How to sell my rental

Question

Not sure if this is the most appropriate forum but...

I have a rental with a low return on equity that I need to sell. The buyer will most likely be an owner-occupant, as the numbers don't really make sense as a rental, which is why I'm selling. What's the best strategy for getting the house sold? The tenant is month to month now. Should I get the tenant out first? Or should I try to sell with the tenant there?

A couple notes:

• This is an out-of-state rental (Wichita, KS), about 2.5 hrs away, and is being managed by a local property manager. 
• I do have a few items that I probably need to address to fetch top dollar for the house. Nothing that I would require the place to be vacant though. Maybe replace a few windows, and possibly a furnace. 
• This house has a mortgage. So I would have to pay the mortgage myself if I gave notice to the tenant. I can afford it, but I would rather not if it's not necessary.

John Henderson · Answer

@Aaron Jones  As others have stated, selling to another investor maybe a good way to go, but if it isn't, then a FSBO can be another option for you.  It is a sellers market and some small repairs may be overlooked especially when a home warranty is added into the deal.  It seems like selling the house with tenants will add DOM which may or may not be an issue.  But as we get closer to winter and the market slows down it might become a factor. Saving the 3-6% in realtor fees by selling it yourself might be easier than some think.  With the addition of the FB pages, CL, FSBO .com, Zillow, finding a buyer is easier these days, I've found adding info about paying the buyer's commission in the ad will gain more support from realtors.

Jimmy Davis · Answer

Here's an idea...especially if your furnace may be going out.  Add a home warranty to the property.  This is a change we've made on our rentals.  If it's a problem or service call that resulted from the tenant then they pay the deductible...if it's on me then I pay for it.

And you should be cash flowing a little bit here in the Wichita market...We have a pretty healthy rental market here.

Shane H. · Answer

@Aaron Jones

Depending on the area of town when you are ready to sell message me - I could recommend a realtor or two.  There's a few who specialize in certain price points, parts of town etc...and can steer you along the way

Aaron Jones · Answer

Thanks for your responses!

@Jared Viernes As for price point, I'm at about the $100k range. I think I still leaning toward releasing the tenants. But perhaps doing so in the spring, around March or April. Would say that'st the best time to be on the market? Or maybe early summer?

@Patrick Purviance PM sent.

Patrick Purviance · Answer

@Aaron Jones  I'd like to know a little more similar to Ben and Diego, as I'm also in the Wichita market as an investor. You never know til you ask...

Aaron Jones · Answer

@Diego Diaz Thanks for your advice. I've sent you a private note.

As for why it's not working out, well, I finally found a decent PM, (I use Cedar Mills Property Management) so that's no longer an issue. But I'm only breaking even on Rent less PM fees vs Mortgage. And I'm coming out of pocket for maintenance and repairs. So the numbers don't really work for me, and I know I can put my equity to work elsewhere and get a better return.

Diego Diaz · Answer

Hello Aaron,

Since your tenant is on a month-to-month lease I would recommend to try to sell it while the tenant is still occupying the house if your lease has provisions to let you show the house while being occupied. There are two main benefits:

1) you do not loose the rent income while trying to sell the house. Most owner occupants do not care that the house is still occupied and are willing to close in 40 days. That why you give the tenant the 30-day notice once you put the house under contract and have a time buffer before closing.

2) I would not discard right away that an investor will not be interested and buying the house, specially when having a tenant in place is always a plus. This house might not be working out for you, but it might work for other investor, you'll never know until you try.

I am curious to know why this is not working out for you. What property management company are you using? I ask because I also have my properties in Wichita managed and have come to realize it is very hard to find a good property manager. As @Ben Relph was asking, it would be good to know the sell price, rent and location to have a better idea of what you're dealing with.