How To Sell Investment Property Quickly

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You Have Better Ways To Generate Passive Income

How To Sell A Property Quickly in 3 Steps

Real estate investing can be a great way to generate a passive income stream. But REI isnt the only game in town and, as with most types of investing, diversification is key.

From dividends and bonds to CDs and REITs, there are multiple ways to establish a passive income flow. Of these, real estate investing isnt the easiest, as anyone whos been a landlord or owned rental properties can tell you.

In fact, Financial Samurais ranking of passive income sources notes that real estate investing comes in at the top of the list for the amount of activity required.

If you treat dealing with rental properties as just another day job, this may not matter so much.

But if you got into REI in hopes of generating a passive income stream thats truly, well, passive, the amount of work involved may make you rethink when you should sell your rental property.

Avoid Tax By Reinvesting

Real estate investors can avoid the capital gains tax if they reinvest in a similar investment . You can seek the support of a lawyer or your tax advisor to set up the sale, so that the gains made can be placed within an escrow account.

This means that the funds will be safely stored away from the taxman and be readily allocated to a new property purchase. You will then have a limit of 45 days to find a new property and six months to complete the transaction. To conduct this transaction successfully, the rule of thumb is to search for your next property before you sell your existing rental property.

This process is further explained in the Internal Revenue Code Section 1031.

A Simple Guide To Selling Rental Property Without Paying Taxes

There comes a point in nearly every real estate investor’s journey where they need to sell a rental property.

You might want the cash, a new property , or to get out of the landlord business altogether.

Before we dive into the options you have to sell a rental property, lets first touch on how you can avoid paying a major tax bill on the profits made from your sale.

Key takeaways

  • A 1031 exchange is one common way that investors defer paying taxes when they sell a rental property.
  • Options for selling a rental property include waiting for the tenant’s lease to expire, paying the tenant to vacate, selling to your tenant, selling your property with an active lease, or listing on Roofstock’s marketplace.
  • Roofstock’s marketplace allows sellers to market their properties to an international network of buyers who are often looking for tenant-occupied properties.

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Use An Online Real Estate Investing Platform

If youre familiar with companies such as Prosper and LendingClub which connect borrowers to investors willing to lend them money for various personal needs, such as a wedding or home renovation youll understand online real estate investing.

These platforms connect real estate developers to investors who want to finance projects, either through debt or equity. Investors hope to receive monthly or quarterly distributions in exchange for taking on a significant amount of risk and paying a fee to the platform. Like many real estate investments, these are speculative and illiquid you cant easily unload them the way you can trade a stock.

The rub is that you may need money to make money. Many of these platforms are open only to accredited investors, defined by the Securities and Exchange Commission as people who’ve earned income of more than $200,000 in each of the last two years or have a net worth of $1 million or more, not including a primary residence. Alternatives for those who can’t meet that requirement include Fundrise and RealtyMogul.

» Ready to start investing?Best real estate crowdfunding platforms

Will I Owe Capital Gains Tax On A Real Estate Investment Property

How To Sell Your House Fast

Yes, depending on your income, you may owe capital gains tax on the sale of an investment property. Unlike a primary residence where you are exempt from capital gains up to a certain threshold, investment properties are not exempt from capital gains at any amount. If you turn a profit on the sale of your investment property after owning it for a year or more, youll owe long-term capital gains taxes at a rate of 0%, 15% or 20%, depending on your income and filing status.

Income single filers
$488,851 or more 20%

If youre filing under a different status, capital gains tax rates can be found here.

There are a few strategies you may try to minimize your capital gains on an investment property. If you choose to explore one of these options, always consult your tax professional.

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Ride The Inflation Wave Until You Cant Take It Anymore

Owning investment property is like a war of attrition. The longer you can last, the wealthier you will likely be. Some of you will get lucky with amazing tenants that stay for 10+ years. Others will experience situations that will test your faith in humanity.

At the end of the day, your investment propertys main purpose is to generate cash flow in as painless a fashion as possible. Once the pain of owning becomes greater than the joy of earning, its time to sell. Continuously work towards that income stream that provides the highest return with the least amount of work.

I have personally sold one investment property and reinvested $550,000 of the proceeds in real estate crowdfunding. I diversified my real estate holdings into cheaper areas with 4X-5X higher cap rates. Further, Im earning income 100% passively. With a family to take care of now, I no longer have time to maintain a house and manage tenants.

