Tips for Selling an Investment Property with a Tenant in Place
While investment properties are a great way to diversify your portfolio and bring in extra cash, what happens if you plan to sell? What is there to know before you sell an investment property with a tenant already in place? Where do you even begin?
Sure, selling an investment property with a tenant in place does present certain challenges, but it’s not impossible. In fact, this is a challenge that property owners often face. So, whether you’re looking for a quick cash out, or you feel that the current market will actually yield a higher return as opposed to what might happen if you wait for the end of a tenant’s lease, there are some things that you must take into consideration before attempting to sell with a tenant already in place.
These are the questions you should be asking yourself:
- Is your tenant paying a fair price? Though many buyers won’t be interested in buying a property that they themselves can’t move into, there are investors out there who are looking for such properties. And, if you do find one of these investors, and you already have a tenant in place paying a fair market rent, then it will make your property more appealing to them and their investment interests, as it’s automatic money in their pocket.
- Did your tenant sign a lease? If your tenant signed a lease, end dates are definitive, and it will therefore be easier to get them to vacate the property. But, for those who simply have a verbal month-to-month agreement, it can be more difficult to vacate, as there are no set or written terms.
- What are the terms of your tenant lease? Some standard leases include clauses that allow owners to give 30 days’ notice to vacate in the event that they sell. So, if you have plans to take on a renter but also to sell in the near future, you’ll want to make sure that this is in your tenant’s lease agreement.
- Is there a “showings” clause in your tenant’s agreement? It can be very difficult to sell a property without showing it to prospective buyers. But, how can you do so with a tenant already occupying the unit? This is where a “showings” clause comes in handy in the lease.
- Do you have a signed agreement outlining showing times and vacate dates should a sale go through? As the owner, you’ll want to make sure you have a signed, written agreement, in addition to a lease, that lays out what will happen if a sale is executed. It should include agreed upon show times as well as vacate details and dates.
In addition to being able to answer all of these questions before you put your occupied investment property on the market, you should also remember to be compassionate for your tenant’s position. Even though you (hopefully) have a clear understanding with them and open lines of communication about the future of the property, you must still take care to handle (along with your hired real estate professional) the transition delicately. This means being mindful of scheduling appointments and correspondence with them.
It’s also worth noting that these transitions, no matter how well communicated, can turn your tenant-landlord relationship sour, fast! Remember, they will have fears, whether warranted or not, that they will be displaced before they expected. So, again, handle the situation with care, and make sure that absolutely everything is in writing.