Frequently Asked Questions By Landlords Looking To Sell
Here are a few answers to some commonly asked questions about selling a rental property in Colorado
– Can I sell with a tenant occupying the property?
o Yes! Selling a rental property in Colorado may add some extra layers of complexity to the situation, as there will be some more loopholes to navigate, but it is possible and it can be done as long as you abide by the right operating procedures. These procedures often include giving the tenant up to 90 days to vacate the premises, and find another place to live.
– What happens to the existing tenants when I sell?
o Oftentimes if there is already a lease in place, then that contract must be honored by all participating parties in the deal. The existing contract will be transferred over to the new owner of the property, and the agreement can remain in place. This process is called an “Assignment of Lease Agreement” and will typically be routed through an escrow account with a local title agency in your area. Security deposits are typically assigned to the new buyer that is going to take over ownership of the home, so please keep these minor details in mind as well.
– Do I need a Licensed Real Estate Agent to sell my rental property?
o No. You can sell directly to a cash buyer such as HBR Colorado, who will make you a fair all cash offer in as little as 24 hours and can usually close the deal in only 7 business days. If you decide to work with a realtor to sell your rental property, many times it will take a lot longer, and you will be responsible for paying commissions, fees, as well as repair costs.
Selling A Rental Property In Colorado
Sometimes taxes can cloud the picture, and complicate things a bit when you are selling a rental property in Colorado, so you should always consult with a licensed tax professional in your area to determine the best course of action for your particular situation. Here is a basic example of how tax costs are calculated, so you can use these figures to hopefully determine what tax costs you will be responsible for when selling your home with tenants.
Let’s assume for the sake of this argument that you are looking to sell a rental property that you purchased for 100k, and the sale price is 150k. Typically this would mean that you would pay capital gains tax on the 50k difference in price. But if you deduct 25k in depreciation during the time you owned it, then you would only owe 25k on the property. It’s all relative to the final sale price, minus the difference in value since you first purchased the property. If you have any further questions about this process then please contact us and we will put you in touch with someone who can accurately analyze your situation and come up with a detailed plan for you to follow.
1031 Exchanges are an excellent way to avoid paying your taxes until a later date, as this will let you play on the power of the actual time value of those funds, giving you some breathing room to reinvest your money into another similar investment property in the area. This is an excellent method for retaining your earnings, and one that we highly suggest using if you are an investor who is looking to pick up more rental properties in the same vicinity.
Selling a rental property in Colorado with existing tenants and tenant co-operation
Tenant co-operation is extremely important to making the deal run smoothly, unless you are selling the home to a cash buyer (such as us) who is used to dealing with these types of situations on a regular basis. When selling a rental property in Colorado with tenants, it’s extremely critical to communicate the situation in a friendly way with the existing tenant. The last thing you want to do is upset the existing tenant, and have them go on a hateful rampage and ruin your property or try to steal something out of the unit. Tenants can become very vindictive and combative when they learn about your plans to sell the property, so dealing with them on a one on one personal basis will be essential to your overall success during this complicated process.
Anybody who is trying to sell a rental property in Colorado knows the stress that is involved in the process, and dealing with a standard real estate agent can often make things even more difficult and complicated in the long run. This is why it’s usually a better option to deal with a cash buyer, because it immediately simplifies the process, and allows you to be put into a position of power in the transaction, as opposed to a helpless victim.
Offering your existing tenants a cash incentive to leave the property without causing problems is usually an extremely effective option for reconciling this difficult situation.
Selling a vacant rental property in Colorado while preventing Vandalism
If your home is vacant, then this adds some extra layers of complexity to the situation that must be dealt with in a calm yet effective manner. Vandalism can turn into a real problem if there is nobody there to occupy the property, especially if it’s in a bad neighborhood where the chances are much higher of someone breaking in and causing damage to the property.
The best course of action is always to make sure that you sell the home as fast as possible, so that squatters don’t infiltrate the home and refuse to leave. This is where pricing can really come into play, as marketing the property at the right price can lead to faster closing times, meaning less time for the property to sit around in vacancy.
If you’ve had a home listed on the local real estate market for more than 60 days without any offers, check out this great article to start getting those offers rolling in!
Selling a rental property in Colorado can be extremely challenging, but with the right knowledge, people, and plan of action it can be accomplished in a timely manner. As long as you are up front with everyone who is involved in the deal then you will have a much better outcome than if you were operating from a place of immaturity and lack of knowledge.
If you are selling a rental property in Colorado and would like a no obligation, all cash offer, contact us now and we will review your information and make you an offer in as little as 24 hours.