Selling a rental

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.

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 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 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 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 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.