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!)