Seven Steps to Getting a Better Price for Your Rental Property
Whether you are ready to sell now, or want to position yourself to sell your rental property at some point in the future, here are seven steps you can take to get a better price for the property:
- Be ready to move quickly. Timing can be critical. In fact, timing might be the single most important consideration when you are thinking of selling. Real estate markets are constantly changing, as are the dynamics that drive prices. Getting a home on the market sooner rather than later might have more of an impact on the price than spending that $5,000 you are ready to spend on upgrades……..that will take 45 to 60 days to complete.
- Vacant is better…………a whole lot better. Tenant occupied properties, except under the rare circumstance where the tenant is totally on board and supportive, generally sell for less than vacant properties, and in some cases significantly less. How a property shows goes a long way to determining what a buyer will pay. If the interior is cluttered, if there are dishes in the sink, if the bathrooms are not clean, or if the home has an unpleasant odor, the buyer is less likely to get excited about it. Carrying the mortgage on a vacant property is less than perfect, but in the end, it will generally result in more money in your pocket.
- Play to the strengths of the property. Consider the features of the rental property you are thinking of selling, and then ask yourself if timing should be considered. If the property tends to be dark and cold, selling in mid-winter may not be the best choice. Conversely, if the back of the house faces west and the home tends to be uncomfortably hot on summer afternoons, selling in July or August may not be optimal. A property with a nice rear yard and/or a pool is going to sell better in the spring and summer, whereas a cozy home designed around a stunning fireplace is going to do better in the fall and winter. If your backyard is just too hot to enjoy during the summer months, a sale in the spring or fall would likely generate the best price.
- Start on landscaping early. Landscaping rehab takes time. Mother Nature will work with you to get a lawn green and in good shape, and she will help get trees, plants and shrubs looking good, but she needs a little time to work her magic. If you are thinking of selling, start working on the landscaping 60 to 90 days ahead of time. Consider bringing in a landscape maintenance company, if you don’t already provide that as part of your agreement with the tenant, three or four months ahead of when you expect to go on the market. A little planning and a relatively small investment, and landscaping can go from a liability to an asset when selling a rental property.
- Think maintenance, not repair. An ounce of prevention is better than a pound of cure. In the world of real estate, the sale process begins the day you buy a property. A well thought out maintenance program for a property will help eliminate big repair bills, and it will save you from a long ramp-up period preparing for a sale. A well maintained property will show better and sell for more every time. If you don’t have a property manager doing it for you, pay special attention to major systems like furnaces and A/C units, have the plumbing checked periodically for leaks that could lead to water damage, have gutters cleaned and verify the landscaping irrigation system is in fact irrigating.
- Stay neutral. Colors and styles matter when updating. If you are planning to sell your property, look at colors and designs that are likely to appeal to a broad range of buyers when painting and replacing flooring. You may love green, but it might take a little extra time, and a price reduction or two, to find a buyer who can fully appreciate green carpet and pastel yellow walls.
- Do the math on turnover costs. Putting a new tenant in a property costs money. When real estate prices are moving up and a property needs only minor work – like a carpet cleaning and a little painting touch-up – there is no compelling reason to strongly consider the option of selling before putting a new tenant in. On the other hand, if you are about to spend $3,000 to $5000 to get a property you don’t plan to own forever into very good condition for a new tenant, take a look at what a sale of the property might do for you. Because, the moment you move a tenant into the fully renovated property, most of the money you just spent walks out the door.