Thinking about selling your rental property? Here’s everything you need to consider.
Selling an investment property is quite different than selling your primary residence. When you are considering selling a property that is tenant-occupied you will need to think about how the tenants may impact the sale of the home. The lease terms and your selling timeline will dictate how you can sell the home. You could sell the home with leases in place or wait for the leases to terminate before listing the property. If you wait for the leases to terminate you will appeal to a larger buyer pool, and the selling process can be facilitated more easily. That being said, there are benefits to selling an investment property with tenants in place ( hello instant rental revenue!) If you determine that selling with tenants in place is the best option for you, following the advice below will help you sell your rental property with relative ease.
When you’re considering selling your rental property, the first step is to locate your lease or leases if you have multiple tenants. Look at when the lease term ends and the monthly rent. Does the lease terminate at a time of year that is favorable for selling for the highest dollar? Does the monthly rent match the market rate? If you’re not sure, you should contact a real estate professional to find out! If your rental revenue is below market rate, and the tenants have a considerable amount of time left on the lease it may be better to wait until closer to the lease termination date to sell.
Next, you will want to look at the fine print in the lease that dictates how the property can be marketed. Identify what rights you as a landlord have to market and show the property. Some leases will allow for showings within a certain amount of days prior to the lease ending. Other leases may state that the tenant can pay a fee to waive the landlord’s right to allow showings during that time period. If you determine that listing your home for sale with tenants in place is the best strategy, you MUST adhere to the showing terms dictated by the lease. Furthermore, you will want the tenants to be cooperative in the process.
Communicate your intentions to sell early on; you will want to ensure they understand that the lease terms will stay the same when the property is sold. The only difference will be the landlord is changing hands. At closing, the security deposit will be transferred to the new owner, and the new owner will deliver instructions for paying rent to the tenants. You also need to make sure to have a plan for how showings will be allowed and how much notice the tenants need prior to showings. Will you communicate showing requests by a text or phone call? Do you need to inform all tenants or is their one point person with whom you can communicate? Are there certain times or days that will never work for showings? How much notice does the tenant need to allow a showing?
In addition to clearly communicating showing notice protocols, it’s also important to set expectations for how you would like the home to be presented fo showings (free of clutter, clean counters, beds made, etc). Ultimately, you can’t force the tenant to ensure your property appeals to buyers. However, you may be able to incentivize tenants with a discount on rent, a gift or you could offer a free home cleaning prior to an open house. In the end, this small expense is well worth it to ensure the home shows well and thus yields a higher sales price.
Selling your rental property with tenants in place means you are selling your property to an investor! Investors have one primary goal - to purchase a property that will provide a return on investment. In order to determine how profitable the property may be, investors will want to know all the figures. Make sure that the monthly rents are marketed. If you have detailed records of expenses and improvements to the property you should provide these. If you installed a new roof last year, or your property has a 10% cap rate, these are facts the investor will want to know! Make it as easy as possible for an investor to see the financial benefits of your property.
Do you have questions about selling your Austin area rental property? Give me a call, and I’ll be able to help you determine the best strategy for your unique situation.
One great benefit veterans who have previously served or are currently serving our country are eligible for is the Veterans Administration home loan aka a VA loan. The VA loan allows for a zero down home loan for qualified veterans. However, just because you served the country does not automatically qualify you for a home loan. Although the VA does not have specific credit requirements for buyers looking to utilize the VA loan, private lenders facilitating these loans often do. In addition, you will also have to show that you have the financial means to pay the mortgage and home insurance moving forward. That being said, if you have a decent credit score and a debt to income ratio of 41% or less, you will likely be able to qualify for a VA home loan.
There are many benefits of the VA home loan. The most well-known of which is the ability to purchase a home with zero money down. However, veterans who purchase a home with a VA loan also have the benefit of no mortgage insurance (a requirement for home buyers putting less than 20% down with a conventional of FHA loan). Additional protections for home buyers using a VA home loan include limitations on closing costs and prohibiting early payment penalties.
