Owning a rental property is often a hassle
From dealing with repairs to coping with bad tenants, the responsibilities of a landlord are many. But nothing is more stressful than selling rental property. As a landlord, you must consider many factors, such as taxes, legal guidelines, and tenants’ rights.
You’re not alone if you’re wondering how to sell a rental property in today’s market. According to the National Association of Realtors, over 4 million homes are on the market in 2023.
Although the prospect of an investment property sale can be daunting, there are many research-backed, time-tested tips you can take advantage of to ensure a great deal—and many alternative ways to sell your property.
Use this guide to learn how to sell your rental property in 2023—complete with tips and advice. Alternatively, consider working with cash home buyers in Texas to skip some steps and expedite the process.
Selling a Rental Property – Information and Advice
There are many reasons you want to sell your rental property. Perhaps you have inherited the property and want to dispose of it, or maybe you’re moving elsewhere and need to relocate.
Alternatively, you can liquidate your investment and capitalize on the next great property!
Whatever your reasons, there are several essential considerations you should keep in mind when contemplating facilitating a home sale.
First, consider your investment. A rental home is a source of cash flow that homeowners often rely on to pay the bills. Consider whether you are prepared to sacrifice your rental income.
Remember that you might face capital gains taxes if you sell a rental property, as unlike homeowners, real estate investors are subject to capital gains taxes.
You may face high short-term capital gains taxes if you have owned the house for under a year. If you’ve owned the property for longer than a year, you’ll face long-term capital gains taxes, which are generally lower.
You can defer capital gains taxes by using the 1031 exchange, which allows you to purchase a like-kind property with more income potential—and without being taxed on capital gains.
Additionally, you can defer capital gains taxes if you move into the home for over two years, allowing you to pass the IRS’ ownership and use tests.
Once done, you must determine how you plan to sell your home. While you can sell it the traditional way, you can also sell a house fast in Wichita Falls by using a cash home buyer.
Determine the state of the real estate market to determine which method to use. Although it is currently a seller’s market, many experts suggest it may soon become a buyer’s market.
Additionally, you’ll need to consider whether you plan to wait until your tenants’ lease agreement expires or if you want to make the sale immediately. Although selling an empty home may be more convenient, it can also cause further income loss if your home sits vacant for too long—and Realtor.com estimates that most homes spend an average of 87 days on the market.
Remember that your tenants are legally allowed to remain in the home until the termination of their lease agreement. Unless they agree to move or are subject to eviction, you cannot require them to leave. You can get your tenants to vacate the home with specific incentives, such as covering moving expenses.
If you have month-to-month tenants, you can ask them to move out by the end of the month, and they are required to do so.
Lastly, you’ll need to prepare your house for the sale. Evaluate your property to determine if there are any needed repairs, and hire a real estate agent who has experience working with real estate investors. They can help you stage the home and determine the sale price of your home.
Landlord Rights When Selling a Property
Landlords have several rights and duties when selling a home.
As a real estate investor, you must inform tenants of your desire to sell and give them time to vacate. Although it is your right to sell, you must remember that tenants can and must be a part of the process.
If you plan to move into the rental property as a primary residence, you must give tenants 63 days to vacate. If you plan to sell the property, you must give them 90 days. You must respect their lease agreement and keep in mind that fixed-term tenancies turn into periodic tenancies at the end of the fixed term.
You have a right to sell your property to another real estate investor. Still, you must provide the new owner with the necessary documentation and lease agreement to maintain your existing tenants if their lease is still active.
Lastly, you can collect rent until your tenants formally move out. If you have good tenants, this shouldn’t be a problem, but if you run into issues, there are options for landlords whose tenants aren’t paying rent.
Tenants’ Rights When Selling a Property
The fundamental rule to remember is that tenants have a right to stay until the end of their lease—unless you reach a mutual agreement that states otherwise. If your tenants have a fixed-term lease, you must wait until it expires. If they have a month-to-month lease, you must give them at least 30 days to vacate.
Tenants have a right to know about showings and require 24-48 hours to vacate the premises. However, they have a right to remain if they so wish. You must schedule appointments at reasonable times and give them notice to vacate the property.
Your renters have the right to occupy the property after it changes hands, and you must provide the new owner with the proper documentation to do so.
Tenants also have a right to refuse that you take photographs of their possessions. This protects their privacy.
In some cases, tenants have a right to a relocation fee, and they may file a suit in small claims court if they disagree with your decision.
Lastly, tenants have a right to their security deposit upon the termination of the lease, barring any damages.
Using a cash home buyer can help you avoid some of these issues. Consider taking a cash offer—we buy houses Arlington residents can be confident will be bought quickly and transparently.
Informing Tenants of Your Desire to Sell
The next step is letting your existing tenants know you plan to sell the home. Whether they are month-to-month or on a long-term lease, they need to know your plans. Telling them about your sale is a courtesy and a necessity since you might need to stage showings.
Determine whether they are open to moving early or if you need to wait until the lease agreement is terminated.
Next, you must determine how to conduct showings and open houses. You can use the following tips to optimize your showing experience:
- Hire a cleaner to visit the home regularly
- Ask a real estate agent to help you stage the house.
- Offer incentives to your renters to get them to vacate the property during the showing.
Offering Tenants the Opportunity to Buy
As a property owner, you might be tempted to sell your home at the highest purchase price possible.
However, there are several reasons it’s a good idea to offer your renters the opportunity to buy the property first.
The Tenant Opportunity to Purchase Act is a law that was first passed in Washington, DC. It determines that tenants have the first right of refusal, allowing them to purchase the property or match other offers from prospective buyers.
These laws exist in several states, so you should determine whether they affect you.
Ultimately, it’s always a good idea to involve your tenants in the selling process—and by allowing them to buy, you are advancing equity for renters everywhere.
What If My Tenants Don’t Want to Leave?
If your tenant refuses to leave the premises, there are specific strategies you can use.
First, approach your tenants with kindness and compassion. Be fair with them and try to understand their position.
Next, consider the lease agreement that you have in place. It will typically outline your options for vacating tenants.
If you have to, you can evict your tenants. You’ll need to provide a formal eviction notice if you plan to do so.
There are also things to do if the tenant damages your property that can protect you in the event of an unpleasant eviction experience.
Lastly, you can undertake a forceful eviction with the help of law enforcement and by following the proper legal recourses.
How to Sell a Rental Property with Tenants Attached
As a landlord, you can sell a tenant-occupied property. The existing lease is simply transferred to the new owner. You’ll need to provide the new owner with a copy of the leasing agreement and communicate with the tenants throughout the process.
This method has many advantages, namely that it’s more accessible and more attractive to property investors. Remember, however, that you’ll need the property in good condition, and your tenants must agree with your decision to facilitate the process.
Selling a rental property can take time and effort. From property taxes to tax bills, there are many considerations to consider.
However, with this guide, you can approach the situation with empathy and tact, ensuring the best experience for you and your tenants.