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Owning a rental property in North Carolina can be a great investment providing you with extra income, but you might be considering selling for several reasons.
Maybe the costs of owning investment properties have increased. Maybe you are moving out of the area and don’t want the hassle of rental properties. Maybe you’ve had a major life change. Or maybe you are in need of immediate cash flow.
Whatever the case may be, if you own an investment property in North Carolina and are looking to sell there are many considerations to take into place.
Know The Real Estate Markets
It’s important to know the current housing market conditions in North Carolina. If your property is in a prime location, real estate investors will take note. Your investment property might be located in the city, country, or small town that is the ideal location for others interested in real estate investing.
Is it a Buyer’s Market or Seller’s Market?
Identifying trends in the housing market can be figured out by researching the following:
- number of homes for sale in your area
- how many days homes are on the market
- examining list prices to sale prices
One of the most important questions to ask when determining your real estate market is whether it’s a buyer’s or seller’s market. If there is a high demand for houses and minimal properties for sale, the market is more advantageous for sellers.
Even though real estate investors want markets with favorable buying conditions (a buyer’s market) don’t get discouraged when selling your investment property. Planning and patience is key when looking to sell a property investment.
Learn About the Economy and Job Markets of The Area
It’s important to study the demographics of the area to know if your property in North Carolina will bring in a potential property investor. Those interested in real estate investing will look for the following:
- Unemployment Rates
- Occupancy Rates
- Rental Conditions
A city or town in North Carolina that has a favorable job market and a secure economy will bring in more residents. This will allow for more rentals in the area whether it’s single family homes or a condo.
Know The Neighborhood
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After determining the market and studying the demographics of the area, examine the neighborhood for any and all conveniences. Is public transportation nearby? Are the roads in good condition? How close are schools? These are all factors that will help sell investment property in North Carolina.
Learn About Tax Laws
When selling rental properties, be mindful that taxes on investment properties are different from primary residence sales. So what’s the difference?
If you sell a home that was your primary residence, you usually do not have to pay taxes on the net proceeds of the sale. However, those tax breaks are not extended to the selling of investment properties.
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Capital Gains Taxes
It’s reasonable to assume that your investment property has increased in value throughout the time you’ve owned it. This means that you will make a profit once it sells. This is called capital gain.
If you’ve owned your rental property for less than a year, the profits would be treated as short-term capital gains. This means you will be taxed at the same rate as your income.
If you have owned the investment property for more than a year, your profit would be treated as a long-term capital gain and you would be taxed at a lower rate.
Other Factors to Consider
If your taxable income is less than $80,000, you do not have to pay capital gains taxes.
Maybe you are looking to re-invest the money from this investment property into another one in a different location. It’s possible to defer capital gains taxes with a 1031 exchange. This means you have a fixed amount of time to find a similar property for investment purposes.
You can also avoid capital gains taxes with the IRS “ownership and use” test. This means you would need to have the following:
- Owned the property for at least two years
- Lived in the property as your primary residence for the past two out of five years
Once you’ve decided which route is the best for your investment property, it’s time to start planning the next step.
Be Honest With Your Tenant
Once you’ve determined you want to sell your investment property, you will need to take into consideration if there is a tenant already occupying the property. There are several different ways in which you can be mindful of your renters.
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Ask Tenants to Vacate Before Listing Property
It’s important to keep in mind if you have renters occupying your property once you have started the process to put it on the market. You can try to work out an agreement where they vacate before it’s listed but notice is required.
Month-t0-month leases often require landlords to inform tenants anywhere from 30 to 60 days to vacate the home. Make sure to check with the NC state law regarding this process.
If your renter is resolved on staying put in the property, you will need to honor their lease agreement. In nearly all states, lease agreements are transferred with the sale of your property. The new owner cannot make changes to the lease agreement until it expires. Again, check with NC state law regarding this process.
The most important part of dealing with your tenants is to communicate. Remember to be kind and conscientious to your renters if they need to stay while you find a buyer. Simple things like giving them ample warning before a showing, maintaining the yard, and informing them once the property sells will help during the process.
Good Tenants Make Good Selling Points
If you already have good tenants in your property, this could become a good selling point. Some property management companies or real estate brokerage firms will look for the right property investment which already has a cash flow.
When listing the property, make sure you are ready to answer these questions:
- What is the monthly rent?
- How long have the current tenants lived there?
- Do the tenants pay the rent on time?
