To Sell or Rent Your Rehab? That is the Question
If you have a tenant move out of an apartment or home that you rent out, it is usually during that time that you ask yourself a simple question: am I fixing this up to sell or am I fixing it up to rent out again? Every time you have a completely empty building, you start to question whether or not you want to sell and move onto something else.
If you are shifting from flipping to rent to flipping to sell, there are a few things you need to consider before making that decision.
Scope of Rehab
If you start flipping a property to sell, chances are that it will cost more and take more time than just fixing it up to rent again. When you are planning on renting again, you have to worry about updating some things that are out of date, changing the carpets, and putting a fresh coat of paint on the walls but when you are flipping a property to sell it, you will have to upgrade many more features the buyers want to see so that the property moves quickly and at a higher price.
What Do I Need to Rehab in my Rental to Sell It?
There are a lot of things you need to think about when rehabbing your rental to sell it. Do you change up the paint colors? What about the floors? Should you include the furniture or appliances or can you move them somewhere else? What upgrades have to be done to get the home to code?
Another question is where should you do the upgrades. Depending on how long you’ve had the rental property, transforming it into a property that can be sold is difficult. The garage will probably need a lot of work, as well as the kitchen. But what about bedrooms? Or the basement? You’ll have to determine where your money goes the farthest and appeals to the most buyers. Making a decision to upgrade only part of the property will have an impact as well. You shouldn’t have a really great kitchen with premium upgrades and then a living room that is boring or a bathroom that looks like it is from the 1970s. Is that what buyers would want to see?
Things to Think About Before Selling a Rental
One of the biggest concerns people have when selling their rental properties is the tax situation. If you sell and settle a house within a year of purchase, you have to pay short-term capital gain tax. If you go over, the taxes are cut in half because it is considered a long-term capital gain. You have to think about Uncle Sam when selling your rental.
You also have to consider when you are trying to sell. Make sure to talk to a real estate professional about the best time to sell your home so that it doesn’t sit on the market and you don’t have to continue paying for your monthly expenses for an entire season. If that happens to you, you might consider renting it for a short time, but then you have to worry about the new tenant destroying your work.
Overall, you really have to make the decision for yourself – should you sell your rental property or keep it as a rental? Since you bought the rental, your life has probably changed quite a bit and you will need to consider your current lifestyle to see if this is the last time you want to flip everything or if you can see yourself doing it again and again.