## Does It Make Sense To Sell Your Rental Property?

 

Being a landlord does not always make sense from a financial and quality of life perspective. Whether you stumbled into rental property ownership accidentally, or you have collected a portfolio of rental properties intentionally, there comes a time when every rental property owner asks themselves if the headaches and financial returns are worth it. 

 

If you are having second thoughts about owning your rental property, we want to make sure you know about OfferMarket. 

 

OfferMarket is a rental property investment platform. We and our network of qualified investors would love to provide you with [competitive offers](https://www.offermarket.us/sell) for your unwanted property. Requesting an offer for your rental property is free and comes with no risk and no obligation.

 

## Financial Perspective

 

At the end of the day, owning one or more rental properties is a business. Your rental income is revenue. Your tenants are your customers. Your real property is an asset. Your mortgage and deferred maintenance are liabilities. The best way to judge the performance of your rental property business is to look at two things: 

 

1. the free cash flow that it generates
2. the equity you have in your property

 

## Free Cash Flow

 

Free cash flow is the cash your rental property generates after subtracting your mortgage principal, interest, taxes, insurance ([PITI](https://offermarket.us/real-estate-glossary/piti)), property management, and your reserve for maintenance. If you self-manage the property, we recommend factoring in your time at the same rate that you would otherwise pay to a property management company. This is typically 5% to 10% of monthly rent and 25% to 50% of first month's rent for new tenant leasing.

 

If your rental property is generating negative free cash flow (i.e. you are losing money on a monthly or annual basis), then the property is likely not worth owning or one or more actions need to be taken to correct the situation. 

 

- Raise rent
- Fill vacancies
- Refinance into a lower rate to reduce your interest payments

 

It is possible neither of the above is feasible. Perhaps the property has major [deferred maintenance](https://offermarket.us/real-estate-glossary/deferred-maintenance) that needs to be addressed in order to fill vacancies or raise rent.

 

When you look at your annual free cash flow plus your equity appreciation divided by your equity in the property, you will get a clear sense of how your investment is performing relative to other investments. Most notably, relative to passive investments that do not take up your time.

 

**For example:** if your property is generating $5,000 per year in free cash flow and your property is worth $5,000 more compared to last year, and you have $100,000 of equity in your property, then your return is 10%. Compare that to the S&P 500's 10 year annualized return of 13.4%. Looking at it this way makes it difficult to justify owning and managing a rental property from a financial perspective.

 

## Quality Of Life Perspective

 

Rental properties are not just financial investments, they are time investments. As we covered above, they are a business and they do not perform well with absentee owners. That's why we recommend factoring in the cost of your time if you self-manage your property. Even if you use a property management company, you're still ultimately responsible for managing your rental property. Finding a great property management company can be easier said than done, and a low percentage of property management companies perform to a satisfactory level.

 

If you're retired and you want something to keep you busy, owning and managing rental properties might fit in great with your lifestyle. If you're retired and you want to travel or reduce stress, owning rental properties might not be an ideal situation.

 

If you own one or more rental properties and you are worried about leaving your loved ones with an unwanted responsibility when you pass on, it might make sense to cash in on your rental investment.

 

## Most common reasons to sell your rental property

 

Drawing on the above concepts and adding one final point to the list, here are the reasons why landlords get tired of owning a rental property:

 

1. Financial returns are inadequate
2. Quality of life is negatively affected
3. Political and economic factors

 

To this final point, we can look to the #rentstrike movement brought on by the major economic shock caused by the COVID-19 pandemic. Landlords, especially "mom and pop landlords" are getting squeezed by a moratorium on evictions, and a growing resentment towards landlords.

 

## Next Step: Get Competitive Offers

 

If you are tired of being a landlord, you are not alone. Either you know for sure you want to sell your rental property or you are still trying to figure it out.

 

Regardless of which camp you are in, you can [request offers](https://offermarket.us/sell) with no obligation. We would love to buy your rental property.

Tired of being a landlord? It has never been easier to sell your rental property for a competitive price. Get risk free offers from OfferMarket.

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Tired of Being a Landlord? Sell Your Rental Property

OfferMarket brings you a comprehensive list of premier property management companies in Montgomery county Maryland. The list provides a good overview and starting point for your property management search.

