Steps to Sell Your Investment Property

Hopefully you are not getting out of the real estate business altogether. Hopefully you had a great experience, are ready to move on to the next investment, and want to pull out some cash to do so. Before you do let me ask you one thing – should you sell?

Consider taking out a line of credit on the property. Sure, the interest rate will be higher and variable, but you only have to withdraw what you need, when you want it. It’s like a big ATM machine that allows you to be ready for the next property. Still want to sell? Read on.

Steps to Sell Your Investment

  1. Consider your taxes. A big sale will have significant tax implications. Talk to your accountant about the best time to sell. Better yet, talk to your accountant years before selling, so you can make good tax moves early.
  2. Do a 1031 exchange. This is a tax thing but warrants its own number here. In fact, it needs its own post. Wait, it needs its own book. Suffice to say, it is a way to defer capital gains tax as long as you are buying a similar investment property. If you are just selling out the property, you are out of luck.
  3. Make repairs. Get any nagging repairs done. If you can see the problems, a buyer can too. If you aren’t going to do the repairs, consider notifying buyers on your listings about it and offering a credit. This gets ahead of the problem and helps you with negotiation later. You might also wish to get a pre-inspection and make repairs before listing. I have never done this, though.
  4. Think about your buyer. Take the time to consider what type of person will be buying your property. Do they like granite countertops? A certain color scheme? New fixtures? You might want to do some of these upgrades before putting it on the market. Make sure your property is similar to what your typical buyer wants. Will the buyer want a tenant in the house? Only if the buyer is an investor – that’s why you need to do this step and think about who your buyer is.
  5. Boost your NOI. If you are selling to retail buyers (who will have this as a primary residence) you can skip this step. Otherwise, look for ways to decrease your expenses and increase income. You might increase rents or implement fees. This will need to be done over a year in advance of selling to make the most of it.
  6. Consider staging the property. Staging is the process of putting generic furnishings in the house to make it look like someone lives there, while removing any personal items, like pictures, to make it look like a generic buyer (hopefully the one doing a walk-through) lives there. If it is already a furnished property, make sure everything is clean and matching, otherwise remove it. It’s better to be empty than ugly.
  7. Get professional photos. I always have to remind people of this. It’s so easy to just take out your cellphone and snap photos in whatever lighting and time of day is convenient. Professional photography costs a few hundred dollars, but believe me, it is worth it. There is also an option to do virtual staging, where the photos are modified. Make sure you know the laws in your area – sometimes these need to be clearly labeled as edited.
  8. Decide whether you will use an agent. An agent will take around 6% of the sale price in commission. In many cases, this is worth it for the amount of work they do for you and the knowledge and experience they have. Take the time to find a good one. If you don’t use one, start researching ways to do a for sale by owner. And be prepared to do a lot of extra work.
  9. List the property. Get it out there, either through your agent or by doing it yourself. This can be a big expense but it is worth it.
  10. Negotiate and close. This goes back to #4. Try to figure out what are your buyer’s motivations. Find their pain points. Try to alleviate their pain while getting you what you need.

Best of luck selling. I wish you the best in your investing future!

Dr. Equity