Home Buying & Selling How To Boost Profits When Selling Your Investment Property

How To Boost Profits When Selling Your Investment Property

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In this ferocious market that most of the United States is currently experiencing, you may want to cash your investment, value it (in some cases) extremely, and move it to another investment. Perhaps you are tired of tenants and toilets and want to look up your notes instead. You may also want to explore larger properties or participate in syndication transactions.

You may want to list your properties and get rid of them, but a little planning can save you time and money.

Sale of rental properties

As market conditions are getting better, it’s time to evaluate your portfolio and sell off some of those dogs. Properties that don’t work as expected, properties that are difficult to rent for some reason, or just strange properties. No matter how good those numbers look when analyzed, the properties may not work well.

If your market is improving, now is a great time to sell. But do you want to deploy and sell tenants or wait until they are empty?

Occupied anti-vacant seat

Both methods have their strengths and weaknesses. Selling an occupied property means that someone is there to file an invoice while you list, sign a contract, and close the property. If you sell to another landlord, they have one less thing to do after closure. A good tenant with on-time rent payment records can greatly contribute to sales.

But when someone is looking for a home to live in, the occupied property is not ideal. Properties that are closed for rent the following month can continue to be marketed in the hope of attracting homeowner buyers, but generally marketing to a crowd of investors when trying to sell an occupied property. .. This is not all bad. Investors understand tenants. But investors also want to trade.

Related: Five important items to consider before selling a rental property

Keep these things in mind when selling an occupied rental property.

  1. Tenants cannot be expelled before the debt runs out. Leasing is done on the property, not the owner. If you have 6 months left to rent and the resident wants to stay, we will not be able to deliver the vacancy when the store is closed. You can offer to buy a tenant, but if they say no, you’re out of luck.
  2. Please cooperate with the tenant. If you try to sell a property that has a resident, your resident, not you, will find it inconvenient. It is also in the driver’s seat. If they don’t clean their units before the screening, you’ll get a much lower offer. If it is difficult to display the property, there may be no offer. Consider offering a rent discount for the screening or coordinating the weekend screening to minimize their inconvenience. Ask people when they want to see the property and accept screenings only during that time.
  3. Sweeten your deals with great records. The landlord cares about profits. It’s great to tell someone that your rent is $ 1,000 a month, but it’s even better to be able to support that statement with written proof. Ask the tenant to fill out an estoppel statement stating the amount the tenant is paying for the rent and the amount of the security deposit. Anyway, you should keep a good record as a landlord. Then show potential buyers your tenant’s payment history, along with cost and repair records.

Vacant properties are much easier to sell, but you pay for everything until you close. All utility bills and external maintenance that may have been paid by the tenant now rests on your wallet. You also need to secure assets. Without anyone living there, you are more likely to be the target of copper thieves and squatters.

However, when it’s free, I can accept the screening at any time of the day or night, and I know it’s clean because no one gets dirty.

Determine the best one for your sales period.

Legally avoid taxes

As of this writing (late 2017), there are two legal ways to avoid paying taxes when selling real estate. Both seem to be heading towards a change in the new tax bill, but it hasn’t changed yet. Be sure to check with your certified accountant for the latest tax information. There is no set time to change this.

Section 121 exclusion

The exclusion of Section 121, more commonly referred to as the “Rule of 2 out of 5”, is based on the Taxpayer Relief Act of 1997. Before the law, you had to buy a more expensive home to postpone the capital gains tax. However, Section 121 has abolished the capital gains tax of up to $ 250,000 for a single homeowner and up to $ 500,000 for a married homeowner.

But there are pitfalls. (This is a government program. Of course, there are pitfalls!)

  1. This is only available in your primary residence. You must have lived and owned this property for 2 of the last 5 years. You can use it to sell rental properties, but only if you meet the residence requirements of 2 out of 5 years.
  2. This can only be done once every two years. These two years do not have to be continuous. You can split them. The time spent in the property should be exactly equal to two years.

Meeting these requirements can save you a lot of money. If you’re shy about the requirements, it’s worth going back to the properties to make sure you meet all the requirements.

You should definitely consult with the CPA before applying for this tax exemption, especially if you are in doubt about whether you meet the requirements.

1031 exchange

The 1031 exchange is far more likely to qualify for the sale of investment property. This does not exempt you from capital gains taxes like the exclusions in Section 121, but it postpones them and essentially kicks the tax-possible in the future.

