If you are a buy and hold investor, at some point you wonder when is it worth it to sell your rental property in Atlanta. There are definitely pros and cons to this business. If all is going according to plan, then you are reaping the benefits of monthly cash flow, tax incentives, and the long-term appreciation of real estate.
Unfortunately, this business isn’t always easy. You’re probably going to have bad tenants, maintenance issues (both large and small), and maybe some evictions.
So if you are here wondering about whether it’s time to sell your investment property, then let’s take a look at some points to consider.
When Is It a Good Time to Sell?
The first question many rental property owners have when they begin the selling process is around timing. Is this a good time to sell? Or should I wait and sell for a higher price as the house continues to appreciate in value?
Well, there isn’t a cut and dry answer to this. A lot depends on how you feel about being a landlord, and whether the pros outweigh the cons. Let’s look at a few considerations:
- Cash Flow – If the property is cash flowing well, meaning all expenses are covered and you are still making a steady profit every month, then why mess with a good thing? On the other hand, if you are only making a little extra after expenses, then the added work may not be worth it. The cash flow spread required per property is different for all investors, but generally, you should shoot for about $300 each month in profit after expenses.
- Condition of the House – If the house is starting to deteriorate, or you know that a major expense is coming up (like a new roof or HVAC), then you may just want to sell it rather than repairing it. Especially if you don’t have the cash to pay for the repairs.
- Tired of Being a Landlord? – Being a landlord, even if you have a property manager, is not without its share of headaches. Would you just rather cash out and put your money in a bond fund with steady cash flow?
- The Real Estate Market – Nobody knows where the real estate market is going, but if you have owned the rental for more than a few years, chances are it is worth more now than it was when you bought it.
How Much Will The Rental Sell For?
Ok, so let’s say you’ve decided it might be time to sell, and now you want to know how much the home is worth. The easy way to ballpark this is to use Zillow to determine how much houses like yours are selling for in your area.
Check out my method for using Zillow to estimate the value of your home:
Note that Zillow assumes that your property is in HGTV ready-to-sell condition. Rentals don’t have to be in tip-top condition. In fact, they really shouldn’t be because tenants can be pretty rough on your house.
What this means is that you might not get full retail value compared to the other homes have sold for recently.
Look at the homes that have sold in the past 6 months or so and see if there are any pictures of the inside of the house. If the finishes, condition, and appliances are similar to yours, then you can be more confident that your home will sell for about the same price.
If not, then reduce your estimate by $5,000 or so for each room that needs to be upgraded including the kitchen, bathrooms, and master bedroom.
You don’t have to be perfect with your estimate, you just want a general figure to give you an idea. You will negotiate and find the right price once you list it for sale.
Just don’t overprice it! If you do, the house will sit on the market longer, which can be frustrating and cost you more in the end. There really isn’t much downside to starting low. The worst that will happen is you will start a bidding war for your house, and then you can choose the best offer. Exactly what you want, right?
How Much Will it Cost to Sell My Rental Property?
Once you determine how much your home will sell for, it’s time to figure out how much it will cost. And this largely depends on how you want to sell the home. Also, remember that you save in money will cost you in time & energy.
Let’s take a quick look at the three most common home selling methods: through an agent, by owner (FSBO), and directly to an investor.
Sell With a Real Estate Agent
If your home is in pristine shape, then this can be the best way to go in terms of effort and cost. But it will likely take some time, particularly if you want to sell for top dollar. You will also pay for both buyer’s and seller’s agent commissions, holding costs, any repairs, and closing costs. These expenses can add up to around 10% of your gross sale, so you want to take that into account.
It can also take a month or longer for your buyer to get a loan approved. If you can’t afford to wait, then a realtor may not be the way to go for you.
Sell By Owner
Many rental property owners are DIY types who want to skip the agent commissions and sell the house yourself. This isn’t a bad idea if you are in a hot market, and you are prepared to talk on the phone.
And by talking on the phone – I mean a lot, with investors, agents, people who have no intention of buying your home, nosy neighbors, and maybe some “cash” buyers. There is a lot to consider when you sell by owner. Check out this post and this video for more info and tips.
Sell Directly to an Investor
If your house is cash-flowing well, the easiest and fastest way to sell is direct to a rental property investor like us. We will pay for the closing costs and any repairs needed, and you don’t have to deal with commissions or a hundred phone calls.
Call us or fill out this form to get a fast & fair offer on your home. We love helping owners looking to sell their rentals in Georgia, so give it a shot!
Tax Considerations When Selling an Investment Property
Lastly, you can’t ignore Uncle Sam when thinking about selling your Atlanta rental property. There is a lot to consider here, so you should consult with a tax professional before selling. Let’s take a look at some general considerations:
Capital Gains – Depending on your income, you are facing 15-20% of the sale in capital gains tax. If you plan to buy another rental property, you can defer this by using a 1031 Exchange through another purchase. Another method to minimize the tax hit is to use tax-loss harvesting. Check with your CPA to see if these strategies make sense for you.
Depreciation Recapture – If you’ve been deducting property expenses on your tax returns, then the IRS is going to want some of that when you sell. This is based on your ordinary income tax rate and is capped at 25%.
These are just a few of the tax considerations when selling your rental property in Atlanta. You definitely want to check with your tax pro when you sell.
Before You Do Any of This…..
Give us a call at (404) 500-8094! Our mission is to help local homeowners solve financial problems, and we would love to chat and see how we can help. We are an Atlanta-based company dedicated to keeping our neighborhoods safe, beautiful, and affordable. We do this by helping our neighbors.
What makes us different is that we will give you multiple options and you can decide what is best for YOU. Not what is best for us. No hard sells… Just friendly conversation. Fill out our form below, or give us a call today! We’d love to meet you!