Tips for Selling Investment Property
Dealing with Tenants when Selling a Home
The simplest route to take is to give the tenant notice that you will not be renewing the lease upon expiration, but this isn't always possible. You may also be able to market the property as an investment property with tenants in place. It may be very attractive to an investor to have instant income and no lag time for finding a new tenant. And your current tenant may be very happy to stay.
If you must sell with tenants in place, check your local real estate landlord tenant laws with regards to giving notice and tenant rights. Each State is different and there may also be other local regulations you must abide by.
Work with an experienced local agent who can offer you the best information regarding the local market conditions. To minimize hassles, you want to get an offer as soon as possible to avoid months of sitting on the market and multiple showings. Your agent can guide you as to what fair market value is based on condition and other factors.
Worst case scenario, if the home is not priced to sell based on condition and other market factors and your tenant moves out, you are left holding a mortgage with no income. You have to determine if a few month's lost income is worth not having to sell the home with tenants in place.
While there are some excellent tenants, a large number of tenants tend to ignore maintenance issues, and so when it comes to selling a home with tenants in it you may find it has become rundown. This leads to the problem of having to do repairs while the tenants are still living in your house. Again, you will have to weigh the cost vs benefit of conducting repairs after the tenant moves out.
It can get even worse if tenants don’t want to move, because they can become very hostile, which can put even the most eager buyers off and hamper showings. There are also ways that very reluctant tenants can delay sales for as long as a year.
An empty house means no income, so planning an exit strategy far in advance is the best bet. Assess your tenants willingness to cooperate, conduct a thorough inspection of the home, make repairs, plan the best time of the year to sell and the best time to inform your tenants you intend to sell.
Tips for Dealing with Tenants
Clear, honest communication is essential when you’re selling a home and dealing with tenants. Just as tenants can become hostile, landlords can seem threatening, even when they don’t intend to be. Explain what’s happening to your tenants and reassure them that their privacy won’t be exploited. For instance, make sure they know you will give them ample warning before buyers are invited to view their home. It’s usually best to choose one or more specific days and times that suit tenants.
If you encounter hostile tenants or tenants who have destroyed the property and appear that they will make selling a challenge, and you need to sell, you may have to consider other options. You could wait until the end of their lease and then start an eviction process, which can be costly and time consuming. Or you could possibly offer them a major concession to move. It may be cheaper than eviction, although hard to swallow. You may even have to consider pricing the property attractively so a prospective buyer will be flexible with the condition of the home and the uncertainty of the tenant situation because they are getting a good deal.
One strategy for maintaining a good relationship with nice tenants is to offer some type of reward to persuade them to do their best in terms of keeping the house looking good while it is on the market, as well as being pleasant when agents and prospective buyers visit. For example you could offer them a discount on rent for maintaining a good showing condition. Or you could also offer a gift certificate for dinner for two for each month your home with tenants is on the market.
A good landlord (which is what you should aim to be) will also be concerned about their tenants’ belongings. So suggest they keep valuables safely locked away whenever strangers are in the house. Put it in writing.
Ultimately you need to remember that while selling a home with tenants in it is challenging, for these people your investment property is their Home. It’s difficult for them too, so open communication is always the best policy.
At Lisa Southern Real Estate & Southern Group Property Management, we can guide you through the entire process of preparing your investment property for sale. If you decide it's not the right time to sell, but you don't want the hassle of being a landlord, CONTACT US, we can help. Property Management is much more affordable than you may think.