If you're thinking of selling your rental property in Indianapolis, now might be the perfect time. Inventory is low, and demand from investors is strong. And when you look at the real estate market stats for Indianapolis, it's easy to understand why:
- Population, employment, median household incomes, and property values are all on the rise in Indianapolis (Data USA).
- Home values in Indianapolis have increased by about 80% over the last 5 years, opening a window of opportunity to sell and turn equity into cash (Zillow).
- Rents in metropolitan Indianapolis are rising year over year, a trend that every real estate buyer looks for (Zumper).
Because Indianapolis has many of the features of a seller's market, you might expect to get several offers when you put your rental property on the market. However, if you want a quick sale at a reasonable price, it's critical to know all of the alternatives for selling your rental property in metropolitan Indianapolis.
Your options for selling rental property in Indianapolis
Selling a rental property that is occupied by a tenant has its pros and cons. Some owners try to get the tenant to leave before the lease is up, but before you do that, make sure you research 2 important things:
- If you want to end the lease early, read it carefully to see what your rights and the tenant’s rights are. In some cases, you can give notice and end the lease agreement. If the tenant has violated a lease term—such as paying rent late— and doesn't agree to leave, you may have the option of starting the eviction process.
- Make sure you know the landlord-tenant laws in Indiana inside and out—it could mean the difference between a smooth sale and a bumpy one. Knowing your state laws will help you understand what your rights and responsibilities are.
After you've determined what you can and can't legally do, the next step is to choose your best options for selling your rental property in Indianapolis:
1. Sell to your tenant
Instead of going through the time-consuming process of listing on the multiple listing service (MLS), why not speak with your tenant and see if they're interested in buying? They just might say yes if they've been renting for a long time.
If your tenant wants to buy, make sure they get preapproved for a mortgage as soon as possible. Also, use the proper Indiana real estate agreement to ensure that both you and your tenant-buyer are protected when you sell to them.
2. Pay the tenant to leave early
You may be able to persuade your tenant to depart before the lease is up with a cash-for-keys incentive if they don't want to buy. A cash-for-keys incentive is a sum of money offered to a tenant in exchange for them leaving the property before the end of their lease.
They'll eventually need to relocate, so agreeing to reimburse their moving costs or assisting with the security deposit for their new home might convince them to move out and allow you time to make necessary repairs in order to put your vacant house on the market.
3. Wait for the lease to expire
There will be times when you may need to wait for the lease on your property to expire before selling it. Even with an active lease, you can put your rental property on the market for sale a few months before it ends.
Give your tenant proper notice before showings and remind them to leave the property in good condition if they want all of their security deposit back.
4. Sell with the tenant in place
If you're looking to sell your rental property in Indianapolis, using an online listing platform like Roofstock is a great option. With a tenant already in place, you can avoid the hassle and expense of trying to convince them to leave. Plus, you may be able to earn a higher selling price for your house when it is occupied by a tenant paying the rent:
- Collect your rental income until the day your transaction is completed.
- Connect with a worldwide network of qualified real estate investors on Roofstock instead of restricting yourself to the local MLS.
- Boost your bottom line by paying a lower real estate commission (3% versus the typical 5% - 6%).
- Make the most of the Roofstock Marketplace by discovering what other rental houses in Indianapolis are going for to make sure you're priced right.
What you should do before selling rental property
There are a few things you'll need to do before going to market if you want to sell your Indianapolis rental property quickly and for an attractive price:
- Include important documents in a buyer package, like a copy of the lease and tenant rent roll, financial reports (such as a profit and loss statement), a list of vendors, and maintenance history.
- Get a professional property inspection and make repairs before putting the property on the market so that buyers don't use needed repairs as leverage to lowball your asking price.
- Talk to your tenants about the sale, showings, and how their lease and security deposit will be transferred to the new owner when the property is sold.
- Estimate your capital gains tax liability and investigate 1031 exchanges as a way to delay paying taxes on the sale by buying a replacement investment property elsewhere in the U.S.
How to price your investment property for sale in Indianapolis
You'll need to find the right balance between the asking price per square foot and emphasizing the property's financial performance. In doing so, you'll be more likely to have a fast closing at a great price:
- Calculate the cap rate by dividing the net operating income (NOI) by the asking price. Compare this ratio to similar properties in your area to ensure you are priced competitively.
- Cash-on-cash (CoC) return can help potential buyers understand how much their down payment will generate if they are financing the purchase. To determine CoC, divide the annual pretax cash flow by the total cash invested.
- After repair value (ARV) of your property is what it would be worth if all necessary repairs were made. This can help buyers understand the instant equity they would receive once repairs are completed.
If you're looking to sell your rental property in Indianapolis, it's important to choose the right option in order to get a fast sale at an attractive price. To get started, get a free price estimate and consultation.