Considering selling your income property and think it’s as easy to sell it as it was to manage it? There are a number of people out there who have gone through what you are about to and can offer tips and tricks to make the process easier and smoother — experts who are happy to share how and when to sell a rental property for a profit.
FitSmallBusiness’ Benilyn Formoso-Suralta gathered many veterans to comment on aspects of selling rentals and the first (and perhaps most surprising thing) they said was never to underestimate the power of a Facebook ad. “Facebook is great because you can reach everyone who lives in the area, and getting the word out will encourage them to schedule a showing,” says one Realtor, “You can even target by interests like ‘real estate.’ It’s no surprise 80% of Americans have privacy concerns about Facebook, but it’s quite effective for advertisers.”
While it may be easier to sell an owner-occupied home than sell one that is empty, the opposite is true when selling a rental. Realtor/attorney Bruce Ailion says, “Trying to sell the property when it is occupied or ‘as is’ costs thousands or tens of thousands of dollars.” He goes on to say that you eliminate 60% to 70% of the market trying to sell with a tenant in the property and what you’ll get are investors, wholesalers, and flippers who need a 10% to 20% margin, not a homebuyer.
Of course, overpricing is a dangerous path to take, since being competitive is key and most investors will be pretty knowledgeable of a location, know the market and can gauge pricing. Those who have sold multiple investment properties know that projecting rents too high and hiding expenses never works out in the long run. Due diligence usually wins out.
According to Gary Beasley, CEO of Roofstock, photos are the name of the game. “Hiring a professional photographer who specializes in real estate photography is always a good idea,” he says. “They will be able to showcase the interiors in the best possible way by highlighting the most appealing lifestyle aspects of the property. However, before you undertake photography, style each room and space of the property to appeal to your desired buyer. That is, without even having to visit the home, let the images sell the property by making the home immediately relatable with furnishings and decor.”
Choosing from among the agents who brought you an occasional renter doesn’t mean one of them is the logical person with whom to list your property. Veteran Realtors who are property management-savvy can offer recommendations of easy upgrades that can increase revenue, such as staging, adding a hot tub, or bringing the unit up to date. Those with heavy property management experience know the rental market and usually come with a list of potential investment buyers they can tap into.
Preparation is vital for selling the property. Gather your financial data (budget, income, and expenses) and make sure they are available at a moment’s notice. Don’t forget the unit’s maintenance history as well. A survey of the utilities and the unit’s insurance status, a list of C.C. & Rs, plus a run-down on the health of the HOA (if any) are all great ideas.
When it comes to improving the property before listing it, Realtor Jason Reed says, “Understand the difference between homeowner quality and rental quality. Most real estate investors won’t need the extra improvements you might consider to sell a home. A rental property should be clean and relatively up to date, but fancier touches like granite countertops or new wood floors are unlikely to provide any kind of return on investment when you sell.”
Be sure to take yourself out of the equation for a moment, put the shoe on the other foot, and view your property as an investor would. What type of return can they generate? Do you have evidence of all the rental payments are being made by the tenant? Make them available, but be sure to delete any personal or sensitive information, such as bank account details, from copies of these documents. “Be ready to answer questions like, ‘have you increased the rent in the past and by how much?’ or ‘how much do you spend on maintenance each year?’ or ‘do you use an agent to manage your property and what do they charge?’” advises Vesta Property’s Russell Gould. And if asked about what works remains to be done on the property, fess up. “Zero is rarely a credible answer to all of these and remember that they’ll probably ask the tenant whether they think that any improvements are required, so be honest.”
Other tips include looking to your own sphere of influence to help sell your property, hosting regular open houses, and being up-front about your rental income to your next buyer by doing a 10-year pro forma and project what you expect rent growth to be.
Source: Fitsmallbusiness, TBWS