Selling Rental Properties: 3 Free Steps To Determine Whether You Should

There’s been a lot of good news of rising home prices coming from the Charlotte housing market, as well as the rest of the country. For real estate investors, this news is a mixed bag. There are less great buying opportunities for them, but their net worth is increasing. It also presents a good opportunity to turn their home assets into cash.




Making money on selling rental homes is a nice aspect of the investment real estate game. Buy low, sell high. When a real estate investor is able to do this, life is good! It makes all the repairs, waiting for late rental payments, and extra tax work worth it!



Let’s face it, there are two main joys of selling investment homes:



1. A good amount of cash is transferred into your pocket

2. The worry about your extra home is gone and given to someone else!



So if you have an investment property that you may want to sell, here are 3 free steps to make a quick determination on whether you should:



1. Determine the value of your home: Ask your property manager or friendly Realtor a realistic range of values for your home. Why a range and not a fixed number, you ask? Real estate pricing is subjective. If your home is in great shape and in a desirable section of the neighborhood, your home should sell in the top of the range. If it’s been beaten by years of tenants and little fix-up has been done, it will be in the lower range of the values. Estimate low for this exercise.



2. Estimate selling costs: Nothing creates a bigger vacuum of air on the phone when I explain that owners should factor in 10-15% in selling costs. After the initial scolding pause, they ask the requisite question, “What? How do you figure that, brother?”



This general estimate of 10-15% is computed by:



6% Realtor fees

1% Miscellaneous seller closing costs

3-8% Less than list price offer and seller concessions (typically paying for the buyer’s closing costs)



For example, Mecklenburg County (Charlotte) currently has an average offer acceptance of 92% of the list price (and this is on the rise from 90% from last quarter).



3. Find out your loan balance: For a general idea, just look at the loan balance remaining on the monthly mortgage statement. If you don’t get a mortgage statement, you’ll really like this exercise!



Once these 3 figures are retrieved, the math looks like this:



Value of home (be a pessimist!) – Estimate the cost to sell (say 12%) – Your loan balance = Profit (or loss)



For example, take a $100K house with a loan balance of $60K:



$100K (home value) - $12K (12% of $100K) - $60K (loan balance) = $28K (Profit!)



This is a general estimate of whether it is worth putting your home on the market to sell. Now you can decide whether this approximate dollar figure works for you.



Selling homes can be a very good thing for your wallet! Just use this simple exercise to see if it is worth doing at any given point in time.



Brett Furniss is the President & Owner of BDF Realty (Charlotte Property Management) which works with Charlotte real estate investors and homeowners and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)

Charlotte Property Management Monthly: Don’t Return Your Tenant’s Security Deposit Just Yet

As a Charlotte property manager, I am a big proponent of returning as much of the tenant’s security deposit to them as possible.  If the tenant took time to care for the property, did what they were supposed to do during their lease period, and paid all of their rent, they certainly deserve it back!  There is a reason property managers are required to put the security deposit into an escrow account; it is a reminder that the security deposit is not the landlord’s money, it belongs to the tenants.

However, that being said, I’m also a proponent of the “slow return.”  By NC law, the security deposit does not need to be returned to the tenant for 30 days.  And also according to the law, if the landlord is still figuring out repair costs and won’t make the 30-day deadline, they just need to notify the tenant that the payment will be delayed in writing and let them know the approximate cost of the repairs at that point in time.

Why would landlords delay the tenant’s security deposit return?  The most popular question asked (by far) when a tenant moves out is, “when can I expect the security deposit back?”  If you want to be a “cool” landlord, shouldn’t you just give it back after the walk-through?  You already know how much the repairs are going to cost (if there are any) and the tenant could use the money back.  You certainly want to be good to the tenants who were good to you, right?

Well, yes, but not exactly.  I recommend keeping the security deposit as long as possible.  Once it is given back, you really need to consider the tenant gone and their account closed.  You need to assume that you will never get any money from them again.

So?  They moved out already, right?

Yes, but…  Walk-throughs are an inexact science and sometimes things are missed.  Think about home inspectors; they are professionals that take hours doing a walk-through to write a comprehensive damage report and they still miss issues with the home.  I guarantee that landlords are not close to conducting several hour walk-throughs at the level of detail that they are (nor should they be).  Things get missed and that’s life.

However, you can provide yourself some extra time so missed things can get caught before it’s too late and you have to pay for it!  It may be one of the handymen working on your home that alerts you to new repair issues.  It may be a Realtor or marketing person who wonders why something looks off.  Or (usually) it’s the next tenant who moves in afterwards that lets you know what’s not up to par (and by the way, they want the issues fixed on your dime!).

Let tenants pay for damages they are responsible for.  And, unfortunately, the delay in returning the security deposit to them is a good way to ensure this happens.

Brett Furniss is the President & Owner of BDF Realty (Charlotte Property Management) which works with Charlotte real estate investors and homeowners and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which  specialize in rent-to-own (lease options) and rent-to-sell homes.  His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)