Lease Should I Sell My Rental Property Now or Wait for the Lease to Pass?
Deciding whether to sell your rental property now or after the lease expires is a significant decision for any property owner. If your rental is currently occupied by a tenant who pays their rent on time and maintains the property well, you might prefer to let them stay. However, it’s essential to weigh the economic implications of selling your property with tenants versus waiting until the lease ends and the property is vacant.
The Pros and Cons of Selling Your Rental Property
Selling a property with tenants might seem more complex than selling a vacant property. However, this isn’t always the case. With proper preparation and utilizing a real estate agent experienced in occupied properties, selling an occupied property can be a seamless process and may even offer financial benefits.
Benefits of Rental Income
Rental income can increase the value of your property compared to it being vacant as it offers an immediate return on investment with monthly cash flow. If the rental income is at or above market rates, selling your tenant-occupied property could be a wise decision. The rent compensates for a potentially lower sale price based on the property condition or the average price a homeowner may pay to purchase. Rental income also makes it easier for a buyer to obtain financing and there is usually fierce competition to purchase a property when a tenant is in place.
Section 8 Properties: A Special Consideration
Properties under the Section 8 program are often appealing to buyers due to their steady income stream. These properties are rented to low-income tenants who receive government assistance for a significant portion of their rent and utilities. The high demand and long waiting lists for Section 8 properties mean a consistent and reliable income source for the new owner. Many buyers specifically look to purchase homes with government assisted rent payments and will pay a premium for them.
Evaluating Property Value Impacts
There are scenarios where tenancy could decrease your property’s value. If the rent is too low compared to justify the potential sale price of a vacant property, selling might not be financially advantageous. Conducting a competitive market analysis helps understand the relationship between the potential sale price of a vacant property and the current rental income.
Making the Best Choice for Your Property
Ultimately, the decision to sell your rental property, whether occupied or vacant, depends on multiple factors, including market conditions, the rental income, and your personal circumstances.
Selling to Investors with Different Objectives
Some investors might be interested in your property for reasons other than rental income. They may plan to renovate or repurpose the property, or perhaps will pay a premium due to an assemblage of other properties they own in the area which could lead to a different pricing strategy and buyer interest.
The Option to Wait
You might consider waiting until the lease ends, renovating the property, and then selling vacant to a homeowner. This approach requires more time and investment but could potentially lead to a higher sale price.
Selling an occupied rental property can be a viable option, particularly in regions like Maryland, Washington, DC, Delaware, or Virginia. Each property and situation is unique, so it’s important to evaluate all factors before making a decision. If you need assistance in navigating this decision, don’t hesitate to seek professional advice tailored to your specific situation.