Selling Rental Property ... how? when?
Great question posed today...
"I own a long term rental property which is currently occupied by tenants. Â I want to sell the house. Â Should I wait until the lease is complete and the renters are out of the house, or go ahead and list it with the renters in place"?
Answer ... it depends! Â
In many cases, your tenants are in control. Â If they are exceptional tenants who will keep the house meticulously clean and neat, have everything decorated well and very uncluttered, and will be super cooperative and accommodate showings... go ahead and list the home. Â
But, if you have "average" tenants, this description may not sound anything like them!
Most people aren't meticulous, don't have showroom decor, and really enjoy their privacy and theÂ "quiet enjoyment" of their rental home. Â And most tenants would prefer not to be bothered by keeping their home spotless and accommodating your showings.Â
So, how do you get around this? Â
1. Â Ask your tenants if they are interested in buying. Â A large number of homes are sold to tenant/occupants. Â Some need help to navigate the confusing world of lending... and you can help pave the way! Â Refer them to a trusted mortgage broker or banker and help them get started to qualify.
2. Â If your tenants can't or don't want to buy and they ARE neat; Offer an incentive. Â If your tenants will keep the house spotless, allow you to spiff up and prepare it for sale, and allow you to place a lock-box and allow showings with a minimum of 2 hours notice for one month, you will reward them with a rent REBATE of $__ dollars. Â Note that world - REBATE. Â Make sure you don't offer to discount their rent as this will modify your lease agreement. Â Only offer a behavior based reward to be given outside the lease terms. Â They pay normal rent, they help you sell as outlined by your expectations, and you write them a check at the end of the month to help them relocate to a new home.
3. Â If your tenants are NOT neat or have college dorm decor; you can offer "cash for keys". Â You can essentially pay your tenants to leave. Â Let them know that you need to sell, and that your real estate advisor (that's me!) thinks the house needs to be empty and ready for the new owners when you list it. Â So... you're asking them to break the lease and you'd like to help pay for their moving truck and give them a great recommendation for their next landlord as a way of thanking them. Â It's well worth the cost as a grungy or ill staged home is not going to sell or will sell well below its potential market price.
4. Â Price to sell! Â If your tenants are still in place, one month will be enough time to get under contract. Â If your tenants have moved out, you don't want to carry the property's holding costs any longer than you have to. Â
5. Â Sell as a rental. Â I consider this a "worst case scenario". Â But, if your property is a little rough to start with and you don't want to update or renovate or can't afford to displace your tenants and carry the cost, you can sell the property as an occupied rental. You'll be selling to an investor, and the price will be significantly lower. Â But, your cost to sell will be minimal.
Happy selling landlords!