How to Sell a Rental Property in Dayton

The rental property market in OH continues to be competitive, with quality rental properties selling in as little as 30 days. Seeing what local houses are selling for in the area may cause some landlords to decide to jump on the bandwagon and sell so they can move on to their next investment. But how can you get the most money possible for your property in today’s market? Find out more below.

Why Sell a Rental Property?

Investing in real estate, especially rental properties, remains one of the most reliable ways to build wealth in today’s dynamic economy. As the demand for housing continues to surge across many regions, owning a rental property offers a lucrative opportunity for both long-term and short-term investors. Whether you’re aiming to generate steady monthly income or capitalize on rapid property appreciation, real estate investing can significantly diversify your financial portfolio and provide a hedge against market volatility.

Even if your strategy leans toward short-term investment, the consistent rise in property values nationwide makes rental properties a compelling option. This appreciation not only increases the value of your asset but also enhances your potential returns when it’s time to sell. However, maximizing your profits involves more than just choosing the right property—it requires smart financial planning.

Before you put your investment property on the market, it’s crucial to manage the sale in a way that minimizes your tax liabilities while maximizing your overall gain. Understanding applicable tax deductions, capital gains implications, and strategic selling options will help you keep more money in your pocket and ensure your real estate ventures remain highly profitable.

Options When Selling a Rental Property

Selling a rental property in OH may seem straightforward—just place a For Sale sign and list it on the MLS—but the process can quickly become more complex if your property has tenants with an active lease. Each county and city in OH can have distinct rules and regulations governing the sale of occupied rental properties, making it essential to stay informed about local, state, and federal requirements before moving forward. Understanding tenant rights, required notices, and your obligations as a landlord will help you navigate the sale smoothly while maintaining good tenant relations. Fortunately, despite the complexities, you have several viable options to sell your rental property effectively without violating any laws or disrupting your tenants unnecessarily.

Waiting for the Tenant’s Lease to Expire

If you’re in no rush and have time, waiting for the Tenant’s lease to expire might be your best option for the sale of that rental property. Not only will you be able to continue to collect your monthly rental revenue, but you’ll have time to find the right real estate agent to sell your home or a savvy investor that has cash in-hand and is ready to buy right now. Waiting for the lease to expire may also allow you to avoid dealing with awkward showings while the renter is still in the property, or an angry Tenant who decides to take steps to not allow the sale of the home.

Pay the Tenant to Vacate

Even if this is required by county, city, or OH law, offering cash to your renter(s) to break their lease and/or move is a fast and straightforward option for getting a Tenant out of the home. Not only that, but paying cash to vacate your rental property can be beneficial to both you and your Tenant. In these situations, a landlord and their Tenant(s) come to a monetary agreement that allows for the lease to be broken with no legal repercussions. This is a win-win for both parties; you get to put the rental for sale on the date of your choice and your renters have a cushion for moving on to their next home.

Sell the Property to Your Tenant

Maybe you’ve grown tired of owning a house that is aging and needs expensive maintenance and repairs you don’t have the time, energy, or funds to complete. Or perhaps you’ve decided to move on to your next investment but you’d like to see the rental property stay in the hands of someone you trust. That’s when selling the property directly to the current occupants of the house might be a great option! Whether it’s done as a traditional home sale or as a lease-to-own situation, you’ll no longer have to deal with the hassle of that unwanted rental property while still profiting from any appreciation on the property during the time you owned and managed it.

Sell the Property with an Active Lease

If you’re ready to sell your rental property but still have an active lease in place, don’t worry—you absolutely can sell it! Selling a tenant-occupied property can actually be appealing to certain buyers, especially investors looking to add a cash-flowing asset to their portfolio without the hassle of finding new renters.

Investors often prefer properties with reliable tenants who have a strong rental history, including timely rent payments, a security deposit on file, and proper care of the property and surrounding grounds. These factors make your property a turn-key investment, increasing its attractiveness and value to potential buyers.

