How to successfully sell your rental property in Birmingham

Current market conditions in Birmingham could make it a great time to sell rental property. Low inventory and high demand from investors are driving up prices, so now might be the opportune time to take advantage of these appealing market trends:

  • Median household incomes and property values are on the rise in Birmingham (Data USA).
  • Home values in Birmingham have increased by about 90% over the last 5 years, creating an opportunity to sell and turn equity into cash (Zillow).
  • Rents in metropolitan Birmingham are rising year over year, a key statistic that every real estate buyer looks for (Zumper).

Since there is high demand for rental properties in Birmingham, you may receive multiple offers when you list your property for sale. However, it's still a good idea to understand all options for selling your rental property in the greater Birmingham area so you can sell quickly and at a fair price.


Your options for selling rental property in Birmingham

Selling a rental property occupied by a tenant has advantages and disadvantages, and some owners try to get the tenant to leave before their lease is up. But you should think things through and research 2 important things before taking this step:

  • Understand your rights and the tenant's rights as laid out in the current lease agreement. In some cases, you may be able to terminate the lease early with enough notice. However, if the tenant has violated a lease term—such as paying rent late—and doesn't agree to leave, you may need to pursue eviction.
  • Familiarize yourself with landlord-tenant laws in Alabama to avoid any legal trouble. 

The next step is to decide which option is best for selling your rental property in Birmingham:

1. Sell to your tenant

If you're looking to sell your property without going through the hassle of listing it on the multiple listing service (MLS), why not try approaching your tenant? They might be interested in buying if they've been renting for a while.

When you sell your home to your tenant, it's important to ensure they get preapproved for a mortgage immediately. In addition, using the right real estate contract to sell a home in Alabama will help to protect you and your tenant-buyer.

2. Pay the tenant to leave early

If your tenant doesn't want to buy, you may be able to convince them to leave early by offering a cash-for-keys incentive. You could agree to pay for their moving expenses or help with the security deposit for their new place in exchange for leaving the property early. 

This can benefit both parties, as the tenant gets help with their move, and you get your property back sooner, with time to make any needed repairs before listing.

birmingham al skyline at night

3. Wait for the lease to expire

You may need to wait until the lease expires. You can still put your property on the market a few months before the lease ends, but you must give your tenant proper notice before showings. 

Also, remind them that they must leave the property in good condition when they move out if they want to get their security deposit back. In some states, landlords can deduct the cost of repairing damage caused by a tenant from the security deposit.

4. Sell with the tenant in place

If you're a property owner in Birmingham looking to sell your rental property, listing it on an online platform like Roofstock is a great option. Not only is it easy to sell your house with a tenant in place, but you can also avoid the hassle and expense of trying to convince the tenant to leave:

  • Get your rental income until the day your transaction closes.
  • Reach a global network of qualified real estate investors on Roofstock versus limited exposure on the local MLS.
  • Pay a potentially lower real estate commission (3% versus the typical 5% to 6%) and keep more of your money to improve your return on investment (ROI).
  • Research the Roofstock Marketplace to see what other rental properties are selling for in Birmingham and make your asking price competitive.


What you should do before selling rental property

If you want to sell your rental property in Birmingham quickly and for a nice potential profit, there are several things to do before listing:

  • As a seller, you can make your property more attractive to buyers by taking care of necessary repairs and improvements and providing a package of important documents, including a copy of the lease, tenant rent roll, financial reports, and a list of vendors.
  • You can ensure a smoother transition for tenants by informing them of the sale in advance and explaining the process for transferring their lease and security deposit to the new owner.
  • Be sure to calculate your potential capital gains tax liability and explore the possibility of using a 1031 tax-deferred exchange to delay paying the tax. A 1031 tax-deferred exchange is a way to delay paying capital gains tax by reinvesting the proceeds from the sale of a property into another similar investment property.


How to price your investment property for sale in Birmingham

When determining the asking price for your rental property in Alabama, it's important to find a balance between pricing per square foot and touting the financial performance of your property. Doing so will help you attract buyers and close on a sale quickly:

  • Cap rate is the ratio of net operating income (NOI) to asking price. To ensure that you are competitively priced, divide the NOI by the asking price and compare it to similar properties for sale in your market.
  • Cash-on-cash return can help potential buyers understand how much money their down payment will generate when they finance their purchase. It's a helpful metric for buyers to understand how their down payment will generate income and compare properties.
  • After repair value (ARV) is used to determine what the value of your property would be after repairs are made if you cannot afford to make all the repairs yourself. ARV shows what a property could be worth and the instant equity buyers would receive if they purchased your home.

If you're looking to sell your rental property in Birmingham, choose an option that will help you get a fast sale at a great price. To start, get a free market analysis and consultation for your property.


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This article, and the Roofstock Blog in general, is intended for informational and educational purposes only, and is not investment, tax, financial planning, legal, or real estate advice. Roofstock is not your advisor or agent. Please consult your own experts for advice in these areas. Although Roofstock provides information it believes to be accurate, Roofstock makes no representations or warranties about the accuracy or completeness of the information contained on this blog.
Jeff Rohde


Jeff Rohde

Jeff has over 25 years of experience in all segments of the real estate industry including investing, brokerage, residential, commercial, and property management. While his real estate business runs on autopilot, he writes articles to help other investors grow and manage their real estate portfolios.

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