Selling A Rental Property In California

Selling A Rental Property In California


Here are some answers to a few FAQs for selling a rental property in California.

–       Can I sell with a renter in place?

        o   Yes! Selling a rental property in California might make it more difficult to sell to a retail buyer though. It would be a good idea to notify your renters as to what’s going on. Remember, depending on where you live you may have to give your tenants up to 90 days notice to vacate the property if they are on a month-to-month lease.

–       What happens to the tenants when I sell?

        o   Many times, if there is an existing lease in place, that lease must be honored. The lease and the responsibilities of the landlord will be transferred to the new owner. This is called an “Assignment of Lease Agreement” and will usually be done through escrow. Security deposits are usually assigned to new buyer as well.

–       Do I need a Realtor to sell my rental property?

        o   No. Selling a rental property in California can be done by yourself very simply.

Selling A Rental Property In California


Taxation can be complicated when selling a rental property in California and you should always consult a competent tax professional to help. To give you an idea of how much taxes you might have to pay here’s an example to help you understand.

Let’s assume you’re selling a rental property you bought for $100,000 and it sells for $150,000. Normally, this means that you pay capital gains on $50,000. Let’s say you deducted $25,000 in depreciation during the time you owned it. You owe the difference between the sale price and your purchase price minus depreciation: $150,000 – ($100,000 – $25,000). Instead of owing capital gains on $50,000, you now owe capital gains on $75,000.

1031 Exchanges are a great way to defer taxes to a later point in time, letting you play on the power of the time value of money. 1031 exchanges allow property owners to re-invest their gains, without tax, into a like-kind property. (I.E. two residential properties)

Selling a rental property in California with tenants and tenant co-operation

Tenant co-operation is so important to having a smooth transaction, unless you sell to a cash buyer who is used to dealing with those situations. When selling a rental property in California with tenants its vital to communicate clearing. The last thing an owner wants is a hostile tenant. (They can be expensive!) Owners should work to set up some sort of protocol for how and when the property can be shown.

Anyone who is selling a rental property in California knows the stress involved. If you choose to sell conventionally with a Realtor, make sure your tenants know to keep the place clean. Offering money or half off rent is a good incentive for them to keep it clean. Just be sure to define what “clean “ is. Making a checklist is a good idea so everyone is on the same page as to what needs to happen in order to show the property successfully.

Reassure the tenants that their belongings will be safe. Let them know that no one will be in the property without giving them notice.

Selling a rental property in California while vacant and preventing vandalism

If your property is vacant this poses a few different problems. For one, vandalism is a serious issue if left vacant for more than a few weeks, and even days in some neighborhoods. Even in higher end neighborhoods, this can be an issue.

If your selling a rental property that is vacant, it’s important to do so in a timely manner. Squatters can be an issue. Pricing the property right and maintaining the property is imperative.

If you’ve had a property on the market for more than 45 days without any offers, check out this great article to start getting those offers rolling in!

Selling a rental property in California has its headaches. With the right plan, it can get done simply and quickly. Just make sure everyone’s clear as to what’s going on.

 If you are selling a rental property in California and would like a free offer, contact us! We’d love to hear from you!

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