Sell Your House to Wright Home Offer

For many real estate investors, selling a rental property the traditional way can be time-consuming and stressful, especially when tenants are involved. If you want a smooth, straightforward sale without the headaches of listing, showings, or repairs, consider selling directly to Wright Home Offer. We specialize in buying houses for cash, including tenant-occupied properties, providing you with a fair offer and a quick closing process. Let Wright Home Offer take the hassle out of selling your rental property so you can focus on your next investment opportunity.. 

When to Sell a Rental Property in Dayton? 

Is there a perfect moment to sell your rental property? The answer often boils down to when you personally feel ready to make the move. Whether you’re a landlord feeling overwhelmed by the demands of property management or an investor eager to capitalize on your rental’s appreciation to fund your next opportunity, the ideal time to sell varies from one owner to another. Sometimes, rental properties can become financial burdens, especially when repair and maintenance costs start to exceed the rental income. Whatever your reason for selling, it’s important to carefully weigh several key factors before deciding if now is the right time to put your rental property on the market:

Equity Level is High on the Rental Property

New data by the Federal Reserve shows that the national median home price has risen 42% since January 2020*. If you are looking to invest in new properties or would like to diversify your investment portfolio, now might be a good time to turn that home equity into cash while home prices remain high.

Housing Demand is Strong 

Whether you’ve heard it online, on the news, or in your local paper, despite inflation the demand for housing is still exceeding the supply for homes in cities and suburbs all across America. Realtor.com’s June 2023 Housing Report shows that homes are selling fast amid the continued inventory crunch. For the month of June, the total number of unsold homes, including homes that are under contract, decreased by 4.6% compared to last year. With 25.7% fewer homes newly listed for sale compared to last year, it’s no surprise most homes spent only 44 days on the market.

Market Dynamics are Changing

Also included on the Realtor.com housing report was that the median price of homes for sale decreased by -0.9% annually in June, which is the first decline seen in the data trend history since 2017. Does this mean investors that want to make a profit from their property should panic? Not necessarily. Estimates are modest for any possible downturn in housing prices over the next few years. Realtor.com noted that by the end of the month, inventory had actually declined for the first time since April 2022. But there may be other factors at play in your area. With many cities experiencing an influx of new construction, you might be finding it harder to rent.

Rising Interest Rates

If you’re planning to sell your rental property and reinvest in another, monitoring mortgage interest rate trends is crucial. Increasing interest rates can significantly impact the affordability of financing for potential buyers, reducing the pool of qualified investors in the market. This dip in demand often leads to lower property values, which may affect your selling price. The historic lows seen in 2021 have given way to much higher rates—currently, a 30-year fixed mortgage can reach up to 7.8% or more, making borrowing more costly for everyone involved.

Property Requires Repairs – Escalating Maintenance Expenses

Over time, rental properties inevitably endure wear and tear from successive tenants. If you’re managing a home, condo, or multi-unit building with mounting repair costs, it might be financially prudent to consider selling rather than sinking more money into costly updates. Major expenses like replacing an aging water heater, fixing a damaged roof, or upgrading an outdated HVAC system can quickly erode your profits. Evaluating whether it’s more economical to sell—even if that means accepting a slightly lower offer—can help you avoid turning your investment into a continual money pit.

Steps to Take Before Selling Your Rental Property 

Identify Target Buyer

Are you considering selling your rental property to another investor, or would you rather offer it directly to your tenant or perhaps a family eager to buy their first home? Knowing who your ideal buyer is can make all the difference in how you approach the sale. Identifying your target market early on helps you set a competitive and realistic asking price, tailor your marketing efforts, and ultimately close the deal more smoothly. Whether you aim to attract seasoned investors looking for income-generating properties or owner-occupiers searching for a place to call home, understanding your audience is key to maximizing your property’s appeal and achieving your selling goals.

