At Arrived, one of our key objectives with individual property offerings and vacation homes is to eventually sell these properties, allowing investors to benefit from rental income and property appreciation. When it’s time to sell, we manage the entire process. From determining the optimal time to sell to preparing and listing the property, we ensure every step is handled smoothly and efficiently. Our goal is to maximize returns while keeping the process straightforward and transparent so you get the most out of your investment.
The Full Cycle of an Investment Property on Arrived
Arrived generally holds properties for five to seven years for long-term rentals and five to 15 years for vacation rentals to maximize returns through rental income and property appreciation.
However, we continuously monitor each property’s performance and market conditions. If we identify opportunities for a higher return or significant changes in the market that suggest an earlier sale would benefit our investors, we may choose to sell the property before the end of the planned hold period. This flexible approach ensures we can capitalize on optimal selling conditions and enhance investor returns. Listing a property doesn’t guarantee a sale– we’ll keep investors in the loop and only proceed if the market meets our pricing expectations to maximize investors’ returns.
How Arrived Decides to Sell a Property
Our primary objective when selling a property is to secure a price that maximizes capital appreciation for our investors.
To achieve the best possible return on a property sale, we consider:
- Current Market Conditions: Assess the real estate market, including buyer demand and inventory levels, to gauge how these factors might impact the property's sale price.
- Comparable Property Sales: Analyze recent sales of similar properties nearby to set a competitive and attractive price.
- Property Appreciation Rates: Evaluate past and projected value changes to determine the best timing for selling to maximize returns.
- Overall Economic Conditions: Review economic indicators like employment and interest rates, which can affect real estate values.
- Lease Cycle Considerations: We assess the lease duration, usually around two years, and consider the timing for marketing and preparing a home for sale. Seasonality of leasing is also considered to synchronize the sale with favorable market conditions, minimizing downtime and maximizing returns. Presenting a vacant home after the lease period enables us to showcase the property to a larger pool of potential buyers, leading to the best possible outcome for investors.
- Impact of Financing Strategies: If a property has leverage, we evaluate how having a mortgage can affect our decision to sell or hold onto the property for a longer period and refinance.
Preparing a Property For Sale
When it comes time to sell a property, we prioritize listing it on the Multiple Listing Service (MLS) through a real estate agent over selling directly to a private investor. Here’s why this approach typically results in a better outcome:
- Broader Exposure: Listing a property on the MLS ensures it is visible to a wide audience of potential buyers, including those actively searching for homes and real estate professionals who can bring buyers to the table. This can lead to more offers and competition among buyers.
- Higher Sale Price: With owner-occupants and investors utilizing the platform, the increased visibility and competition can result in a higher sale price than selling directly to an investor. Investors typically look for discounted prices, which can limit the potential sale price.
- Market-Driven Pricing: Selling through the MLS allows the market to dictate the price, ensuring that the property is sold for its fair market value based on current conditions and comparable sales.
- Professional Marketing: Real estate agents provide professional marketing services, including high-quality marketing content, detailed property descriptions, and open houses, which can enhance the property’s appeal and attract more buyers.
Selling a Property Offering
The success of selling a property hinges on a well-structured go-to-market timeline. This timeline involves crucial steps designed to prepare the property for sale and efficiently attract potential buyers.
- Comparative Market Analysis: Conduct a CMA to determine the property’s market value by comparing it to similar properties in the area.
- Enhance Appeal: Perform necessary rehabilitation, maintenance, and cleaning to enhance the property’s appeal.
- Market Prep: Create high-quality marketing content, including engaging descriptions, professional photography, floor plans, 3D tours, and aerial images.
- Staging: Arrange furniture and decor or utilize virtual staging to make the property more appealing and help buyers visualize themselves living there, especially in competitive markets.
- Listing Prep: Ensure all access arrangements are in place, complete the required paperwork, and set up the property on the MLS.
- On Market Pulse: Monitor the property’s performance closely. Review showing feedback and activity to gauge buyer interest and make any necessary adjustments.
- Ongoing Maintenance: During the listing period, it's common for a property to need ongoing maintenance, such as mowing the lawn or additional cleaning.
- Monitor List Price: Occasionally, price adjustments may be necessary once a property has been listed to stay competitive in the market.
Choosing an Offer
When a property receives several offers, choosing the most advantageous one involves carefully evaluating multiple factors. Here’s how an investment firm like Arrived would approach selecting the best offer:
- Offer Price: The most straightforward criterion is the offer price. Higher offers are typically preferred, as they directly contribute to maximizing the return on investment. However, price alone is not the only consideration.
- Buyer's Financial Stability: We assess the buyers' financial stability to ensure they can complete the purchase. This involves reviewing proof of funds or mortgage pre-approval letters to confirm that the buyer has the financial capability to follow through on their offer.
- Contingencies: Offers may come with various contingencies, such as conditions related to inspections, appraisals, or financing. We evaluate these contingencies to determine how they impact the likelihood of a successful and timely closing.
- Closing Timeline: The proposed closing date is another critical factor, as is a buyer’s flexibility and ability to close quickly. We compare the proposed timelines to our own goals and requirements.
- Earnest Money Deposit: The amount of earnest money made by the buyer to show serious intent is an important consideration. A larger earnest money deposit can indicate a more committed buyer and provide additional security in the transaction.
- Terms and Conditions: The specific terms of each offer, such as requests for repairs or closing credits, are evaluated. Offers with favorable terms and fewer demands are often preferred, as they reduce potential complications during the sale process.
- Overall Impact on Investment Goals: We consider how each offer aligns with our broader investment goals and strategies. This includes assessing how quickly we need to sell the property and whether any offer aligns better with our strategic objectives.
How Proceeds Are Distributed to Investors
Arrived manages a detailed closing process after an offer is accepted and the property is under contract. This includes the buyer conducting due diligence, such as inspections and appraisals, followed by the final closing, at which ownership is transferred and all legal paperwork is completed.
Once the sale is finalized, Arrived handles the offboarding of ancillary services like utilities, HOA fees, insurance, and property management. After these tasks are completed, the proceeds from the sale are distributed to investors. Funds are deposited into each investor's Arrived Cash Balance, ensuring a smooth and transparent payout process.
Considering Capital Gains Taxes
Selling an investment property can affect investors' capital gains. Capital gains are the profits earned from the property sale, calculated as the difference between the sale price and the original purchase price minus any improvements or costs associated with the sale. Investors may be subject to short-term or long-term capital gains taxes depending on how long the property has been held and the applicable tax laws. Long-term capital gains, which apply to properties held for over a year, typically benefit from lower tax rates than short-term gains. Investors should consult with tax professionals to understand the specific tax implications of the sale and how they may impact their overall returns.
