Author Topic: Sell Rental that is currently occupied or wait until lease ends.  (Read 1648 times)

PeterPuffy

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I have a Condo rental property that I am looking to sell. My life has changed and I need the equity for a down payment for a single family home. There is no rush, but I would like to start looking for a new home after I am able to sell this property. (we currently live in another property).

I have been a landlord with a management company for 3 years now, and the current renter lease is up on 9/1/2015.

We are in good standings with the renter; rent is always paid on time and we have fixed problems as they have come up.  Should I look to start to sell the property with the occupied tenant (start now?) or should I wait until the end of the lease to sell the property? Does anyone have experience with either outcome?

Market Value: 80000
Original Purchase price:84000
Amount remaining on mortgage: 0
Gross Rents: 895
Management Company cost: 89.5
Taxes and Insurance: 142
HOA costs: 288
Average Monthly Maintenance cost (over 3 years): 60

Thanks for your help!


JasonK

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Re: Sell Rental that is currently occupied or wait until lease ends.
« Reply #1 on: May 27, 2015, 05:32:19 PM »
If you try to sell the property now you're limiting your buyers (at least for a month or two) to other investors, and they'll come up with a purchase price based on the net rents of the property, which is going to put you at a sales price must less than $80K. 

Since we're only talking about a few months I'd hold off, clean the place up once it's vacant, possibly do a bit of paint, etc and now you've opened your market up to owner occupants as well as investors.   Hopefully you can get close to market value then.

PS be sure to read your management agreement as well.  Usually there is a clause that appoints the PMC as the default realtor if you decide to sell - if you like the management company that's fine, but you may want to terminate the relationship once the property is vacant (with appropriate notice-read the fine print) and engage a realtor who works on owner occupant residential property full time (management companies typically focus on investment properties).  Most property management companies do a poor job as realtors in my opinion.

CashFlowDiaries

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Re: Sell Rental that is currently occupied or wait until lease ends.
« Reply #2 on: May 27, 2015, 08:09:41 PM »
Hey Peter,

I think jason is right on target.  Many investors dont even want to purchase condos because the HOA fees and rules really limit your cash flow potential.  With that being said, if you try and sell now, you are looking at even a smaller pool of investors willing to purchase because of so many that wont touch condos.

I would definitely wait to sell this puppy.  If you start giving your tenant notice now, they may be inclined to just start looking now during the summer as its easier to rent during the summer then when school is starting back up.  If that is the case which very well may be, you tenant my leave sooner then anticipated and you being the owner and all. You can let them know that if they leave and break the lease you will give them a pass.  No consequences.  It would be a win win for everyone.

PeterPuffy

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Re: Sell Rental that is currently occupied or wait until lease ends.
« Reply #3 on: May 28, 2015, 06:09:09 AM »
You both bring up good points that I wasn't thinking about. From a investment standpoint I don't believe that this property is doing that great.

I will wait until the lease expires and spit shine the puppy up.

Thanks for your help

JasonK

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Re: Sell Rental that is currently occupied or wait until lease ends.
« Reply #4 on: May 28, 2015, 09:06:19 AM »
Agree, your returns aren't that good on this property (HOA fees are killing you).  Another reason investors typically shy away from condos.  With your current return, I'd be tempted to sell the property even if you didn't need the equity for a downpayment and place the funds in a Vanguard index fund, but that's just me.

Another point I thought of - taxable gains on the sale.  It doesn't appear you will have any gain on this property, but if you use(d) the property as your residence for at least 24 months in the last 5 years before sale any gain up to $250K is non-taxable.  You mentioned renting the property for 3 years, so you MAY be right on the line depending on the exact date you sell, exact dates of rental, etc.  Just FYI