There comes a time when a real estate investor wants to transition from owning single-family rentals to managing apartment buildings. The question that we need to address now is how to sell these rental houses for the most money possible. If you want to get the highest price possible for your investments, then you need to convert the rentals to sell them as single-family homes. This article is going to show you how to convert your rental homes into homes you can market to a homeowner.
Why You Should Convert Your Rental Homes
It may be tempting to clean up the house, slap on a fresh coat of paint, and then place a For Sale sign in the front yard – but if you want to sell the house to a homeowner, more is going to be required. There are quite a few reasons why a rental investor should convert his rentals before he sells them. Consider these main reasons:
Increases your buyer base. The more potential buyers you have the quicker and easier you will sell the house. Right now your primary purchaser will be another investor. Why not triple your buyers by making your property appeal to a homeowner.
Higher sales price. Rental properties are valued based on the capitalization of the net operating income. Investors set a desired return and they will not pay more for a property. If you sell a home to a primary owner, on the other hand, then you can price the home based on the quality, condition and features not just the rental income.
Steps to Convert Your Rental
If you want to get the best price for your single family rental home, then there are a few steps you need to take to maximize the market value.
- Stop renting the house. A homeowner does not want to deal with a tenant. They do not want to have to wait until the lease runs out in order to move in. Most home buyers will want to move in right away. So if you are planning on selling the house, keep it vacant during the listing period. If you need the rental income, then put in a month-to-month tenant and make sure your buyers knows they will be out before the closing.
- Upgrade the appliances. Most tenants do not really care if the appliances match as long as they work, but a homeowner wants the kitchen to be a focal point of the house. If you want to get the most bang for your buck, trade out those ancient mix-matched appliances for a nice new matching set. Check out your local appliance store as they often sell kitchen appliance packages at a discount.
- Change out the hardware. The goal here is to make the house look more modern and appealing. Homeowners are willing to pay for these small upgrades. What can you upgrade? Change out the light switches, the bathroom hardware and the kitchen cabinet knobs and pulls. These little changes catch the eye and add value.
- Modernize the kitchen. Kitchen cabinets are expensive so if your cabinets are dated, why not replace the doors rather than the whole cabinets. You can completely change the look of the kitchen for a fraction of the cost. Another option is to reface the cabinets. You can modernize the face of the cabinets by covering them with a self-sticking wood veneer.
- Install crown molding. If you want to really make your converted rental look like an elegant home, then put up some wide crown molding. This catches the eye and adds more value than the cost of installation.
- Upgrade the trim. If your rental is full of the basic 3 inch molding, consider stepping up to a more modern look. You can easily create high baseboards with a simple 1 x 4 or 1 x 6 topped with a piece of base cap trim. The same holds true with doorway casing. Have it painted in a high gloss white for a modern look.
- Spruce up the landscaping. Most tenants do not pay much attention to the landscaping, but first impressions mean a lot to a homeowner. A few nice shrubs and a flowering bush along with edging the sidewalks and driveways will make the house look inviting.
Getting your rental ready to sell as a primary residence takes some attention to detail. Compared to the increase in the sales price, the cost to convert your rental will be minimal. When it comes time to sell your rentals, every dollar counts. The higher your sales price the more money you will have to invest in a better income-producing property.