May 2

Selling a Rental House: What You Need to Know

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Are you interested in selling a rental house? It’s still a great time to sell real estate, according to market trends. Selling prices are at historic highs, with over 86% of the market at a very low-low chance of declining.

There are tips to know before selling a house, however, and rentals are no exception. This article covers how to sell your rental property quickly and easily without sacrificing profits.

Know Your Tax Laws

When you sell property, the IRS determines if it qualifies as a residence or investment property. If you didn’t live in the house for a specific amount of time and rented it to tenants, it’s considered an investment property.

Investment properties are more subject to the capital gains tax. This means you pay taxes on a certain amount of the profit from selling your investment, similar to an income tax on your taxable income.

Capital gain taxes can take a hefty chunk from your profits. There are a few ways to mitigate this tax:

  • Convert property to a primary residence before selling
  • Use a 1031 exchange
  • Tax-loss harvesting (balancing gains against other investment losses)
  • Seller financing for paid-off properties
  • Leverage lower tax brackets

Some options may not be viable. If you can’t reduce your capital gains tax, you can usually at least offset it with tax-deductible home improvements.

Get all Your Paperwork in Order

Paperwork is always an applicable tip to sell real estate. Necessary documents include (but aren’t limited to):

  • Loan documents
  • Original sale contracts
  • Property deeds and titles
  • Insurance and tax records
  • Home improvements and add-ons
  • Maintenance records
  • Property surveys
  • Appliance warranties
  • Lease and rental agreements
  • Certificate(s) of Occupancy
  • HOA documents
  • Inspection and appraisal documents

Documents can take a few weeks or even months to get in order. If you sell a house to a cash buyer, it can be a faster process with less paperwork.

Don’t Leave Your Tenants Hanging

If you’re selling tenant-occupied property, you want to make sure your tenants aren’t caught by surprise. Moving is generally an expensive and disruptive process, particularly for families.

There are several ways you can make the sale easier on your tenants:

  • Work with their schedules for showings
  • Offer financial incentives for them to vacate
  • Help them find new rental property vacancies in the area
  • Sell the property to your tenant or a real estate investor

Selling a rental house to the tenant or another property investor means your tenant won’t have to vacate from the sale. Tenant occupancy can even be a selling-point perk for investors, who won’t have to scramble to find new tenants of their own.

Sell As-Is or Make Improvements

There are different strategies for selling a house as-is or maximizing it on the market. Consider all the pros and cons of each strategy before your sell.

As-is allows you to skip the cost of major cosmetic or repair improvements. However, your rental property’s market value may take a significant dip. You’ll also have to negotiate more with buyers.

Selling a market-ready home means you may have to shell out major money on repairs, upgrades, and improvements. You can generally recoup these costs back on the market, but sometimes your ROI doesn’t add back up.

Ultimately the real market will decide the best strategy for you. For example, a hot-selling market means buyers will snatch up properties quickly at their listed price, even if it needs some repair and cosmetic work.

Get the Most Value From Selling a Rental House

There are many steps to go through before selling a rental house, but a little preparation goes a long way. You can maximize your profits and lower your stress by preparing for taxes, paperwork, and tenant concerns. 

Are you looking to sell a house as fast, easy, and stress-free as possible? Our team is ready to give you cash for your real estate. Learn more about our 3-step process and how to get started today! 

Let's get started on your all-cash offer!

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