- What utilities are covered by the tenants?
- When does the current lease or contract expire?
- Do the current tenants maintain the property in a good condition?
Be honest with your tenants when you know you are about to list your property. Let them know that potential buyers will be coming through the property. You can offer small incentives like gift cards to keep your tenants happy during this process.
Make Necessary Repairs
While there might be buyers who will purchase your investment property without repairs, it might not be a bad idea to upgrade and make small repairs. You might be trying to sell your property investment in North Carolina quickly, but making necessary repairs could produce a higher price.
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What If I Can’t Make Repairs?
If you can’t make repairs due to time or money issues, you could still potentially find investors. An investor or buyer might look for a property investment that needs work in order to get a lower purchase price.
Another item to consider is if your property is currently empty. Renovations and repairs might take time, meaning you will be losing out on rental income during that time.
Benefits of Making Repairs
If you do have time and money to make repairs and upgrades, you could possibly bring in buyers willing to pay more for your NC investment property. As the seller, it might be in your best interest to increase your property value by installing new flooring, applying fresh paint, providing new appliances, and making sure there is access to high speed internet.
These types of repairs and upgrades could yield a higher cash return on your property investment.
Questions to Ask Before Making Repairs
Before you begin spending time and money on repairs, make sure to consider these questions:
- WHAT IS THE CURRENT CONDITION OF THE REAL ESTATE MARKET? ARE INVEstment properties IN HIGH ENOUGH DEMAND WHERE YOU CAN SELL?
- Do you have current tenants? CAN YOU WORK AROUND TENANTS IN ORDER TO MAKE REPAIRS?
- Will the property have to be empty for repairs, meaning you will lose rental income?
- What tax considerations do I need to take into account? knowing the difference between repairs and improvements will help make your decision.
Stage Your Property
First impressions matter. Even if you can’t make all of the necessary repairs to your property, there are plenty of ideas below to help you get started.
Make potential buyers notice your property from the get-go! Whether you have single family homes or a condo to sell, one of these items will work for you when staging your property.
- Apply a fresh coat of paint to the front door and/or shutters
- replace house numbers
- cut the grass and clear out any weeds
- add a welcome mat
- consider planting seasonal flowers in any flower beds
- add to your living space by placing outdoor chairs on the front porch
Kitchen and Bathroom Ideas
Properties that have updated kitchen and bathrooms tend to be noticed more in today’s market. Not all renovations have to break the bank! Take a look at some ideas that work when staging your property.
- keep counter space clear and wipe them down.
- update cabinets with a fresh coat of paint.
- replace hardware like faucets and door knobs. If you can’t replace it, make sure to clean and make it shine!
- remove hard water stains and clean the grout or tile.
- consider replacing the shower curtain and adding new bathmats.
- add a hand towel next to the bathroom sink along with a candle and fancy soaps.
- place all personal belongings in the medicine cabinet or cabinet.
Emphasize The Best
Highlighting all of the potential space and features of your property is key. Too much furniture can make a home seem smaller than it actually is. Consider these other ideas when staging your property.
- cut back any unnecessary furniture items. This will free up more space making it easy for buyers to walk around the property.
- highlight focal points like a fireplace, office space, or walk-in closet.
- clear off the coffee table.
- remove any personal items like family pictures, diplomas, or kids’ artwork.
- If you allow pets in your rental property, make sure pet odors and dander are nonexistent.
- hire a professional stager and/or photographer to take photos.
While all of these items might not be relevant to your investment property, staging your property before listing could possibly help the sale.
Set the Right Price
Many buyers will search for an attractive place that is located in a big city or metro area with access to numerous amenities. If your investment property in NC fits this criteria, setting the right price is key for other investors and realtors alike.
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Finding the right realtor can help when listing your property. Real estate agents know home values in NC and can help with properties like rentals. There are also real estate agents who specialize in buying and selling investment properties.
Real estate agents who specialize in property investments in North Carolina can help with the following:
- knowing and understanding today’s housing and renting trends
- tax laws on investment properties
You can also choose to sell to real estate investors. When selling to a real estate investor, you can sometimes expect a cash close. Investors might also purchase your property as is, eliminating the need for repairs.
Last But Not Least
Selling your investment property in NC does not have to be as stressful as you think! Search for the right information regarding the market and tax laws, notify your tenants of your intention, stage the property, and list. There are always others looking to invest in real estate. Before you know it, your property will be sold!