Learn from our EXPERIENCE.
When you decide it’s time to sell your rental property, there are two main courses of action you can take as a property owner: 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 property owners 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 an owner 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 to prepare the property to sell
Cleaning and updating the property for the best presentation to buyers
Allows the opportunity to stage the property with furniture that accentuates the property for photos and showings
Allows for the convenience of open houses and uninterrupted “go and show” showing schedule
Allows for flexible closing and possession date negotiation
Cons
Mortgage carrying costs and increased expenses with no rental income
Timing of the lease end:
if your lease ends at the end of the summer, fall or winter it may not be the best time to sell the property.
Property Owner Solution
Evaluate lease-end dates:
Consider a renewal or lease extension to improve the end date of the lease for a future sale.
Discuss options for the tenant:
Compensation/motivation for an earlier move out .
Collaborative relationship with concessions during the sale of the property.
Option 2: Sell with tenants in the home
Pros
Rental income continues (even if reduced by concession) while selling.
Investment properties with tenants in place can be a positive and proof of the success of the investment.
Allows tenants a rent concession for collaboration and cooperation with the sale.
Staged, lived-in property; if the tenant lives in the property in a way that highlights the feature of the property, it can help others see themselves living in the property.
Cons
Unhappy tenants - in most cases a sale is displacing the tenant, and they are not happy or motivated to help with a successful sale.
Managing the staging and cleanliness of the property can be difficult.
Managing the the open house and showing schedule can be challenging and inconvenient to tenant.
Financial concessions are important to gain cooperation.
Property Owner Solution
Offer rent concession for cooperation through the sale.
Offer flexible move-out options to allow tenants to optimize opportunities in the rental market.
Offer to clean the property before open houses.
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.
Ready to make your next real estate investment move? SCHEDULE a rental consult with Jen Fox TODAY!
Source: Zillow
