If you're considering selling your rental property in Detroit, now might be a great time to do it. With low inventory and high demand from investors, the market looks favorable for sellers. And when you look at the real estate market stats for Detroit, it's easy to see why:
- Employment, median household incomes, and property values are all on the rise in Detroit (Data USA).
- Home values in Detroit have increased by more than 124% over the last 5 years, with sellers seizing the opportunity to sell and turn equity into cash (Zillow).
- Rents in metropolitan Detroit are rising year over year, a trend that every real estate buyer loves to see (Zumper).
The housing market in Detroit is still pretty competitive, with some homes receiving multiple offers and going under contract quickly. However, before you list your home, understand your options for selling your rental property with a fast closing and for an attractive price.
Your options for selling rental property in Detroit
Selling a rental property currently occupied by a tenant has its own set of pros and cons, which is one reason some landlords try to get the tenant to leave before the end of the lease. However, it's important to think things through and do your research on 2 key topics:
- Review your current lease agreement to understand landlord and tenant rights. Some leases allow for early termination with proper notice. In other cases, you may need to pursue eviction if the tenant has violated a lease term—such as not paying rent on time—and they don't agree to leave.
- Familiarize yourself with landlord-tenant laws in Michigan to ensure that you're following all the rules and regulations.
The next step is to decide how to sell your rental property:
1. Sell to your tenant
Instead of spending precious time listing your property on the multiple listing service (MLS), simply ask your tenant if they’d be interested in buying. If they’ve been renting for a while, they may be interested.
When you sell to your tenant, make sure they get preapproved for a mortgage as soon as possible, and be sure to use the right real estate contract for selling a home in Michigan to ensure that both you and your tenant-buyer are protected.
2. Pay the tenant to leave early
If your tenant doesn’t want to buy, you could try convincing them to leave before the lease is up by offering a cash-for-keys incentive.
Eventually, they will need to move anyway, so agreeing to pay for their moving expenses or helping with the security deposit for their new place can get the tenant out and give you time to make any needed repairs before listing your vacant property for sale.
3. Wait for the lease to expire
Sometimes you may just have to wait for the lease to expire before selling your property. Of course, you can put your rental property on the market a few months before the lease is up.
Always give your tenant proper notice before showings, and remind them they need to leave the property in good condition when they move out if they want to get all of their security deposit back.
4. Sell with the tenant in place
Many property owners who sell a rental property in Detroit use an online listing platform like Roofstock. It's simple to market your property when you have a tenant, and you'll save time and money instead of persuading the tenant to leave:
- Continue to collect rent until the deal closes.
- Market to a larger pool of potential buyers (including out-of-state and international investors).
- Enjoy a competitive real estate commission (3% as opposed to the usual 5% to 6%).
- Research what other comparable properties are selling for in Detroit on the Roofstock Marketplace so you can price yours competitively.
What you should do before selling rental property
If you're looking to sell your rental property in Detroit, there are a few things you should do to ensure a quick and top-dollar sale:
- Compile a buyer's package with important documents like a copy of the lease, tenant rent roll, financial reports, vendor list, and maintenance history.
- Have a professional inspection and make necessary repairs so buyers don't try to lowball your price.
- Explain the sale to your tenants, including showings and the process for transferring their lease and security deposit.
- Calculate your potential capital gains tax liability and explore 1031 exchanges as a means of deferring capital gains taxes by reinvesting the proceeds into another similar property.
How to price your investment property for sale in Detroit
You can price your investment property using a variety of methods, including the cap rate and cash-on-cash return. You can also sell your property as-is or after making repairs. The important thing is to find a selling method that will help you get a fast closing and a great price:
- Cap rate is a measure of a property's potential return on investment (ROI) and can be used to price a rental property by comparing your home to similar listings.
- Cash-on-cash return measures the amount of money a buyer will make from their down payment and can be used to attract buyers who are interested in financing their purchase.
- After repair value (ARV) is the value of a property after repairs have been made and can be used when selling a property as-is instead of making repairs.
Get a free price estimate and consultation for your Detroit property. This can help you determine the best asking price for your rental property. With the right pricing, you can sell quickly and at a great price.