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Who we think are the premier Montgomery county property management companies - OfferMarket

Who we think are the premier Montgomery county property management companies

## In a rush? [Get your free home sale docs!](https://forms.gle/ZXNDfumpzNmkupnL7)

 

## Purchase And Sale Agreement

 

Regardless of whether you sell your house with or without an agent (For Sale By Owner), the most important document you need is a Purchase And Sale Agreement. Commonly referred to as the "PSA" and "Contract Of Sale", this form is the legally binding agreement signed by both the Seller and the Buyer, that details the terms upon which real property (i.e. your house and the land it sits on) will be conveyed from you to the Buyer.

 

In most cases, the Buyer will submit their offer to you formally as a Purchase and Sale Agreement, and it will contain the following terms:

 

- **Purchase Price:** the amount the Buyer will pay to the Seller
- **Earnest Money Deposit:** the amount of money the Buyer will place in an escrow account as a good faith gesture once the Seller accepts the agreement. If the Buyer fails to perform their responsibilities in the agreement, the Seller will receive the Earnest Money ("EMD") as damages. This amount is typically 1% - 2.5% of the purchase price of the home but can be higher in a hot housing market.
- **Acceptable financing:** the types of financing the Buyer can use (i.e. cash, conventional financing, FHA financing, VA financing, seller financing)
- **Close by date:** the date by or before which settlement will occur
- **Inspection window/Study period:** for how long will the Buyer have the right to inspect the property?
- **Contingencies:** what would allow the Buyer or Seller to cancel the agreement and have their Earnest Money Deposit refunded? Common contingencies include inspection results, financing falling through, and buyer's home sale falling through.
- **Closing costs:** how will items such as documentary stamps, recordation taxes, State and local transfer taxes be allocated to the Buyer and Seller?

 

### [Read: Pro Tips To Get Your Offer Accepted](https://dwshorowitz-offermarket.medium.com/pro-tips-to-get-your-offer-accepted-f050ab6358a0)

 

In traditional real estate transactions, this document is signed by the Buyer and then provided to the Seller or Seller's Agent by the Buyer or Buyer's Agent as their formal offer. If the Seller accepts the terms in the agreement, they sign. Once the agreement is signed by the seller ("acceptance"), the contract is considered executed and the responsibilities detailed in the agreement for each Party must be met.

 

### Property Disclosure or Disclaimer Statements

Certain states require the Seller to provide property disclosure or disclaimer statements to the buyer before the buyer formally submits their offer. This requirement is commonly waived if the buyer does not intend to live in the property.

 

## Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards

To cover your bases, you should complete the EPA's Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards form.

 

## Want home sale documents sent directly to your inbox?

 

Fill out the form below and we'll send you our standard home sale documents specific to your state.

 

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## Selling your house For Sale By Owner is easy with OfferMarket

 

When you sell your house For Sale By Owner with OfferMarket, we manage everything for you. That includes buyer verification, tour requests, documents and closing coordination.

What documents do I need to sell my house without an agent? We'll answer this question and provide you with templates.

What documents do I need to sell my house without an agent?

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What documents do I need to sell my house without an agent? - OfferMarket FAQ

Grow your real estate investing business with the most competitive DSCR loan product. OfferMarket also provides DSCR rental loans, bridge loans, hard money, fix & flip, rehab, ground up construction loans.

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### What is deferred maintenance?

 

Deferred maintenance is maintenance that needs to be performed on a property but has not yet been performed. Deferred maintenance is a cost and a liability. Deferred maintenance is one of the most [destructive mistakes made by landlords](https://offermarket.us/blog/tired-of-being-a-landlord-sell-your-rental-property) for the following reasons:

 

1. maintenance that is put off will cause more expensive problems in the future.
2. maintenance that is put off will cause tenants to vacate and make it harder to fill vacancies.
3. maintenance that is put off will make it difficult to charge market rent.

 

The key takeaway is that deferred maintenance can be destructive to value. A property owner -- whether a homeowner or a rental property investor -- should be careful not to defer maintenance except in the following cases:

 

- You are already planning to do a larger related or major renovation and are therefore conserving cash for this planned investment.
- The maintenance being deferred is purely cosmetic and will not destroy financial value.

For example: painting can be deferred a couple of years if you have a tenant on a long-term lease. Just know that you will need the finds to pay for this maintenance when the time arises or it can harm your ability to fill a future vacancy.

Deferred maintenance is any required maintenance on a property that has not yet been performed. There's more to learn about deferred maintenance at OfferMarket. 

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