Selling a rental property – especially one that’s occupied by tenants – can pose some unique challenges. It’s not like selling a regular house that you live in or even one that’s vacant. As an income-producing property, there are certain things you have to consider before you transfer ownership to another person. Add to that the fact that tenants may be currently living at the property, and you’ve got to have a solid understanding of how this transaction will go, as well as a good plan for how to sell it. Use these tips to help sell your rental property faster.
- Talk to your tenants Start by having an open and honest discussion with your tenants. You need to get them in the loop on your plans to sell as soon as you can. This can be a stressful time for them, because they may be unsure of where they’ll end up once you sell, or how they’ll mesh with the new owner. Assure them that the lease they signed will still be valid until it expires (by law, tenants are allowed to stay per the terms of the lease even if a property is sold). You’ll also need to tell them that there will likely be people coming through for showings, inspections, etc. Let them know they’ll always get advance notice of this, so they won’t be completely unprepared.
- Showing the property When you’re showing a property for sale, you want it to look its absolute best. But when it’s an occupied rental property, you really don’t have any control over this situation. Your best bet for this is to offer incentives to your renters to keep the place in top shape for showings. This could include a cleaning service, gift cards, or even a discount in the rent. If you plan to host an open house at any point, it might be worth it to put them up in a hotel for a night or weekend. While it will cost a bit more for you to do these things, it will be worth it in the end knowing that the property is clean and will show well to buyers.
- Target select buyers Rental properties are unique in that you automatically have one potential buyer already lined up: your current tenant. If your renter is happy at the property, it might be worth it to talk to them about buying it, either through traditional methods or a rent-to-own process if that is feasible for you. Another group of buyers you’ll want to focus on is other investors. As an income-producing property, your property will likely appeal to other investors interested in adding to their own portfolio. You can tailor your marketing strategy to reach these folks and really play up the cashflowing aspect of the property.
- Have your numbers ready Chances are, some of your interested buyers will, in fact, be other investors. Be prepared to show them the financials of the property and what they can expect in terms of income and expenses if they were to buy it. You can do this with a pro forma that outlines all this information and will detail projected cashflow. The pro forma contains important info like net operating income, vacancy allowance, expenditures, and much more. Get this ready beforehand so you can be prepared when other investors start looking at your property.
- Work with the right people When you’re ready to sell a rental property, gathering the right team can make a huge difference for you. This means having a real estate agent who’s experienced in working with rental properties, a lender who works with investors, and a contractor who can supply quality, affordable work. As the seller, you may not need to worry quite so much about the lender, but it still doesn’t hurt to have this person in your back pocket, just in case a potential buyer doesn’t have a lender of their own. Bottom line: it pays to work with people who have an understanding of rental properties and buying and selling them.
Bonus tip: Don’t pour a bunch of money into expensive upgrades – they almost never pay off! Homeowner quality and rental quality are two different things, and what attracts a buyer who’s looking for their primary residence won’t be the same things that attract an investor. Don’t waste money on costly upgrades that won’t translate to rental dollars.