I ask a lot of questions. I thank everyone for all the help. I’m still learning.
I have a client who wants to sell a rental property. There are tenants living in the property for the last 5 years.
House ARV: 83k
Client asking 68-75k
Renting for $700
I was wondering if rental properties usually sell for more than a regular fix and flip since there are tenants already living in them. What else should I know about rental properties. I’ve already asked for a copy of the lease. Tenants pay on time every time.
Also do I factor in cost for rehab?
You need to look at the condition of the house. Some people will live in a house that is falling apart. Sometimes they are the reason the house is falling apart.
Find out the normal things when comparing the value of the house to comparable houses that have sold, bedrooms, baths, square feet, age of roof, HVAC, plumbing, etc.
Then look at the tenants. Do they pay a rent that is average for the area or is it below market? Do they take care of the house and yard? Are they people you want to rent to. EG. for me I do not rent to violent felons.
Also factor in any rent control measures. Such as LA, CA one must pay a tenant certain amounts to have them leave at certain ages, disabilities or amount of time in the place. Ask for lots extra if you are taking on a tenant that requires a payout above $5k to make them move. Someday you will have to make that payout.
Factor in if rent control will not let you raise the rent as you want or if the rent is well under market.
Don't take someone's rent controlled pig with lipstick!
That said, the turn key properties sold as package deals to the stupid, do sell them above market. But if you are looking on your own, try to pay below market always!
@Denise James market value will determine what it will sell for regardless of whether there is a tenant or not. Appraisers use the comparative market approach on single family homes rather than the income approach.