Again, this is a government program, so there are rules. Lots of rules. If you forget to dot only one “i” or cross only one “t”, the avoidable capital gains tax will blow everything out of the water. Nor is the rule a “common sense” rule. No, it’s a government program with government bureaucratic formalism, and it seems to have been drawn from a seemingly creepy place for no logical reason.

First, you need a qualified intermediary to facilitate your transactions. If you are planning a 1031 replacement, start looking for a QI now.Ask for recommendations at Bigger Pockets Forum For a reputable QI. Once you have decided on a QI, follow all directions and ask as many questions as you need to understand the process.

There are strict dates you have to follow, forms to fill out, and documents to submit. The QI must be included in the sales transaction before it is closed, and it must also be included in the purchase.

Do not consider this overview as the Gospel, as the requirements are very complex. Anyway, you need a QI involved in the sale and subsequent purchases. Be sure to follow their instructions. However, here is a brief overview.

  1. You need to buy an expensive property of equal or greater.
  2. You must spend all of your net income from the sale for a new purchase.
  3. You must identify a new property within 45 calendar days after the current property is closed.
  4. The new property must be closed within 180 calendar days of the closure of the previous property.
  5. You must own the previous property as an investment property.
  6. You need to buy a new property as an investment property.

There are many other rules to follow, and QI will guide you through the process. However, in order to take advantage of any of the 1031 redemption benefits, QI must be involved in the sale of the current property. Do not sell your investment property without consulting a certified accountant and a qualified intermediary.

House to sell or rent

Sale of fix and flip

There is such satisfaction in transforming an ugly house into a beautiful and modern home. If you do it right, there’s also a great, fat salary at the end. This is my preferred investment method and is combined with the exclusions in Section 121 to eliminate capital gains taxes. However, this is a plan I have been running since I bought the property. If you haven’t lived in your house for two years, you can’t abolish capital gains tax.

You can still move there, live there for two years, and then sell. The clock is ticking when you actually move, not when you buy a house, so you’re adding two years to your sales timeline. Not everyone’s timeline takes two years.

Related: The people who need to participate to sell the property quickly are:

Needless to say, don’t cut corners or do rough work. Of course, every time I say “not to mention”, I have something to say. Don’t do bad work, and don’t let your contractor run away with sloppy work.

There is a debate about whether you should start marketing your property before you complete the remodeling. It costs minimal to plant a sign that says “coming soon” in the front yard, but the buyer’s imagination is zero and seeing what the house looks like during rehab is It may be too much for some people.

Don’t advertise the flip until you’re done. There are too many bad reactions from potential buyers who do not understand the process.

Here are some tips for selling a flipped home after the rehab is complete.

  1. Stage the property. Most people can understand what to do with a master bedroom or living room, but those strange spaces and strange corners can be confusing. The buyer has no imagination. What you can do to visualize these spots that are not obvious will help you sell your home faster.
  2. Make a binder about the house. This binder contains all appliance manuals (including installation notation if available), all warranty information, the name of the contractor used, and other relevant information about the property.
  3. List (almost) everything you have done. Not all improvements are obvious, but that doesn’t mean they aren’t important. The new doorknobs and lighting switch covers aren’t something everyone cares about or notices. On the other hand, new electrical services and plumbing work are not visible, but it is very important to be careful. Go through the house from room to room and pay attention to everything you have done, especially unclear repairs. When you recently bought a home and are asking for a much higher amount than you paid for it, you want to fully clarify why you are asking for so much in your home. Put a copy in the binder, print it, put it in a frame, and keep it in a very easy-to-understand place in your house during the show.

Market timing

For every investor who sells at the very peak of the market, there are 12 billion people who miss that peak on either side. Okay, it’s a statistic made up, but I’m trying to prove the point. The market cannot be timed. Trying to do so is a futile movement.

Someone is everytime Immediately after your home closes, I will sell your home at a higher price than you.

Someone is everytime Sell ​​real estate just before you do for more money you can get.

Sell ​​because you are happy with your earnings. Sell ​​because you want to own something different. I sell because I need to cash out, but not because I’m trying to time the market, but because it’s time to sell.

Selling your home can be overwhelming. There are lots of things you have to do, what you know, and all those scary forms you have to fill out.With her new book How to sell your homeAgents and Investors, Mindy Jensen will guide you step-by-step from preparing your home for sale to choosing the right agent for you, closing procedures, and beyond.

Scheduled to be released on January 11, 2018, Book this book now!

How to Sell Your Home Advertising v2

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