Owning a rental property can be an excellent long-term investment.
With the right tenants and a responsible approach to property management, your endeavors as a landlord can be a solid and reliable source of income.
However, there may come a time that you decide to move on from the rental market. This could be because of the tax implications of owning more than one house, or perhaps you want to invest in a more ambitious portfolio.
Whatever the reason, you need to make careful arrangements to introduce this property to the market.
Not all landlords are fully versed in how to go about this correctly, though. There’s more that goes into preparing a rental property to sell than simply advertising it on the market.
The legal, ethical, and commercial preparations that you make go further than making sure you get the best price for your house. They also help you avoid mistakes that impact your bank balance and your reputation.
So what’s the best route forward? We’re going to take a moment to review a few of the primary actions and considerations you have to take to have a successful and positive experience.
Handling Current Tenants
Before you can put your property on the market, you must take a responsible approach to your current tenants.
While you certainly need to have your own interests in mind, it’s important to approach the matter with both legal prudence and some empathy. Remember that your tenants may have made your property their home for several years, and your decision to sell could cause emotional and practical disruption in their lives.
If you take an understanding tack, you can make the situation more positive for everyone involved.
This begins with some attention to the notice period you give them. There are certainly legal mandates you must apply here. Indeed, as a result of the COVID-19 pandemic, the Centers for Disease Control (CDC) has extended its moratorium on evictions until June 30, 2021.
As this has already been extended a few times, it’s vital you regularly check with the CDC for the current status on this issue. These extreme circumstances aside, the statutory notice period can vary both from state to state but also by the terms outlined in your rental contract.
Most states require at least 30 days, but if you’re uncertain, you should consult a lawyer. However, it can be useful to send a letter or talk to the tenant well in advance of the official notice being issued.
You don’t have to explain your reasons for selling, but let them know that you understand moving house can be difficult, and you want to give them advance warning so that everyone has the time and space to adjust.
Unfortunately, there are going to be times when the behavior of your tenants is not ideal, and there is the possibility that they might even use eviction as a reason to cause damage to the property.
It is still important to give proper notice, but also use it as an opportunity to reiterate the tenant’s responsibilities before they leave.
Provide them with an inventory and give space for them to let you know about aspects of disrepair. Following the correct procedures here can help you to prepare for any reparations you need to do after tenants move out and before sales viewings start.
It also ensures you’re acting correctly and legally should you need to recoup any costs from the tenant either through an itemized bill or small claims court.
Assessing the Market
Part of preparing your property to sell should include gaining an understanding of the current real estate market.
There are often fluctuations, and various factors can contribute to valuations — everything from style to geographical location can determine whether it is the right time to sell, and this can change with the trends in a matter of months.
Therefore, if you have the luxury of doing so and don’t just need a quick sale, it’s certainly in your best interest to start reviewing the markets well in advance of your intention to sell.
On the most basic level, one of the things you need to take into account is seasonal demand. In general, you’ll find that spring and summer are seasons of increased demand and tend to result in your ability to get a higher price for your property.
However, it’s important not to take this for granted, and study the market for your particular location. For instance, does your city have an industrial presence where you tend to get an influx of new workers looking for homes at other times of the year?
Aside from the time of year, it can also be wise to consider other aspects that influence the housing market and how these are reflected in your property.
Among the most important of these can be the demographic. Speak to local real estate agents to understand what the primary demographics for buyers in your area are.
What Baby Boomers are looking for in homes is not necessarily the same as Millennials, and their available budgets may well also be different. This can help to influence any pre-viewing adjustments you make to your property to make it more attractive, and even which realtor you use to take care of the advertising and sale.
Most property owners will have prepared the home for the rental market, putting in place elements that attract tenants. However, the amenities you put in place for rental may not necessarily be the same as those that might be appealing to buyers. As such, to sell your home for the maximum profit, you might need to make some savvy upgrades.
Unless there is serious damage to your property, a full renovation is rarely necessary and can eat into your potential profits. Rather, it can be smarter to make an inspection of the building and take note of small changes you can make to add value to the property.
Some of the aspects that can boost profits here are surprisingly simple. A new front door and garage door can refresh the look of the house, while a few new bathroom fixtures give the buyer the impression that there’s less they’ll have to upgrade when they move in.
Even replacing a chain-link fence with one of natural wood can positively shift the sale price.
Preparing your property for sale is not always a complex process, but taking some prudent steps can bolster the chances of a positive experience.
Take a responsible, empathetic approach to your current tenants, and make time to review the current market to make sure you’re hitting it at the right time.
With a few small but smart upgrades, you can enhance the value of your property, too.
Dan Matthews is a freelance writer with a penchant for financial wisdom and solid research. You can find him on Twitter @danielmatthews0 and LinkedIn.
Josh founded Money Buffalo in 2015 to help people get out of debt and make smart financial decisions. He is currently a full-time personal finance writer with work featured in Forbes Advisor, Fox Business, and Credible.