If you're looking to sell your Montgomery rental property, now may be the perfect time. Currently, the market favors sellers, with high demand from investors and low inventory. Here are some statistics about the Montgomery real estate market that investors will want to see:
Employment, median household income, and property values are all rising in Montgomery (Data USA). Home prices in Montgomery have increased by about 45% over the past five years, allowing owners to capitalize on higher prices by selling and cashing in on their assets (Zillow). Rents in the Montgomery metropolitan area are increasing every year, a metric that any real estate investor loves (Zumper).
Selling your Montgomery rental property is a quick and easy process if you know your options. Before you put your property on the market, make sure you understand the different ways you can sell it so you can sell it for a fair price.
Options for Selling Rental Property in Montgomery
Some investors try to end the lease early and sell the property vacant, while others try to sell it with tenants still in it. There are pros and cons to each approach, but before you make a decision, look at two key points:
If you want to end your lease early, read your current lease carefully to see if it is possible. If your tenant is violating the terms of your lease, such as not paying rent or having an illegal roommate, you may be able to serve them notice or evict them. Be sure to follow all Alabama landlord-tenant laws to handle the situation appropriately.
Next, determine the best option for selling your rental property.
1. Sell to a tenant
Before you hire a real estate agent and fill out a form to list your rental property on the local MLS, consider contacting the tenant to see if they're interested in buying. If they've been renting for a while, they might be open to buying.
If they are interested, make sure they get pre-approved for a mortgage, which is when a lender promises they are willing to lend you a certain amount of loan money based on your financial information. Also, if you are selling a house in Alabama, make sure you use the proper real estate contract to protect both you and the potential buyer.
2. Pay the tenant for an early move-out fee
If your tenant doesn't want to buy the property, you may be able to convince them to move out before the end of the lease by offering a cash key exchange incentive, where you agree to cover their moving expenses or help with the deposit on a new home in exchange for them vacating the property.
Either way, they'll need to move out, so this is a good way to get them out and give you time to make any necessary repairs before putting the vacant property up for sale.
3. Wait until the lease expires
If your tenants don't want to buy or move out early, you'll have to wait until the end of the lease. You can, of course, put the property up for sale a few months before the end of the lease, but you'll need to give your tenants proper notice before they can view it.
However, waiting until the lease expires to sell a rental property does carry risks. The tenant could damage the property, reducing its value. Therefore, it's important to remind your tenant that they need to keep the property in good condition if they want their full deposit back. Secondly, if the housing market drops, you may not be able to sell the property for as much as you would have if you had sold earlier.
4. Sell with tenants present
Many property owners selling rental properties in Montgomery use online listing platforms like Roofstock, which give you access to a global network of qualified real estate investors rather than being limited to the MLS.
Benefits of using Roofstock include:
Maximize your cash flow by continuing to receive rental income until closing day. Pay competitive real estate commissions (3% vs. the typical 5%-6%) to keep more of your hard-earned money and increase your return on investment (ROI). Use the Roofstock Marketplace to see what other rental properties in Montgomery are selling for.
What to do before selling your rental property
To sell your Montgomery rental property fast and for the highest price, there are some important steps you need to take before you put it on the market.
Gather important documents related to the property, such as copies of leases, tenant rent ledgers, financial statements, vendor lists, maintenance history, and a summary of any capital repairs or improvements made in recent years. A property is easier to sell if it's in good condition, so have it professionally inspected and make any necessary repairs before putting it on the market. Inform your tenants that you plan to sell the property and explain how you will handle viewings. Let tenants know that arrangements will be made to transfer their existing leases and deposits to the new owner. Understand potential tax liabilities on capital gains, and consider the possibility of delaying payments by using a 1031 tax-deferred exchange to purchase another investment property.
How to Price Your Investment Property for Sale in Montgomery
Pricing your rental property means understanding how buyers think: Your asking price per square foot needs to be competitive, but it's also important to highlight the property's financial track record to close quickly at a good price.
Potential buyers will be interested in a property's cap rate. Cap rate is calculated by dividing the net operating income (NOI) by the asking price. Comparing this ratio to similar properties for sale in your area will ensure your price is competitive. Cash-on-cash return helps potential buyers understand how much money their down payment will generate if they finance the purchase at current interest rates. If you can't afford to make all the necessary repairs, it's important to determine the after repair value (ARV) of the property. This allows buyers to understand the additional equity they will receive once all the maintenance is completed.
By emphasizing these key points, you can sell your Montgomery rental property for top dollar. Contact us for a free estimate and consultation.