5 Essential Items to Consider Before You Sell Your Rental

by | BiggerPockets.com

There comes a time for every real estate investor when you consider selling an investment property. Maybe your priorities shifted and you’re turning your attention to a different market or type of investment property. Maybe an unforeseen turn in circumstances leads to a need to sell your property. Maybe this particular property just isn’t working out for you. Whatever your reason, you either need or want to sell!

But wait—is that really the best option for you and your financial future right now? No matter what the circumstances are or reasons for your need to sell, taking a moment to consider all of your options and the entire situation may prove very beneficial.

When you’re tired and frustrated with a property and just want it gone, it can be tempting to just do whatever it takes to get rid of it. And in the process, you end up losing out on profits.

Instead of scrambling to rid yourself of an unwanted property, pause and weigh these five vital considerations first. It is critical that you take a pause before making a move!

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5 Essential Items to Consider Before You Sell Your Rental

1. Is the market in my favor?

There are two major factors that can play into this. One is the overall seller versus buyer’s market. Which are you in right now? If you’re in a buyer’s market, it might be a harder and longer road for less payout than you were hoping for. It’s also something that you can’t really control—if you can’t afford to wait it out for whatever reason, you can’t. And that’s fine! Just remember to recognize it and plan accordingly.

If you’re in a seller’s market but are trying to sell a property that is occupied by a resident, then you may have a harder time getting the highest price and best value for your property. Regardless of how well your property has been managed, there will be costs incurred by the new owner when they buy the property. There could even be deferred maintenance issues that have to be addressed. These are issues that you will have to face as a seller if you need to move the property quickly.

Related: Here’s Who You Need to Enlist In Order To Sell a Property FAST

The other consideration is season. Certain seasons are just better for home buying than others. It’s easier to get good curb appeal in spring and summer rather than winter.

Home buying is just bigger in the warmer months. Take advantage of that, and avoid putting your home on the market in the dead of winter unless you absolutely have to. That’s when you should be looking to buy, not sell.

2. What does the competition look like?

Whether you’re in a heated market or not, your competition matters! Don’t neglect to do your homework if you’re thinking about selling (or buying) an investment property. What are comparable area homes listed for? What did they sell for? What edge did they have over your property, if any? Don’t waste your time trying to compare your property with a newly renovated, retail-priced property either. That is where many investors create false expectations by convincing themselves (or being convinced by others) that their properties have greater value.  

If you can find properties in the same condition (meaning occupied if yours is occupied or between residents if your property is between residents, etc.) in your area that have sold or are listed, those are the comparable sales you are looking for or the competition you want to keep an eye on.

Consider all of these factors! Look at the homes that will be on the market while yours is. The same shoppers that are looking at your property will likely be looking at those, too. If you know what’s out there, you can better know how to properly price your property and what the appeal of other area properties are—so you can gain a competitive edge.

3. Where can I increase my value before I sell?

There’s no harm in looking to squeeze more value out of your investment before you let go of it. If it’s been a headache for you, you probably don’t want to throw a lot of money at it right before you sell. But there are so many small, low-cost updates and renovations that can really give you a solid return on your investment.

At the very least, they can lend you a lot of aesthetic appeal, something that can be very powerful when you show a home to buyers.

Consider things like paint, new fixtures, flooring updates, lighting, and the little details that make a big impact. You don’t have to go into a huge renovation if you don’t want to, and you may not be able to with residents occupying the home. If you are between residents and have simply had enough of the investment or need to move quickly, you may not be able to do any major renovations (though a kitchen or bathroom update can certain have a significant impact on your property value).

4. Is my curb appeal up to par?

There is so much power in having great curb appeal. It’s a lot easier for an investor to have a clean, clear home to present than for a traditional seller who may still have a home full of furniture. The same holds true for the investor who wants to sell their property while it’s occupied. It is difficult to spruce a property up while occupied.

Outside curb appeal, however, can happen whether a property is occupied or not. Trimming bushes and trees away from the roofline, windows, and doors can open up a property and make it inviting to a prospective buyer. A fresh coat of exterior paint and fixed up wear and tear issues will go far in enticing a new buyer. New house numbers, fresh shrubbery and mulch, and even a new mailbox are small gestures that make a property look more inviting.

If you are selling an investment property and hoping to attract a new investment buyer, this is a great way to show off your property. After all, a property that is well maintained and cared for will not only attract interested investors; it will also attract and keep residents.

