How to Sell a Rental Property in North Carolina
The real estate market in NC remains highly competitive, with well-maintained rental properties often selling within a month. Observing the current selling prices of similar local properties may prompt some property owners to consider selling to capitalize on the market trend and fund their next real estate venture. To maximize your property’s selling price in the present market conditions, read on for valuable insights.
Why Sell a Rental Property?
Investing in real estate and acquiring rental properties is considered a smart financial move, especially in today’s thriving market. Many regions are experiencing a housing shortage, making rental properties highly profitable for both long-term and short-term investments. Property values are consistently appreciating in North Carolina, enhancing the appeal of rental investments for diversifying portfolios. To maximize returns, it’s essential to manage the transaction in a tax-efficient manner, minimizing liabilities and boosting profitability.
Options When Selling a Rental Property
When it comes to selling a rental property in NC, the process can vary from simply putting up a For Sale sign and listing it on the MLS to dealing with complexities such as existing tenant leases. It is crucial to understand and comply with your county’s regulations regarding the sale of an occupied rental property. Before listing the property for sale, ensure you are well-versed with the current regulations at the county, city, and state levels. Despite the potential challenges, rest assured that there are various avenues available to you.
- Waiting for the Tenant’s Lease to Expire
If you have the flexibility and can afford to wait, allowing the Tenant’s lease to run its course could present the optimal scenario for selling your rental property. If you have a single family house you are likely to sell for more money to a buyer that intends to live there assuming the condition is above average. In addition, this approach enables you to keep generating monthly rental income while giving you the opportunity to select a suitable real estate agent or a knowledgeable investor with immediate purchasing power. Holding off until the lease ends might help you steer clear of uncomfortable showings with the tenant still in residence or potential complications with a disgruntled tenant obstructing the sale.
- Pay the Tenant to Vacate
Offering cash to your renter(s) to break their lease and/or move is a fast and straightforward option for getting a Tenant out of the home. Not only that, but paying cash to vacate your rental property in North Carolina can be beneficial to both you and your Tenant. In these situations, a landlord and their Tenant(s) come to a monetary agreement that allows for the lease to be broken with no legal repercussions. This is a win-win for both parties; you get to put the rental for sale on the date of your choice and your renters have a cushion for moving on to their next home.
- Sell the Property to Your Tenant
Maybe you’ve grown tired of owning a house that is aging and needs expensive maintenance and repairs you don’t have the time, energy, or funds to complete. Or perhaps you’ve decided to move on to your next investment but you’d like to see the rental property stay in the hands of someone you trust. That’s when selling the property directly to the current occupants of the house might be a great option! Whether it’s done as a traditional home sale or as a lease-to-own situation, you’ll no longer have to deal with the hassle of that unwanted rental property while still profiting from any appreciation on the property during the time you owned and managed it. Make sure that you have a qualified mortgage broker review your renter(s) ability to get a loan before committing to this course of action.
- Sell the Property with an Active Lease
If you’ve decided to sell your rental house but you still have an active lease associated with the property, can you still sell? Yes, you can!
For some investors interested in a rental property to add to their portfolio, your occupied house with an active lease is preferable to one that is vacant and requires the work of finding renters. If your Tenants have a good payment history that includes a security deposit with their lease, are consistently on time with their rent, and maintain the house and land around it, this is a great selling point for the house’s next investor, especially if they are paying at or above market rent!
- Sell Your House to Zack Buys Houses
Sometimes selling an investment property in a non-traditional way can mean less hassle for real estate investors looking to move on to their next investment. If selling your rental for a fair cash price sounds like the right option for you, Zack Buys Houses can help. Make the sale of that unwanted rental property as easy and stress-free as possible. Get a competitive cash offer faster than you could get with a traditional home sale by working with a local house buying company that has built their business by buying houses for cash.
When to Sell a Rental Property in North Carolina?
Deciding when to sell your rental property is a personal choice. Whether you’re a landlord looking to reduce the time spent managing properties, or you want to capitalize on the property’s appreciation to fund a new investment, the timing of the sale is ultimately in your hands. In some cases, ongoing maintenance costs may outweigh rental income, prompting a decision to sell. Consider the following factors when determining if now is the optimal time to sell:
- Equity Level is High on the Rental Property
Recent statistics released by the Federal Reserve reveal a significant 42% increase in the national median home price since January 2020*. For those considering expanding their real estate investments or seeking to enhance their investment portfolio diversification, leveraging current high home values to unlock cash could present a strategic opportunity at this time.
- Housing Demand is Strong
Whether you’ve heard it online, on the news, or in your local paper, despite inflation the demand for housing is still exceeding the supply for homes in cities and suburbs all across America. Realtor.com’s June 2023 Housing Report shows that homes are selling fast amid the continued inventory crunch. For the month of June, the total number of unsold homes, including homes that are under contract, decreased by 4.6% compared to last year. With 25.7% fewer homes newly listed for sale compared to last year, it’s no surprise most homes spent only 44 days on the market.
