If you're looking to sell your rental property in Kansas City, MO, now might be a great time. Low inventory and high demand from investors have made for a seller's market in KC:
- Population, employment, median household incomes, and property values are all on the rise in Kansas City (Data USA).
- Home values in Kansas City have increased by about 78% of the last 5 years, with sellers seizing the opportunity to sell and turn equity into cash (Zillow).
- Rents in metropolitan Kansas City are rising year over year, with 45% of the households occupied by renters, 2 statistics that every real estate buyer loves to see (Zumper).
All of these trends point to one thing: Kansas City is a great place to sell right now if you're looking for a fast sale at a fair price. The good news is that selling your rental property in Kansas City doesn't have to be a difficult or stressful process. With a little preparation and understanding of the market, you can sell quickly and get a great return on your investment.
Your options for selling rental property in Kansas City
Selling a rental property that is currently occupied by a tenant has its advantages and disadvantages, which is why some landlords try to get the tenant to leave before the lease expires. However, before taking this step, it is important to think things through and do your research on 2 key aspects:
- Review your current lease agreement to understand what your rights are as well as the tenant’s rights. In some cases, the lease may allow you to terminate the agreement early with enough notice. Alternatively, you may need to pursue eviction if the tenant has violated a lease term – such as paying rent late – and they refuse to leave voluntarily.
- Familiarize yourself with landlord-tenant laws in Missouri to ensure that you follow all the rules and regulations.
After you understand what you can and cannot do legally, the next step is to decide on the best course of action for selling your rental property in Kansas City. Each option has its own advantages and disadvantages, so it’s important to weigh all your options carefully before making a decision.
1. Sell to your tenant
If you're looking to sell your rental property in Kansas City, one option is to sell directly to your tenant. This can be a great way to avoid having to go through the hassle of listing your property on the multiple listing service (MLS).
But before you do, make sure that your tenant is preapproved for a mortgage and that you're using the right real estate contract for selling a home in Missouri. This will help protect both you and your tenant-buyer.
2. Pay the tenant to leave early
If your tenant doesn’t want to purchase the property, you may be able to convince them to leave before the lease is up by offering a cash-for-keys incentive.
Cash-for-keys incentive is an agreement between the landlord and tenant where the landlord provides financial assistance in exchange for the tenant's return of the rental property keys. This type of arrangement is often used as a way to get tenants to vacate a rental unit early so that repairs can be made prior to listing the home for sale.
3. Wait for the lease to expire
There may be times when you need to wait until the lease expires. Usually, you can list your rental property a few months before the lease is up.
Always give your tenant enough notice before showings, and remind them they need to leave the property in good condition when they move out if they want to get their security deposit back. In some states, landlords are allowed to withhold part or all of a tenant's security deposit to pay for damage caused by a tenant that is not normal wear and tear.
4. Sell with the tenant in place
When selling a rental property in Kansas City, many property owners use an online listing platform like Roofstock. This way, they can sell their house with a tenant in place and save the time and expense of trying to convince the tenant to leave. Some benefits of using Roofstock include:
- Collecting your rental income until the day your deal closes
- Having your house seen by a global network of qualified real estate investors (as opposed to just those in the local MLS)
- Paying a competitive real estate commission
- Staying ahead of the competition by seeing what other properties in Kansas City are selling for on the Roofstock Marketplace
What you should do before selling rental property
To help sell your rental property in Kansas City quickly and for a high price, follow these 4 steps:
- Gather together important documents related to the property, such as a copy of the lease agreement and tenant rent roll, financial reports including a profit and loss (P&L) statement, a list of vendors and maintenance records, and a summary of any capital repairs or improvements carried out in recent years.
- Have a professional property inspection done to identify any potential problems that could be deal-breakers for buyers, and address these issues before putting the property on the market.
- Inform your tenants of your plans to sell the property, how showings will be handled, and the process for transferring their existing lease and security deposit to the new owner.
- Understand your potential capital gains tax liability and explore the possibility of using a 1031 tax-deferred exchange to delay paying the tax by acquiring another investment property anywhere in the United States.
How to price your investment property for sale in Kansas City
Selling your rental property in KC is all about finding the right balance between price and value. You want to have a competitive asking price per square foot, but you also want to be able to show potential buyers the financial benefits of buying your property:
- One way to do this is by calculating the cap rate. This is done by dividing the net operating income (NOI) by the asking price. This ratio can then be compared to similar properties for sale in your area, which will help you determine if you are pricing your property correctly.
- Another metric that can be used is cash-on-cash return. This helps potential buyers understand how much money their down payment will generate when they finance their purchase rates.
- It's also important to determine what the after repair value (ARV) of your property is if you can’t afford to make all of the needed repairs. This will give buyers an idea of the instant equity they’ll receive once all of the maintenance is done.
When everything is said and done, choosing the right option for selling your rental property in Kansas City will help lead to a fast sale at a great price. To get started, get a free price estimate and consultation for your property in Kansas City.