An investment property is any property you purchase in order to make a profit. This can include purchasing a property, fixing it up, and selling it for more money or it could be purchasing a property that you rent out to tenants. Whatever type of property you invest in, know that it will be a little harder when it comes time to sell.
Fewer Buyers
The first hurdle you will encounter is fewer buyers. This is especially true if you’re trying to sell a rental property. A majority of buyers are looking for homes for themselves. Your potential buyers will include other investors and it can be trickier to find them. One of your best options might be working with a real estate agent. They can help you market your investment property and guide you to the right buyers. Just know that it may take longer than other types of properties and you should be patient as you go through this process.
Tenants’ Rights
If you own a rental property, you need to be mindful of the tenants you have. When you sell, you need to review the rights of your tenants and make sure the sale will not disrupt them in any way. If possible, you should wait until the leases for your tenants end before you sell. This can make things easier for everyone. If this is not possible, you need to create a smooth transition between you and the new buyer. You should review all the leases on file to ensure the information is correct. Giving the buyer accurate records will ensure they know how to handle everyone on the property.
Dealing with Taxes
Selling an investment property opens you up to several taxes. If you want to save money, you need to be smart about when and how you sell your property. In most cases, selling a rental property means you will have to pay depreciation recapture taxes and capital gains taxes. The amount of these taxes will depend on the value of the home and how it has changed over time. To avoid paying these taxes, you can take advantage of a 1031 tax-deferred exchange. To do this, you must buy a new property within 180 days of selling your old one.
There are plenty of reasons why you should consider selling an investment property. Selling your property can help you make a profit or allow you to move on to new, better investments. As you begin this process, keep in mind the challenges that may arise so that you can be prepared to overcome them.
Check out this article on how to invest in real estate without worrying about maintenance!