The strong real estate market conditions here in South Florida could mean that it's a great time for you to cash out of a rental property.
While this can often be a complex decision, today I'd like to address a couple of common key considerations.
Tax efficiency is always a concern where capital gains are likely. However, for those investors who are selling rental property as a means of, say, buying a more attractive or larger property, the 1031 Exchange is a really great option.
A 1031 Exchange enables investors to take money that would otherwise go towards taxes and use it to make more money. It recognizes that you are selling an investment property and using the money to pay for another property intended to be used as an investment.
As you would expect, there are plenty of rules governing what's eligible in a 1031 Exchange, including some flexibility in terms of what can be classed as business property. For instance, you can even include a vacation home if it's only used by you for two weeks out of the year or for less than 10% of the time it's been rented for.
Inevitably, you need to talk to an expert to make the most of this opportunity and we have excellent contacts with experts in this field that we can put you in touch with.
Another concern for landlords can be how to handle the impending sale with existing tenants. Clearly there will be contractual obligations, but effective communication is absolutely key.
It's sometimes feasible to negotiate the sale of the property to a new investor who will be happy to have existing tenants and to honor the terms of a still active lease agreement.
Most of the time however, it's more straightforward to give your tenant the legally required notice to vacate. If a very fast sale is essential, it is not uncommon for tenants to be paid to leave early. Again all a balance of your individual circumstances and needs.
It also makes a lot of sense to put the property on the market 90 days before the lease is up so that the unit is not unoccupied for an extended period of time.
I hope that the above is of help to you and I would be delighted to answer any other specific questions you have if you're exploring the possibility of selling rental property.
Please don't hesitate to contact me.