8 Tips for Selling a Rental Property: Navigating Taxes and Tenants
Any landlord will tell you that the gig comes with plenty of ups and downs — and when the latter starts to outweigh the former, it may be time to sell. Kyle McCorkel, a seasoned real estate investor in Hummelstown, Pennsylvania, has developed a knack for knowing when it’s time to seriously consider selling a rental property.
During the pandemic housing boom, McCorkel made the decision to sell two of his rentals to capitalize on the high market prices just as the property taxes were starting to spike. “My expenses were going up faster than rent was going up, so I decided to seize the opportunity to cash out and move my equity into better-performing investments,” he says.
DISCLAIMER: As a friendly reminder, this blog post is meant for educational purposes only and is not intended to be construed as financial, tax, or legal advice. HomeLight always encourages you to reach out to a tax professional, real estate attorney, or other advisor regarding your personal situation.
The state of the rental property market in 2024
Despite high interest rates and plateauing rent prices, the rental property market has mostly held steady. In the first quarter of 2024, investor home purchases ticked up 0.5% year-over-year, marking the first increase since mid-2022. This group accounted for 19% of all home purchases during that time period, the highest share in two years.
Investors are increasingly opting to buy properties with cash; in Q1 2024, 69% of real estate investors paid for their purchases in full with cash. “[Cash offers] give buyers an edge, even if they eventually intend to take out a mortgage against the property in the future,” says Eric Hughes, founder and CEO of Rental Income Advisors in New York.
As of July 2024, rental prices have risen modestly for six consecutive months, according to Apartment List’s National Rent Report. With the potential for steady rental income, a pool of potential buyers still exists for landlords considering selling a rental property in 2024. And, with home prices on the rise, landlords stand to turn a hefty profit if they decide to sell.
But let’s not sugarcoat it: Tricky tax rules, existing lease terms, and wear-and-tear from tenants can make selling a rental property a major headache under any market conditions. However, when the time is right, you need to act — and with the right approach and preparations, you can make a graceful exit without too much disruption.
With tenant communications and handling repairs weighing on your to-do list, here’s what experienced rental property owners, landlords, and real estate agents say it will take to pull off a smooth rental property sale.