The VA home loan is designed to protect the veteran, and thus there are a variety of property specific requirements for buyers looking to purchase a home with a VA loan. If you are shopping for a home in the Austin area, and are planning to use your VA loan it’s important to understand these requirements so you don’t waste your time looking at properties that may not be eligible to purchase with a VA loan.
Purchasing a New Construction Home with a VA Loan in Austin
If you are thinking of purchasing a new construction home with a VA loan, the builder must be registered with the VA. If the builder is not registered with the VA, that does not necessarily mean that home is off the table. The VA builder registration process is relatively simple, and a VA builder ID can be procured within a week in most cases. However, the builder must be willing to go through this process.
Purchasing an Austin Condo with a VA Loan
If you would like to purchase a condo in Austin using a VA loan, you will need to make sure the condo complex is on the VA’s approved condo list. For a condo to be approved it must meet the following criteria:
Just because a property meets the criteria above does not automatically mean it is eligible for a VA loan. A condo must be listed on the VA’s approved condo list. You can view and search for VA approved Austin condo buildings on the VA’s website.
Minimum Property Requirements to look out for when shopping for an austin home to purchase using a Va Loan
Whether you are buying a new construction home, a condo or an existing home with a VA loan you will need to make sure the property meets the VA’s minimum property requirements. These requirements are designed to protect the veteran from safety related issues as well as future economic burdens. Here are some of the minimum property requirements to look out for while shopping for an Austin home:
This list is by no means exhaustive, but if you are looking to purchase a home in Austin using a VA loan, it should give you a basic idea of what to look out for when considering your options. If you want to utilize your VA loan to purchase an Austin home, I’d be happy to help you navigate the process. Contact me today so we can start working to find the perfect home to meet your needs.
An accessory dwelling unit, aka an ADU, may be the perfect solution to all of your 2020 problems. The idea of a back house is nothing new to the Austin real estate market. They’ve been becoming more and more popular over the past decade as property values have increased throughout central Texas. They are great for buy and hold investors looking to capitalize on their investment by creating more opportunities for rental revenue. Similarly, more and more developers are building two units on one lot and then selling both units separately as detached condos. However, this year, more than ever, the benefits of an ADU as more than just an investment strategy are clearer than ever before.
Our houses have become places for much more than resting our heads at night and gathering for family dinners. Our homes now are someplace we spend the majority of our time. We work from home, workout from home and so much more. With all of the time you are now spending at home, you may have started to feel a bit confined by the four walls and space available. If you’re feeling a bit claustrophobic in your current home, an ADU could help. This accessory dwelling unit could be used as a home office, a class room, a home gym and so much more.
If you’re thinking about building an ADU on your property, you will first want to do your due diligence on if your zoning allows for a secondary dwelling unit. The rules will vary from one municipality to the next. In the City of Austin, they have very clear rules on building an accessory dwelling unit. The rules are based on lot size ( in order to build an ADU you must have a lot size of at least 5,750 sqft ), the property’s zoning, and impervious cover requirements. You can view the complete requirements in the City of Austin’s Land Development Code.
If you determine that you can physically build an accessory dwelling unit on your property, the next step would be to speak to a builder to determine what the costs would be. At this point, it would also be wise to speak with a trusted real estate professional to see if the costs to build an ADU would be recouped when you eventually sell your home. You may determine that building an ADU is not the best economic move, or that the construction timeline is too long to stay sane while doing everything in your current home.
If you still have your dreams set on the idea of a secondary dwelling unit, you could purchase a new home with an existing ADU on the property. There are some properties with secondary dwelling units for sale in the Austin market. There are also other properties, that have a secondary structure that could be remodeled to serve your unique needs.
Here’s a list of Austin area homes with ADU potential currently for sale:
If you’re looking for a home with an accessory dwelling unit in Austin or have questions about building an ADU at your Austin home, feel free to contact me today.
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