Related: 4 Reasons Property Owners Might Choose to Sell via Seller Financing

5. Where am I willing to negotiate? Where am I not?

Everyone has a breaking point. You need to know where yours is before you get deep into negotiations. What offer is too low for you? What is absolutely off the table? Where are you will to work with the buyer? Be thinking about all of these things!

Weigh for yourself how much you want to be rid of your property so that you can move on to the next thing. You have opportunities waiting for you and something potentially holding you back. You may possibly be in a situation where you need to act quickly, which is an even better reason to take a breath early on and decide what your limits are at this point.

Only you can answer for yourself what cost is too high and what sacrifice is too much to get there. It’s just far, far better that you know the answer before the offers are on the table.

Selling an investment property, especially before you plan to sell it, can be difficult. While we own property, it could have a great deal of value. If it is not performing up to your expectations, it could lose its value. Either way, as investors, having to move quickly on an investment that we may have expected to be long-term can be a shock. Take your time and don’t rush. There are usually multiple options and they will all be there when you are ready and have your strategy ready.

Any tips you’d add?

Leave your comments below!

About Author

Chris Clothier

In 2005, Chris Clothier (G+) began working with passive real estate investors and has since helped more than 1,100 investors purchase over 3,400 investment properties in Memphis, Dallas and Houston through the Memphis Invest family of companies.

11 Comments

  1. Thomas Phelan

    Great article but most certainly one of the first five essential Items sould be …

    Does it make sense to do a 1031 Exchange?

    The only way to determine this is to talk to someone who has an understanding or better yet, an expertise
    on 1031 Exchanging. Most 1031 Exchange Companies will provide you all of the information you need for FREE.

    No need to go to a Lawyer or Accountant who will usually take notes on your situation then call a 1031 Exchange Company, get the answers, then charge you.

    Unfortunately the majority of Realtors have no clue about 1031 Exchanging and have nothing to offer before or after the property goes under contract.

    • Chris Clothier

      Thomas, Thanks for your comments. 1031 exchange rules and regulations, heck, even the fact that they exist, is probably one of the least known and understood options for investors that want to sell properties, yet stay in the game.

      I appreciate your input and for pointing out that 1031 exchange companies should be consulted before you sell to see if there is an opportunity to take advantage.

      Best to you ~ Chris

  2. karen rittenhouse

    Hi Chris:
    #1, is the market in my favor? It’s such a seller’s market (best in our area since we stared in 2005), that we’re selling a lot of rentals when they become vacant. I give them a quick facelift, then put them on the market at full retail and we’ve had 6 in the past 6 weeks sell within 48 hours!

    Taking advantage because we know this seller’s season won’t last. And it’s been fun to swap out lower performing assets for higher.

    Real estate is an ever changing and evolving business and, as you point out, you must be aware of what’s going on to get the highest advantage from your asset.

    Agree whole heartily. Thanks for your post!

    • Chris Clothier

      That is great Karen. We’ve been looking to do the same thing, but our properties are also seeing rent appreciation not just price appreciation. So, we are opting for faster payoffs rather than selling at this time. We’ll see how the market continues to perform.

      Love your input and appreciate your sharing.

      Best, Chris

      • karen rittenhouse

        Totally agree, Chris. We’re using our current wholesale business to generate the cash to pay off the holds even faster. Even though we’re using this sellers market to sell the less exciting ones, we still hold over 100 rentals!

        There’s no business like real estate!

  3. Jen R.

    Great article! However, my #1 consideration when thinking of selling a property tends to be “what are the tax consequences?“, followed closely by “into what other investment(s) will I roll my profits when I sell?”

    • Chris Clothier

      Thanks for sharing Jen. Each situation is different, but if a property has been performing and I am looking to transition into something else, your advice is spot on. Always being aware and looking ahead is great advice.

      Best to you – Chris

  4. Loree Blough

    Be sure to monitor and KNOW YOUR COMPS! We sold three rental properties in2017 and 2 of the three went for far more than the realtor told us to list the house for. We investigated and increased our listing price (one property we listed for $50K more than the realtor suggested and it still sold for more than our listing price. We would have left $70K on the table if we followed the advise of our selling Realtor (and he was the local “expert” with hundreds of sales and years selling in the specific property location! List high, you can always reduce your price or accept a lower offer. Tough to go up in price without doing significant improvement to justify and if your realtor doesn’t like YOUR LISTING PRICE, you may want to ask a few different realtors. Don’t go nuts but if you know the comparable sales price of recent sales in your area, you should sell at equal or slightly higher if size, condition and curb appeal are exactly the same or better on your property!

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