If you are reading this blog, you might be thinking about selling a rental property, and you need to consider many things first to make a decent profit from it. Selling a rental property can be intimidating, complicated, and overwhelming for most people, especially if it is your first time.
The rental property market continues to be very competitive, and if you want to get the most out of it in the least stressful way, this is the right guide to help you sell your rental property in the best way possible.
5 Things To Do Before Selling a Rental Property
Here are five essential things you need to know about selling a rental property in Virginia Beach:
Understanding The Real Estate Market
The rental property market continues to be very competitive. Before listing your rental property for sale, take the time to research and understand the local real estate market in Virginia Beach.
Familiarize yourself with recent sales data, market trends, and the average time for properties to sell in your area. This step will help you set a realistic asking price and make informed decisions throughout the selling process.
Get An Appraisal Of Your Property Done
Evaluate the condition of your rental property and determine if any repairs or renovations are necessary before listing it for sale. Consider hiring a professional inspector to identify any potential issues that may arise during the selling process.
Plan to complete these tasks well before listing if it requires significant repairs or renovations. A well-maintained property is more likely to attract buyers and command a higher selling price, regardless of the season.
Determine The Tax Implications Of Selling Your Property
Optimize your financial strategy and avoid being caught off guard by substantial capital gains taxes. When sell a rental property that has served as your primary residence, you typically won’t have to pay taxes on the net proceeds, allowing you to enjoy tax-free profits.
This exemption comes with a crucial condition: you must have owned and lived in the house for at least two years within the past five years. Short-term capital gains, accrued from owning the property for a year or less, selling rental property taxes at the regular income tax rate.
Long-term capital gains earned from owning the property for over a year are taxed at a lower rate. One strategy to defer capital gains selling rental property is to explore the benefits of a 1031 exchange, which allows you to sell one investment, inherited property and acquire another “like-kind” property without immediately paying capital gains tax. It’s crucial to consult a qualified intermediary to navigate the complex rules and requirements associated with a 1031 exchange effectively. The other tax that property owners must also prepare for is depreciation recapture.
However, it is essential to note that depreciation recapture is taxed like your regular income tax despite having held the asset for more than a year. This is because you have already been allowed to reduce your taxable rental income by writing off depreciation as an expense.
Review Tenancy And Lease Agreements
If selling a rental property is occupied when you decide to sell, one option is to negotiate with the tenants and offer an incentive for them to vacate. But if they’re intent on staying put, or if selling a rental property with tenants and want to use that as a selling point, you’ll have to respect the lease terms. If selling a rental property with tenants are paying month to month, you can choose to give them notice to vacate.
Check to see what the rules are in the state. Landlords are required to issue a 30-day notice for tenants residing in the property for less than a year and a 60-day notice for those who have lived there for over a year, as per the Virginia Statement of Tenant Rights and Responsibilities, to ensure a seamless transition between landlords and tenants.
Seek Help From A Real Estate Professional
The selling a rental property process can be complex, especially regarding rental properties. Consider hiring a real estate agent specializing in investment properties or having experience in the Virginia Beach market.
An experienced agent, proficient in Virginia property management requirements, can offer essential insights and assist in accurately pricing, effectively marketing, and skillfully negotiating on behalf of the property seller. This professional support significantly eases the burden for the individual selling the property.
By understanding the steps above, you’ll be well-equipped to confidently navigate the selling process and maximize your return on investment.
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