Best Practices for Selling Income Property for Top Dollar

At some point in your rental property investing endeavors, it will be time to sell. There are a variety of reasons why you may want or need to sell. For example, you'll need to sell if you no longer have the time or patience necessary to manage the property, if you need cash to invest in another venture, or if you are simply ready to cash out. Here are a few tips to keep in mind when selling rental property.

The first thing you need to do is to get the property in the best shape possible. Do any repairs and general maintenance that needs to be done, and make sure the property looks as nice as possible, before it is put on the market. Houses with unkempt lawns, missing or damaged appliances, or broken windows or doors will deliver a poor first impression that may be difficult to overcome.

You'll also want to research your local real estate market in order to set your price at a level that will be competitive with other properties in the area. Pricing the property too high will extend the time it will take to sell, and pricing it too low will leave money on the table. So do your research and find that sweet spot in your particular market.

You must also have your numbers in order. Obviously investors will want to analyze the property's income and expenses to make sure all the numbers work. They will need to verify that the rental income received is enough to take care of the mortgage, insurance, property taxes, and other property expenses. Since these are things that investors must absolutely know and understand, make sure you have a nice profit & loss spreadsheet pre-prepared, along with a file containing copies of all the property's invoices from the previous 12-24 months.

Similarly, make sure you have all of your tenant information at your fingertips. When people look at a rental property that has existing tenants, they will want to know the history of those tenants. How long have they been living in the property? Do they consistently pay their rent on time? Are they good tenants in general? Do they have a lease (which the new owner by law must honor)? The answers to these and similar questions are critical, so have all the leases, tenant correspondence, and other landlord-tenant documentation ready to show potential buyers. If you have good tenants, this can make a big difference in the perceived value of the property.

Finally, realize that you will have to negotiate whether you want to or not. You will need to be flexible when it comes to the terms of the sale. For example, instead of getting one lump sum for the property, consider doing seller financing. This will let the buyer pay you in installments over time, with interest. It can be a nice way to retain a post-sale income stream. It can also help sweeten the deal for potential buyers because they generally would not have to put up as much cash out-of-pocket as they would with a traditional bank mortgage.

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