You Can No Longer Afford The Maintenance

Lets face it, the cost associated with properly maintaining a rental property can get expensive. As a landlord, you need to be sure the property is habitable for your tenants and is up to par with health codes and regulations.

While some repairs can be chalked up to DIY projects, others can cause quite a hit on your bank account. If you are finding it difficult to fund costly repairs or to maintain your to-do list, selling can be the answer.

There are 48.5 million rental units in the United States, according to HUD. Nearly half of these units are owned by individual investors.

Owning a rental property and taking on the role of landlord requires time and money. For some landlords, the increasing expenses and hassles with tenants become too much.

  • The property needs repairs
  • Property taxes increase
  • Tenants continually late on rent
  • Tenants cause damage thats expensive to repair and skip out
  • Difficult to find tenants because the neighborhood or city has changed
  • Management and staffing costs for the property are breaking your budget
  • On-site management cant handle the job

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Turn The Investment Property Into Your Primary Residence

If you convert your rental home into your primary residence, you can avoid capital gains taxes, but its not a quick fix. Youll need to live in the home as your primary residence for at least two years of the past five before you can qualify for an exclusion of $250,000 in profit for single filers and $500,000 for married filers.

Calculating Return On An Investment Property

HOW TO SELL REAL ESTATE PROPERTIES Fast With This(2 Tips)

There is no guarantee that your property will appreciate in value, but presuming you did your research and the property is in a desirable location, you can reasonably assume the value will hold, if not increase, by at least 1% per year. Economists suggest 3% to 5% is reasonable to expect, but conservative forecasting approaches are better to avert financial concerns down the road.

The return on your investment will depend on many factors, including fluctuations in the market, your costs to maintain the property , the amount of rent you receive, the interest rate you obtained on your loan, and the type of property it is .

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Youre Ready To Move On

Things change. Maybe its time for new scenery or you have another opportunity calling your name. No matter your reason for being a landlord, its your right to do what is best for yourself.

If youve decided to make a change in your life and being a landlord is not part of your plan, selling your rental property is a logical solution.

Sometimes, something new comes along and you simply feel its time to move on. Nothing about bad tenants, bothersome maintenance, or anything of the sort.

Maybe your eBay store is turning a nice profit, or your stock investments are performing well.

Theres another possibility, as well. Selling a rental property can include a fair amount of downsides: repairs, dealing with a steady stream of potential buyers , and similar irritations. Do you have the time or stamina to deal with it all?

One HomeGo seller didnt, which is why he sold his rental properties the easy way.

My health had taken a turn for the worse. I lost my kidneys and bladder. We actually had two other homes as well. I sold all three of them because I just didnt have the wherewithal to continue to try to take care of my own properties. HomeGo appealed to me mainly because of my health. My health went really quickly, and I didnt know if I was going to recover or not. I didnt feel like I could leave my wife saddled with the rent houses. I needed a quick turnaround.

The National Economy Has Lagged

Similar to a property whose needed repairs outweigh its current rental value, rising interest rates will eat into your rental profits if you financed your property.

The nation continues to deal with the pandemic-era economy and rising inflation. This has led the federal government to announce a rise in interest rates. Many economists expect rates to continue to rise.

If you financed your rental property, stay wary of the changing rates. This increases your mortgage payment to the extent that renting the property is no longer profitable.

While the housing market continues to boom, you may want to sell before rising interest rates depress home values.

Stressed about selling your rental?

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The State Of The Rental Market In 2022

The rental property market continues to be very competitive. Eric Hughes, founder and CEO of Rental Income Investors in New York, says its still common for quality rental properties to sell within just a couple of days on the market. This competitiveness has fueled an increase in cash offers, since this gives buyers an edge, even if they eventually intend to take out a mortgage against the property in the future, he says.

Taylor notes that when interest rates started going up in 2022, there was a definite slowdown in purchasing by investors. I recently received an unsolicited email from a national wholesaling company saying they had 150 homes they needed to sell fast, he says. That is a big clue that even their list of buyers were holding back and being more cautious.

Taylor adds that rental prices have continued to climb because of the strong job market but since many mom-and-pop landlords buy with cash and then refinance into bank loans, I suspect well see a slowdown in rental property purchases by these buyers, he predicts.

Lets not sugar-coat it: Tricky tax rules, existing lease terms, and wear-and-tear from tenants can make selling a rental property a major headache under any market conditions. However, when the time is right, you need to act and with the right approach and preparations, you can make a graceful exit without too much disruption.

