Selling a rental
What about the tenants, and the taxes?
Why am I selling, and what happens to the money?
Sell because the numbers or your goals changed, not because of a bad month. Then decide what the proceeds do next: if you'll reinvest in real estate, a 1031 exchange can defer the capital gains tax, but its clock (45 days to identify, 180 days to close) starts the day you sell, so the plan has to exist before you list.
The tax conversation is the big one here. Have it with a professional before anything else.
- How long
- Most people spend about 2 weeks here.
How to: Reviewed the returns
Review the property's actual returns against your goals
How to: Estimated the tax
Estimate the capital gain and depreciation recapture
How to: Decided on reinvesting and 1031
Decide whether you'll reinvest, and whether a 1031 exchange fits
How to: Considered timing
Consider market timing with your agent
How to: Met my tax advisor
Meet your tax advisor before you list
Go deeper
- Planning the 1031 after the sale. The deadlines are strict and start at closing.
- Ignoring depreciation recapture. It's taxed on top of the gain and surprises people.
- Selling on emotion after one bad tenant. Let the analysis decide.
From the Thrive team
- A 1031 exchange requires a qualified intermediary to hold the funds. You can never touch the proceeds yourself.
What do I owe my tenants when I sell?
What do I owe my tenants when I sell?
The lease survives the sale; the buyer steps into your shoes as landlord. Tenants deserve clear written notice, an explanation of what changes and what doesn't, and reasonable scheduling of showings. Their security deposit transfers to the buyer at closing. Handled well, tenants cooperate; handled poorly, they can slow everything down.
Tenants worry about being displaced. Telling them early and honestly is both kind and practical.
- How long
- Most people spend about 2 weeks here.
In Georgia
Georgia lease terms and entry-notice provisions are largely set by the lease itself, so read yours carefully; deposits must be accounted for and transferred to the new owner at closing.
How to: Leases reviewed
Reread the leases for notice and entry terms
How to: Tenants notified in writing
Notify tenants in writing before the listing goes live
How to: Explained what transfers
Explain that leases transfer and what showings will look like
How to: Showing schedule agreed
Agree on a showing schedule that respects their home
How to: Deposits documented
Document deposits and prepaid rent for the transfer
Go deeper
- Skipping proper notice. It creates legal exposure and hostile showings.
- Being vague about the lease. Tenants want to know their agreement stands.
- Ignoring quiet enjoyment. Constant showings without scheduling cause complaints and cancellations.
From the Thrive team
- A small incentive for tenants who keep the unit show-ready is often the cheapest marketing you'll buy.
How much will I actually keep after taxes?
How much will I actually keep after taxes?
Your gain is the sale price minus your adjusted basis (what you paid plus improvements minus depreciation). Depreciation you claimed is recaptured at a higher rate, then the remaining gain is taxed, plus state tax. A 1031 exchange defers all of it if you follow the rules. Get the real number from a tax advisor before you set a price.
The net after tax is often smaller than sellers expect, and larger than they fear once a 1031 is on the table.
- How long
- Most people spend about a week here.
How to: Know my adjusted basis
Calculate your adjusted basis with your tax records
How to: Estimated recapture and gain
Estimate depreciation recapture and capital gains
How to: Know the state tax
Add state tax to get the total
How to: 1031 decision made
Decide finally on a 1031 exchange
How to: Intermediary lined up
Line up a qualified intermediary if you're exchanging
Go deeper
- Waiting until closing to think about tax. By then the planning options are gone.
- Forgetting recapture. It can be a quarter of the depreciation you took.
- Missing the 1031 window because the replacement property wasn't lined up.
From the Thrive team
- Identify candidate replacement properties before you close on the sale. Forty-five days goes fast.
How do I market an occupied rental?
How do I market an occupied rental?
Decide who you're selling to: investors, who buy on the rent roll and the numbers, or owner-occupants, who may pay more but need the unit vacant or the lease ending soon. Document the income, expenses and payment history thoroughly, photograph the property respectfully with tenants' cooperation, and price to the buyer pool you chose.
An occupied home shows differently. Clean, documented and honest beats staged.
- How long
- Most people spend about a month here.
How to: Buyer profile chosen
Choose the buyer profile: investor, owner-occupant, or both
How to: Financial package assembled
Assemble the rent roll, leases and 12 months of income and expenses
How to: Photos done with notice
Photograph with the tenants' cooperation and notice
How to: Priced to the pool
Price to the chosen buyer pool with your agent
How to: Disclosures prepared
Prepare the disclosures, including any known issues
Go deeper
- Marketing only to investors when an owner-occupant would pay more, or the reverse. Consider both.
- Thin documentation. Investors pay for proof, not promises.
- Letting the property show poorly because it's a rental. Presentation still sets the price.
From the Thrive team
- A clean rent roll with on-time payment history is the most valuable marketing document an investment property has.
How do investor buyers negotiate, and how should I respond?
How do investor buyers negotiate, and how should I respond?
Investors negotiate on the numbers: cap rate, cash flow, repair estimates. They'll ask for detailed financials and specialty inspections, and they'll test the price against what the property earns. Provide the data up front, be flexible on terms that don't cost you much, and hold the line where the numbers support it.
It's less emotional than a home sale. That's easier once you stop expecting it to be personal.
- How long
- Most people spend about 2 weeks here.
How to: Financials provided
Provide full financial documentation before they ask twice
How to: Performance explained
Explain the property's performance and upside plainly
How to: Flexible where it's cheap
Be flexible on timing and reasonable contingencies
How to: Negotiating from the numbers
Negotiate from the numbers, not from attachment
How to: Buyer verified
Verify the buyer's funding and closing history
Go deeper
- Getting defensive about the numbers. Investors want facts.
- Refusing normal contingencies. Investors need inspection and financing periods too.
- Inflating income. They'll find the truth in due diligence and renegotiate.
From the Thrive team
- Investors buy on certainty. A property with clean books and a cooperative tenant is worth a premium.
How do I close, and how does a 1031 exchange actually run?
How do I close, and how does a 1031 exchange actually run?
Closing is standard except for the tenant transfer: deposits and prorated rent move to the buyer, and the tenants get notice of their new landlord. If you're exchanging, the qualified intermediary receives the proceeds at closing, you identify replacement property within 45 days, and you close on it within 180. Calendar both dates the day you sign.
The exchange timeline is unforgiving. Everything else is routine.
- How long
- Most people spend about a month here.
In Georgia
The Georgia closing attorney disburses to the qualified intermediary in an exchange; make sure the attorney knows about the exchange well before closing day.
How to: Intermediary engaged
Engage the qualified intermediary before closing if exchanging
How to: Deposits and rent transferred
Transfer deposits, prorated rent and tenant records at closing
How to: Tenants notified of new owner
Send tenants written notice of the new owner
How to: Replacement identified in time
Identify replacement property within 45 days
How to: Replacement closed in time
Close on the replacement within 180 days
Go deeper
- Touching the proceeds. It disqualifies the exchange.
- Missing day 45 or day 180. There are no extensions.
- Rushing a poor replacement to make the deadline. Have candidates before you sell.
From the Thrive team
- Put both 1031 deadlines on every calendar you own the day the sale closes.
That's the whole path.
Keep it, and come back any time. If something here doesn't fit your situation, ask one of us.
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Elliott or Ashley will answer, usually within one business day. No pressure, no pitch.
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