If you're thinking about selling your rental property in Pittsburgh, now could be the ideal time. There's a high demand from investors and low inventory, which could make it easy to sell. And when you look at the real estate market stats for Pittsburgh, it's easy to see why:
- Employment, median household incomes, and property values are all on the rise in Pittsburgh (Data USA and BLS).
- Home values in Pittsburgh have increased by about 60% over the last 5 years, with sellers profiting from buyer demand by selling and turning equity into cash (Zillow).
- Rents in metropolitan Pittsburgh are steadily rising year over year, and 50% of the households are renter-occupied, 2 data points every real estate buyer looks for (Zumper).
Pittsburgh is a seller's market, so you may receive multiple offers when listing your property for sale. However, it is crucial to understand all the options for selling your rental property in the Pittsburgh area before going to market if you want a fast and fair sale.
Your options for selling rental property in Pittsburgh
If you're thinking of selling your rental property, you may be wondering what to do about your current tenants. After all, selling a property that's already occupied can be tricky. In some cases, landlords try to get their tenants to leave early so they can show the property to prospective buyers.
However, this isn't always easy, and it can often lead to conflict. That's why it's important to read your current lease and review your state's landlord-tenant laws before taking any action.
- Some leases allow you to terminate the agreement early with enough notice. Other times, you may need to pursue eviction if the tenant has violated a lease term – such as paying the rent late or damaging the home – and doesn’t agree to leave.
- Review the landlord-tenant laws in Pennsylvania to make sure that you do everything by the book. Doing so will give the landlord a better understanding of their rights and obligations.
After you've determined what you can and can't legally do, the next step is to think through the various alternatives for selling your rental property in Pittsburgh:
1. Sell to your tenant
This is often the quickest and easiest way to sell a rental property. If you have a good relationship with your tenant and they're interested in buying the property, it can be a win-win situation.
However, you'll need to be sure that they're actually qualified to buy the property before moving forward. In some cases, you may not be able to get as much money for the property if you sell to the tenant.
2. Pay the tenant to leave early
If you don't mind paying your tenant to leave early, this can be a good option. With a cash-for-keys incentive, you simply offer your tenant a lump sum of money in exchange for them vacating the property within a certain timeframe.
This can also be an effective way to get rid of problem tenants or those who are behind on rent. Just be sure that you follow all legal requirements and put everything in writing when offering this type of incentive.
3. Wait for the lease to expire
Many landlords wait until their tenant's lease is up before selling the property. While this may seem like the simplest option, it comes with a few risks. Market conditions can change quickly, and you may find that your property is worth less than it was when you first leased it out.
If your tenant is unhappy with the sale, they may deliberately damage the property in order to try and get a bigger payout from you. Finally, you will need to notify your tenant each time the property is shown to a prospective buyer, which can be disruptive and inconvenient. Overall, it's usually best to sell sooner rather than later to avoid these potential problems.
4. Sell with the tenant in place
If you're thinking about selling your rental property in Pittsburgh, you may want to consider keeping the tenants in place and selling through Roofstock. There are a few benefits to doing this:
- Continue to receive rent payments until the day of closing. This can provide some much-needed cash flow during the selling process.
- By listing on the Roofstock Marketplace, you'll reach a wider pool of potential buyers than you would through the local multiple listing service (MLS).
- Since Roofstock charges a competitive real estate commission, you'll save money on fees.
- The Roofstock Marketplace provides data that can be helpful in setting a fair price for your property.
All things considered, selling with tenants in place through Roofstock can be a smart choice for Pittsburgh rental property owners looking to maximize their profits.
What you should do before selling rental property
Before you list your rental property for sale in Pittsburgh, there are a few things you should do to prepare:
- Compile a buyer package. This should include any relevant paperwork, such as the lease agreement, repair history, and current rent roll. Having this information readily available will make the sale process much smoother.
- Perform a prelisting inspection. This will give you a chance to identify any potential problems that could interfere with the sale.
- Let your tenant know that the property is for sale. This includes informing them of how showings will be handled and how their security deposit will be transferred to the new owner.
- Look into a tax-deferred exchange. Calculate your potential capital gains tax liability and figure out how a 1031 exchange can be used to buy a replacement property anywhere in the U.S.
By taking these steps, you'll be in a much better position to sell your rental property quickly and for top dollar.
How to price your investment property for sale in Pittsburgh
When you're selling a rental property in Pittsburgh, you'll want to price it differently than you would a primary residence. You'll still want to have a competitive asking price per square foot, but you'll also want to tout the financial performance of your property to get a fast closing at a great price.
Cap rate, cash-on-cash return, and after repair value (ARV) are 3 things that buyers look for. Here's what you need to know about each one:
- Cap rate is the annual net operating income (NOI) of a property divided by the purchase price. In other words, it's a measure of how much income a property generates relative to its purchase price. The higher the cap rate, the more attractive the property is to buyers.
- Cash-on-cash return (CCR) is a measure of how much cash an investor earns on their investment each year. It's calculated by taking the annual pretax cash flow and dividing it by the total cash invested in the property. For example, if an investor purchases a property for $100,000 and it generates $10,000 in annual cash flow before taxes, the CCR would be 10%. The higher the CCR, the more attractive the property is to buyers.
- ARV is the estimated value of a property after repairs and renovations have been completed. This is important for 2 reasons: First, it allows buyers to see the potential upside of a property; and second, it gives them an idea of how much they'll need to invest in order to realize that upside.
By understanding these 3 metrics, you'll be better equipped to price your rental property for sale in Pittsburgh. To get started, get a free price estimate and consultation for your property.