How do I Sell a Rental Property with Tenants Present?
When you decide it’s time to sell your rental property, there are two main courses of action you can take as a landlord: Waiting for the lease to expire before selling, or selling while your tenants are still living in the home. There are benefits and drawbacks to both options.
In many parts of the country, the real estate market is booming, which means that landlords who may have been holding onto a property while they waited for their equity to increase may now decide that it’s finally the right time to sell.
Of course, if you are a landlord selling a house, there are probably people living in it. Selling with tenants can be a challenge, and a tenant can make or break your sale. You’ll have to plan well in advance, communicate openly with your tenant, and make some compromises in order for your sale to be a success. Let’s explore the pros and cons of each option.
Option 1: Wait for the lease to expire
Pros Allows time for updates: If you’re able to wait for your tenants to move out, you’ll be able to clean, do any cosmetic updates, and just generally spruce up the home before listing, which may help you snag a higher sale price.
Can alleviate timing issues with closing: In a hot real estate market, the home could sell quicker than you expect, and depending on the terms of the lease and regulations in your state, you may have trouble getting your tenants out in time. If the home is unoccupied when you list it, you can accept the best offer without having to worry about timing.
Cons Mortgage carrying costs: Each month without tenants is a month when you’re on the hook for the mortgage payment. If it takes a few months to prepare your home for sale, list, accept an offer, and close, you’ll be responsible for the full carrying costs. Landlord solution
Once the lease has expired, you’ll probably want to get the property sold as quickly as possible. This is where Stellar can jump in and work our magic with our team of qualified vendors that will turn your rental into a showplace on the double!
Option 2: Sell with tenants in the home
Pros Built-in staging: When a home is furnished, buyers often have an easier time picturing themselves living there. If your tenant has taken good care of the home and decorated it nicely, it may be more desirable to potential buyers. It’s attractive to investors: Having tenants already living in the property is a big selling point for anyone who might be looking to buy the home as an investment property — you’ll be saving them the hassle of finding a tenant!
Cons Disgruntled tenants can make showings difficult: You’ve just told your tenant they have to move out. And now you expect them to keep the home showing-level clean and accommodate showings and open houses? This can be a difficult pill to swallow, and unpredictable tenants can have a big impact on how the house shows.
In order to persuade your tenants to cooperate with your listing plans, consider offering them lower rent for a few months in exchange for an agreement to show a clean and well-kept home. Other incentives include offering a flexible move-out date or reimbursing moving costs.
Review lease agreement to determine legal options
Whichever path you choose, the first step you should always take is reviewing the lease agreement you have with your tenant. You should also look up laws in your state regarding how much notice to vacate you are required to give. Your real estate agent can be a great resource for local legal requirements, as well as offer tips for a successful sale with tenants in the home.
The actions you can take — and when — mostly depend on what type of lease agreement you have with your tenants. Source: Zillow