Decide on Your Pricing Strategy

When preparing to sell your rental house, condo, or any investment property, it’s important to clarify your primary goal. Are you aiming to maximize your profit and willing to wait for the right buyer? Or is a fast, hassle-free sale more important to you? Additionally, consider whether the property will be vacant at the time of sale or if there’s an active lease in place, as this can significantly influence buyer interest and offer amounts. Understanding these factors early on will help you tailor your selling strategy effectively, ensuring you meet your financial and timeline expectations while navigating the complexities of selling an occupied or vacant rental property.

Buyers Inspection and Do Repairs

If your goal is to maximize profit from selling your rental property, it’s crucial to avoid surprises during the appraisal and buyer’s inspection. Preparing your property thoroughly before listing it can make all the difference. Ensure that all systems are functioning properly and that the property complies with local building codes. Hiring a seasoned real estate broker can provide valuable insights into market expectations and help you price the property competitively. Additionally, investing in a pre-listing inspection allows you to identify and address any issues early, preventing last-minute repair demands and lengthy negotiations. This proactive approach not only smooths the selling process but also increases buyer confidence, helping you secure the best possible sale price.

Run a Lien Search

Do you still have an outstanding mortgage or loan on your property? If so, your lender likely holds a lien on the title until the mortgage is fully paid off at closing. This lien must be cleared before the sale can be finalized. However, there could be other hidden liens or claims on your property that you might not be aware of. To avoid surprises during the selling process, it’s a smart move to have an escrow officer conduct a comprehensive title search. This search will reveal any existing encumbrances, such as unpaid taxes, contractor liens, or judgments, that must be resolved prior to listing your home. Addressing these issues ahead of time ensures a smoother sale and prevents delays when closing your property sale.

Inform Tenant

When selling a rental property, it’s essential to be diplomatic and transparent with your tenants. Most states legally require landlords to inform existing tenants well in advance that the property will be going on the market. Providing clear, timely notice helps maintain a positive landlord-tenant relationship and reduces potential conflicts.

To ensure a smooth process, notify your renters as early as possible about your plans to sell. This approach not only fosters goodwill but also gives tenants ample time to prepare for showings or potential changes. Staying informed and compliant with your specific state and local landlord-tenant laws is critical to avoid any legal issues or misunderstandings during the sale.

Remember, tenants might have varied experiences with rental properties being sold—some may be familiar with the process, while others might find it unsettling or stressful. Reassure them that the sale will not disrupt their current lease terms, and their security deposit will be fully transferred to the new property owner. Clear communication helps ease tenant concerns and ensures the sale moves forward smoothly with their cooperation.

Analyze Capital Gains

When you sell your rental property, it’s important to understand that you may be liable for taxes on both depreciation recapture and any capital gains realized from the sale. This tax obligation often causes many investors to hold onto their properties longer than necessary, driven by concerns about losing a significant portion of their profits to capital gains tax. However, there are effective strategies to minimize or even defer these taxes, allowing you to maximize your investment returns.

During the time you hold the property, depreciation expenses help lower your taxable rental income, providing valuable tax relief each year. Yet, when you eventually sell, the IRS requires you to “recapture” the depreciation deductions you claimed, taxing them as ordinary income at rates up to 25%. This depreciation recapture can take a sizeable chunk out of your profits if you’re not prepared.

Fortunately, one of the most powerful tools to defer capital gains and depreciation recapture taxes is the 1031 exchange. By reinvesting the proceeds from your sale into a “like-kind” replacement property within 180 days, you can postpone paying these taxes. This tax-deferred exchange helps real estate investors continue building wealth by rolling gains into new investments without immediate tax consequences.

If you’re considering selling your rental property but want to avoid heavy tax burdens, exploring a 1031 exchange with a qualified real estate professional can help you make the most of your investment. Planning ahead and understanding these tax strategies can save you thousands and accelerate your portfolio growth.