After decades of owning rental properties, some landlords reach a point where the investment has done its job.
The equity is there.
But so are the repairs, tenant issues, maintenance calls, management responsibilities, and other headaches that come with owning rental property.
That was the situation for the owner of a group of Parkland-area duplexes I recently helped sell.
After decades as a landlord, he was ready to be done with the day-to-day responsibilities of directly owning and managing rental properties.
The question was how to get him out without unnecessarily giving up the investment and tax advantages he had spent decades building.
The Challenge
Long-term rental owners often have a different problem than someone who purchased a property five years ago.
They may have significant appreciation and a very low tax basis.
Selling outright can potentially create a substantial taxable gain.
At the same time, exchanging into another traditional rental property can mean signing up for many of the same responsibilities they're trying to leave behind.
This owner didn't want another property to manage.
He wanted to simplify.
Preparing the Properties for Sale
Before putting the duplexes on the market, I walked through the properties and helped identify what should be addressed to prepare them for sale.
The goal wasn't to unnecessarily renovate everything.
It was to determine which items would improve marketability and help us present the properties effectively to prospective buyers.
Once they were ready, I implemented a targeted marketing strategy and negotiated the sale.
The Result: Full Price in Under 30 Days
The duplexes sold for full price in under 30 days.
Rather than buying another rental property and continuing to deal with tenants, repairs, and day-to-day management, the seller completed a 1031 exchange into a Delaware Statutory Trust (DST).
The exchange allowed him to defer capital gains and transition from actively managing rental properties to a hands-off passive real estate investment.
You Can Retire From Landlording Without Necessarily Retiring From Real Estate
This is an increasingly important conversation I'm having with longtime multifamily owners.
Selling doesn't necessarily have to mean:
Sell → Pay the taxes → Leave real estate.
Depending on an owner's circumstances, there may be other options, including exchanging into newer or easier-to-manage properties, consolidating several properties into one, or exploring passive real estate alternatives such as a DST.
The right strategy depends on the owner.
If you've owned your rental properties for 10, 20, or 30+ years and are beginning to wonder whether it's time to make a change, start planning before you're ready to sell.
Knowing the property's value, your equity position, and your potential exit options gives you time to make a better decision.
Charles Burnett, CCIM
Sound Property Group
206.931.6036
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