List On Free Websites

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Free listing websites can be a valuable resource when selling your rental property. These websites provide you with the opportunity to land on the screens of hundreds, if not thousands, of potential buyers. Selling a rental property has become a lot easier with the advent of such online services.

One of the most prominent service providers is Mashvisor. Listing on Mashvisor will place your listing in front of thousands of potential buyers, making it one of the most useful online services you should look into.

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Study Your Local Housing Market

Looking into the health of your local rental market will allow you to better understand the value your property has to a real estate investor. In fact, this can be one of your strongest selling points. If you can advertise a strong real estate market, a strong local employment market, and high occupancy rates in your area, real estate investors will be lining up for a chance to capitalize on your rental propertys huge potential. It may also be useful to have knowledge of your areas available land and upcoming construction projects, thereby giving you an idea of future trends in your areas real estate prices. Selling a rental property that also offers investors peace of mind definitely comes with a premium.

When You Have Greater Sources Of Passive Income

Besides rental income, theres dividend income, bond income, REIT income, real estate crowdfunding income, P2P income, CD income, and royalty income. Its important to have a diversified passive income stream because you never know which asset class may get pounded and which asset class will flourish. For your review, Ive conveniently ranked the best sources of passive income in the chart below.

With an activity score of 6 , rental property is the passive income stream that requires the most amount of activity.

This is fine if you compare rental income to day job income . But if you have other sources of passive income that generate just as much or more, then real estate becomes less optimal. Here are my passive income investments ranked.

In my case, I never anticipated my online business to grow to multiple times my rental property net income. Just my severance negotiation book sales alone generate more passive income than my $1,000,000 Pacific Heights 2/2 condo rental with zero work required.

Online income is far superior to rental income once it gets going due to no maintenance, no property tax, no tenants to deal with, and unlimited scale.

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Selling An Investment Property The Right Way

Lets be honest, there is more than one way to sell an investment property. You may already know a system that has worked for you in the past. If not, and you are otherwise looking for the most important steps of selling an investment property, look no further. Below you will find the most important steps to help you sell an investment property:

It is worth pointing out that a good real estate agent will facilitate a smoother sales process. If you do decide to hire a Realtor or an agent, they will see to it that selling an investment property goes well, or at least as well as the situation calls for. Again, they will cost you money, but I am convinced they are well worth it.

Any Condition Tenanted Or Vacant For Its Full Market Value Offers In 3

Real Estate Experts: How To Sell A Home Fast

Sell any property quickly, through an exclusive network of professional buyers, at zero risk. There’s no fee until the sale’s complete.

Access a market for landlords who are happy to trade in non-standard properties, that might need work or are already tenanted.

Sell one or many properties at once. Whatever your situation, you will have access to a consultant to address your needs.

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Is Selling My Investment Property The Right Thing To Do

Owning a rental property can be a great investment that brings cash flow and capital gains. However, over time the market and your personal circumstances can change, impacting your investment. This might be the time to reconsider whether being a landlord is right for you.

Every investor wonders if or when they should sell their rental property. Its not always an easy decision and depends on where things are at in your life. Perhaps youre feeling the pressure of getting the best returns on your investment property while still covering two mortgages, or you simply want to put your time and effort into other things.

Whatever your situation, if youre wondering whether to sell or sit on your property for now, its important to get the information you need to make an informed decision. There are financial pros and cons for each choice. In this blog we explain your options to help you answer the question, should I sell my investment property?.

For more information to help you decide whether or not to sell, check out out Property investor guide.

According to the experts the general rule of thumb when owning property is: youre always better to buy and hold. This strategy has long been a mantra, where investors buy for a low price and hold onto a property for a long time. In theory, reaping financial benefits over time regardless of market fluctuations.

Youre A Remote Landlord

Being a landlord is difficult enough. Youve got to find tenants and screen them.

Youve got to do the paperwork and ensure regulations are met. Youve got to deal with troublesome tenants. And then there are the repairs which, lets face it, seem never-ending at times.

Keeping up with landlord duties requires significant time and effort, no matter where you do it from. But attempting the landlord lifestyle from a remote location adds yet another layer of complexity into an already complex situation.

When each showing, each maintenance request, each walkthrough, means a phone call, a drive, or a flight, the time and money invested really adds up.

If youre managing properties remotely, consider selling. You can always reinvest locally and save yourself the stress.

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