The Golden Question: When Should You Sell a Rental Property?

The Golden Question: When Should You Sell a Rental Property?

Are you ready to unload that rental property? Rental properties, whether a single-family house or a large home in an HOA, can be highly profitable, but the ups, downs, and overall hassle can sometimes be a dealbreaker.

If you’re done dealing with leases, renters, maintenance, and more, you can sell your property! Knowing when and how to sell your rental property is essential, as you must navigate tenant rights, IRS capital gains taxes, the rental market, and potential lease transfers. If you feel overwhelmed, don’t worry.

This article is your complete guide to selling a rental property, and we buy houses in NYC, so we understand the local market and the value of real estate investing! Keep reading to learn everything you need to know about selling your rental or investment property without running into legal trouble or hefty property taxes.

When to Sell a Rental Property

Is it the right time to sell your rental property? Let’s talk about it! Below are signs that it’s a good time to sell your real estate:

  • The property value is higher now than when you bought it
  • It no longer generates positive cash flow
  • You’re tired of being a landlord
  • The property management and maintenance are too expensive
  • You have better sources of passive income than rental income
  • You want to expand or diversify your portfolio
  • The housing market is ideal for selling

We know selling can be stressful, but there are plenty of cash home buyers in New York, and it’s easier than ever to sell a house fast in Nassau County! If you’re ready to sell, we can help you unload your property quickly and effortlessly, even if it’s a rental property.

The real estate market can be volatile, but we’re always happy to buy your property for a generous cash offer. Even if the seller’s market isn’t excellent, you can still sell your property to real estate investors or commercial rental property owners. If you’re losing money or miserable maintaining the property, don’t wait any longer to find a buyer and move on.

Laws When Selling a Rental House

When selling any property, you must adhere to various laws. However, selling a rental property can be even more complex, especially when tenants and leases are involved. The sections below discuss the tax implications and tenant rights laws associated with selling a rental property.

Tax Implications

Selling a rental property can come with hefty capital gains taxes, which can be frustrating and substantially reduce the profit you make on the sale price. Selling a non-rental property makes you eligible for capital gains taxes exemptions so that you can keep more of your profit. But you are not eligible for these exemptions when selling an investment property.

To avoid the capital gains taxes altogether, you need to have owned the property for at least two years and used it as your primary residence for at least two years within the past five years. Otherwise, you will have to pay either the short-term capital gains or long-term capital gains taxes.

If you own the property for less than one year, you must pay short-term capital gains tax, which can be anywhere from 10% to 37%, but usually no higher than 15%. If you own the property for longer than one year, you will pay long-term capital gains tax, which is lower than short-term. Long-term capital gains tax rates are either 0%, 15%, or 20%, depending on various factors.

To avoid these taxes, you can live at your property for two years before selling it. Or wait until you’ve owned the property for more than a year to at least avoid short-term capital gains taxes.

Tenant Rights

When selling a rental or investment property, navigating the current tenant is usually the most difficult aspect of selling. We recommend consulting a lawyer or even a real estate agent before you do anything involving your current tenant.

It’s also best to notify them of your intent to sell as soon as possible, even if it’s several months away. That way, you have time on your side if you have to evict later on. One of the sections below will further explain tenant rights and offer tips on navigating them properly. But it’s important to be aware of your tenant’s rights before you move forward with selling.

Do You Need to Let Tenants Know?

No distinct laws in place require landlords to inform tenants when and if they plan to sell the property. If you want to sell the property and transfer the tenant lease to the new owner, some states require you to give the tenant 30 to 60 days’ notice, while others don’t require you to discuss this with tenants.

The laws concerning informing tenants of a property sale mostly revolve around vacating the property. If you do not plan to transfer the lease for whatever reason, you need to notify the tenant at least 30 days before they need to vacate.

The notification windows vary state by state and sometimes city to city, so check your local laws to ensure you don’t notify your tenant too late. But to reiterate, notification is only legally required if the tenant will need to vacate the property and conclude their lease.

Do Tenants Have Rights When Landlords Sell?

Yes, tenants still have rights when the landlord decides to sell the property. If the landlord wakes up one day and decides to sell, they cannot just kick the tenants to the curb. The tenant rights depend on the state but below are some of the most common tenant rights laws to be aware of when selling your rental property.

  1. Right to receive notice to vacate the property
  2. Tenants sometimes have the right to a relocation fee
  3. Right to accept a lease termination payout
  4. Right to occupy the property before the sale is final
  5. Right to leave the property in any condition
  6. Right to the original lease terms under a new property owner
  7. Right to their security deposit
  8. Right to a well-maintained property
  9. Right to 30-day window to vacate after the final sale
  10. Rich to occupy the property during showings
  11. Right to file a lawsuit in small claims court
  12. Right to occupy after foreclosure
  13. In some states, tenants have the right of first refusal to buy the property
  14. Right to 24-48 hours’ notice before showings
  15. Right to schedule showings at reasonable hours

Some of these rights concern the process of selling the property by the owner, while others relate to the tenant rights after the property sale. Most of these laws are reasonable and work to ensure tenants cannot be forced out of their residences suddenly and unfairly. Things like lease termination payouts, relocation fees, and first right of refusal vary by location and depend on extenuating circumstances.

when to sell rental property

Can You Remove Tenants When Selling?

Yes, it is possible to remove or evict tenants when selling your rental property. For example, if you have a month-to-month lease with a tenant and you give them 60 days’ notice to vacate, they legally have to leave the property.

The same situation applies to long-term lease agreements if they’re coming to an end. If the tenant’s lease is ending soon and you plan to sell, you can just choose not to renew their lease, and it will be a clean break.

On the other hand, if you have a tenant with a long-term lease, tenant removal can be more challenging. In many cases, the best solution is to offer the tenant a payout to terminate the lease early and vacate the property. It could be a small incentive, like a few hundred dollars, or it could be several thousand if you have anxious potential buyers you want to accommodate.

You can also frame the buyout as a relocation fee, meaning you’ll pay the tenant’s moving costs in full to make it easier for them to vacate the property. Ideally, the tenant will take this offer and quietly leave. However, you may have a difficult or comfortable tenant who doesn’t want to leave. If the buyer is looking for an investment property, you may be able to convince them to take over the lease. If not, you may need to evict the tenant.

Before you do anything, check the lease agreement for the property sale terms. As the landlord, you likely know the terms of the lease but double-check anyway. We recommend consulting a lawyer before taking action, especially if you expect your tenant to be unhappy about the sale.

In some states, you need to offer them the first right of refusal to buy the property. If you don’t already have a home buyer, this offering can make the sale of the property seamless and leave you and the tenant happy!


We want to emphasize that the perfect time to sell a rental property is when you’re ready. If your property is profitable, but you’re miserable dealing with tenants, monitoring leases, and maintaining the rental home, it’s okay to sell.

On the other hand, it’s best to sell if the property isn’t making you money, even if it seems like it’s a buyer’s market. And we’re to help you get a generous cash offer and fair purchase price no matter when you decide to sell.

We believe an all-cash offer is better for everyone, so let us take your property off your hands!

The Golden Question: When Should You Sell a Rental Property?