to have the home toured when you have to give a tenant ample notice. In many cases the tenants will refuse because it clashes with their schedule. Why should your tenants bend over backwards to help you sell your property? They don’t benefit from the sale. In fact, it is a big inconvenience for them and they might have to move.
As much as you might think people can see past dirt and junk, very few people can. It’s the biggest goldmine for you as a buyer … you (hopefully) can see what a clean up and a little updating can do to a place. Few other buyers can. Homes look best empty or staged. You will get a much better price for your property if you stage it, or at the very least, have it empty and clean. Finally, you should prep your property for showings. To do that you want to have it clean, freshly painted, little things fixed like those closet doors that won’t close and that sink that always drips, and the curb appeal maximized. These are low cost things to do that can increase the appeal of the home by thousands of dollars. While it’s possible to do this while a tenant lives there, it’s more difficult. It’s also hard to ensure the tenant doesn’t just bang up the new paint job or mess up the freshly cleaned unit before anyone can see it.
Finally, many investors, like us, often do not want to inherit other people’s tenants so we’re going to ask for vacant possession if we can get it.
A little caveat on this advice: it only applies to homes with suites where your market of buyers is home owners and investors. If you’re selling a trip-plex or any multi-unit property where your ONLY buyer is going to be an investor, I would not want it to be vacant unless it really needs a lot of work. Even if it needs work, I would probably try to do a lot of the work while tenanted or wait until the worst units are vacant, complete the work required on those units and then begin advertising while simultaneously seeking new tenants. The investor will be looking for the place to be tenanted so they have income coming in from day one.
There are a lot of reasons to sell a property. It’s not always going to be the right time in your market to get the maximum value for your property so if you do decide it’s time to sell then you must be ready to do what you need to do to make the property as appealing as possible.