- Market Dynamics are Changing
The recent Realtor.com housing report highlighted a 0.9% annual decrease in the median price of homes for sale in June, marking the first decline in this trend since 2017. While this may raise concerns for investors aiming to profit from their properties, there is no immediate need for panic. Projections suggest a modest impact on housing prices in the coming years. Despite inventory shrinking by the end of June, following a trend reversal since April 2022, local factors could influence market dynamics. For instance, certain areas are witnessing a surge in new construction, potentially leading to challenges in renting out properties.
- Rising Interest Rates
Before selling your rental property to invest in a new one, it’s essential to keep track of fluctuations in mortgage interest rates. Elevated interest rates can raise the expenses of acquiring rental property for investors and cause a decline in housing market demand, which may result in a decrease in your selling price. In 2021, the once historically low interest rates are no more, as 30-year fixed mortgages have surged to rates reaching as high as 7.8% for homeowners.
- Property Needs Repairs – High Maintenance Costs
Over time, as multiple tenants have come and gone, your once brand-new rental property may have experienced wear and tear from regular use or even neglect. Property owners with houses, condos, or other real estate assets may reach a point where ongoing maintenance costs for essential upgrades start to outweigh the financial benefits. From installing a new water heater to replacing the roof or upgrading the HVAC system, the expenses can accumulate rapidly, impacting your overall profit margins. By evaluating the financial figures, selling the property at a slightly reduced price could potentially prevent further losses from being sunk into a property that has become a money drain.
Steps to Take Before Selling Your Rental Property
- Identify Target Buyer
Thinking about selling your property to another investor or transferring it to your tenant or a family in search of their first home? Identifying your target market is crucial when selling your property as it enables you to set the right price and appeal to the ideal buyer.
- Decide on Your Pricing Strategy
When the time comes to sell your rental property in NC, it’s crucial to define your goals clearly. Are you aiming for maximum profit and willing to wait, or do you prefer a quick, hassle-free sale? Additionally, consider whether the property will be vacant or under an active lease, as this can influence the pool of potential buyers and the final sale price significantly!
- Buyers Inspection and Do Repairs
Optimize your returns when selling your rental property in NC by streamlining the appraisal and buyer’s inspection procedures. Prior to listing the property, confirm compliance with all regulations and prepare it for the market. Consult with an experienced real estate agent and schedule a pre-purchase inspection to prevent any surprises. This proactive strategy can streamline the negotiation process and prevent unexpected repair costs.
- Run a Lien Search
If you currently have a mortgage or other financial loan on your property, there is probably a lien from the lender on the title. This lien will only be cleared when the property is sold and the mortgage is settled at closing. However, there could be additional liens that you may not be aware of. To ensure there are no hidden encumbrances to address before selling, it is advisable to have a real estate attorney conduct a title search. If any issues arise, it is crucial to resolve them before listing the property for sale.
- Inform Tenant
Be diplomatic! North Carolina doesn’t require landlords to let their existing Tenant(s) know the property will be going up for sale, but the state does require tenants are given reasonable notice of showings to prospective buyers and that they are informed of a sale . To keep things civilized, let your renters know with as much notice as possible that you will be putting the property up for sale.
Staying informed about North Carolina and local laws is crucial to prevent legal conflicts stemming from misunderstandings or lack of knowledge. While some tenants may be familiar with the process of their rental property being sold, others may find it unfamiliar and daunting. It’s important to reassure them that the sale will not impact their lease agreement, and that their security deposit will be transferred to the new owner.
- Analyze Capital Gains
When it comes time to sell your rental property, it’s important to be prepared for tax implications such as depreciation recapture and capital gains. These factors often lead investors to hold onto properties longer than ideal, fearing the impact of Capital Gains tax on their profits. However, there are strategies available to mitigate capital gains taxes.
During ownership, property owners commonly leverage depreciation expenses to lower their taxable net income. Yet, upon the property’s sale, the previously claimed expenses are subject to taxation as regular income, taxed at rates of up to 25%. Fortunately, there is a solution to this issue. Through a 1031 tax-deferred exchange, investors can postpone paying these taxes on their investment properties by acquiring a replacement property within 180 days of the sale.
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The Bottom Line is…
If you own a rental property in North Carolina that you are looking to sell with less hassle and for more money, Zack Buys Houses has a solution. We are a direct house buying company that has built our reputation on buying houses for cash with less stress (and less fees!). Contact us today and get a competitive cash offer for that house or rental property. We buy homes in any condition, and we don’t mind purchasing properties that still have tenants! Even if the house needs upgrades and repairs, we want to make you a fair cash offer today.