Today I would like to follow up on all that by talking about another one of the things that the sellers of investment property need to consider: the fact that you don't live in the property, and you may not know much about the property to disclose to a buyer.
I always give my sellers a full packet of disclosure documents to fill out before the property goes on the market. First, you should note that there is a check-box on the Real Estate Transfer Disclosure Statement where you can note if you are, or are not, occupying the property. You would check the "not" box. Second, I will tell you that it is a good idea to overtly state in your disclosures that you have never lived in the property as your primary residence, or that you have not lived in the property in ____ years. A good place to do this is the Seller Property Questionnaire. On the 4th page there is an "Other" Section where this statement can go.
Hopefully as a landlord, you have been keeping accurate maintenance records for the property. The big-ticket things you probably know and can disclose -- for example, you probably know approximately when you replaced the roof, or that you replaced the dishwasher before the current tenant moved in, that you have a company spray for bugs every other month, etc. And you should note those dates and details in your disclosures. If you have contractor receipts, it is best to include copies of them with your disclosures as well.
But what about the non-big-ticket things? This information can be of equal importance to a buyer, but as the seller you may not be aware of the property's certain idiosyncrasies that only someone who lives in the house will. Like the fact there are 4 constantly barking dogs next door, there is street sweeper that makes lots of noise every Tuesday morning at 4am, that vagrants rummage through the trash cans at night, that the bathtub has a slow drain, that airplanes fly overhead sometimes, that the neighbor grows marijuana in the backyard, or that the downstairs tenant can hear the footsteps of the upstairs tenant...or that the tenant you think is low maintenance and never complains just didn't choose to tell you that the water heater is leaking, that the bathroom exhaust fan stopped working, etc.
Remember my last post about communication with your tenants when it comes time to sell? This is the perfect time to schedule a walk-through of the unit -- not only to talk about showings and introduce your Realtor, but also to ask your tenant if there are any little things like this you may want to disclose. If during your walk-through, you discover the water heater is leaking, that is a good opportunity to get it repaired before the property goes on the market, and then be sure to disclose that the repair was made. Ask your tenants about potential nuisances and disclose them. Something like "Per tenant, neighboring dogs bark at night" should be adequate.
One thing I also highly recommend is augmenting your disclosures with some professional inspections. For example, it is a really good idea to get a termite inspection before the property goes on the market, and either make the recommended repairs for a clearance, or just use the written report itself as a disclosure.
It's definitely in the seller's best interest to make disclosures as transparent and accurate as possible. Inadequate disclosures can lead to buyer frustration and potential issues with the new owner down the line...
Read my previous post on this topic: How to work with tenants when selling an investment property.
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