Just as one follows specific procedures when buying a rental property, the same due diligence should be observed when putting out a rental property in the market. By getting you and the property ready, you will be able to sell the property quite quickly and make the most out of it. Here are some of the things you have to do before you can place your property in the market:
1. Paperwork: Expense and Income report
Getting your financial information ready before selling your rental property is essential. When you prepare an expense and income report, you and a potential buyer will have a better idea of the property’s value.
Alongside the expense and income report, you should include a report of all the income the property receives monthly or annually. This report could have the monthly rental payments by tenants and additional rent that you get from parking spaces and washer and dryers, and in some cases, if you have a cell phone tower or a billboard.
Don’t forget to include a report of the money you spend annually. Expenses include property taxes and insurance payments. If utilities are your responsibility, include water, sewer, electricity, gas and oil charges.
Realtors and investors will want to know the percentage for the maintenance. In most cases, the amount lies at 5% of the gross operating income. However, these costs are different depending on the property size, its age, costs incurred when repairing or replacing failing fixtures, windows, door locks, wobbly railings, roof leaks, plumbing leaks or cracked tiles.
• Vacancy Costs
Most Realtors will also include a vacancy factor. It varies based on property type, but it ranges between 5%-10% of the gross operating income. Vacancy costs comprise of the costs incurred when marketing the property such as ads costs and costs that result from holding the property such as insurance and taxes.
2. General Tips
• Notify tenants
When you decide to put out your property in the market, potential buyers will want to go into at least one of the rental units to have a view of the property. For this reason, establish how and when you will tell your tenants that you are selling the property. Based on the property size, you don’t have to show all the tenants that you are selling your property. Just notify the tenants in apartments you’d want prospective buyers to see.
In some cases, news of the sale of the property could cause fear among tenants. They may be worried that they may be displaced if it is sold. They also worry over new management. Some tenants might also take advantage of this situation to paint you in a bad light, so be wary of allowing interactions between tenants and prospective buyers.
• Fill vacancies
Before you sell the property, it’s best that you have a 100% occupancy in your rental units. However, if you have a vacancy, do not bypass the usual screening process to fill the vacancy quickly. In case the property doesn’t sell fast, you will have to stick with the tenant you placed in the vacant unit. You don’t want to have a tenant who may damage your property at such a crucial time. You’re better of having a vacant unit than to have one under a lousy tenant.
In order to better your chances of selling fast, you might hire the services of a Realtor so if you don’t already have one, interview various Realtors. If you are looking to have your property managed, look no further. At LAPMG, we offer property management services and leave you to other pursuits. Check us out here.