One of the most potentially frustrating times in the life of a real estate investor is preparing to sell an investment property that is currently occupied by a tenant. There's a whole host of ethical, financial, and legal considerations that need to be taken into account, and quite honestly, if it's not managed properly, the whole process is not exactly fun.
Today we're going to be sharing 3 of the many golden rules investment property owners need to follow when selling an occupied property. This is by no means an exhaustive list, but it should give you a good starting point to get you thinking about the kinds of considerations that need to be taken into account. Let's get started.
You Can't Simply Evict The Tennant If You Want To Sell
Almost all jurisdictions in the US give tenants the right to remain in your investment property providing the lease agreement is still active and remains in good standing. However, despite this, there are some situations where you will want the property vacant before you put It on the market (renovations, staging, etc).
If this is the case, you have other options available to you.
Understand How To Get A Tennant To Leave
The easiest way to get a tenant to leave is to coordinate the time you plan to put your property on the market with the end date of your current lease agreement. Simply inform the tenant that you intend to sell the property and that you will not be renewing the lease agreement once it has run its course.
If you're on a rolling month to month agreement the amount of time you will have to wait is very short – but it's always best to give the tenant as much notice as possible.
However, this isn't always possible. One of the most popular alternatives is to renegotiate the terms of the lease. By offering the tenant a cash incentive to leave early you will often get things moving in the right direction. The tenant can be asked to leave before you put the property on the market (so you can stage it / renovate it), or the property can be sold as "vacant upon closing"
When a property is sold as vacant upon closing, there's a little bit of risk involved for you and the buyer. If the tenant decides not to honor the renewed lease agreement then your new buyer is going to have a whole heap of hassle to deal with, and you may be legally responsible for dealing with the situation.
Remember That It's Not Always A Good Idea To Terminate The Lease
It's almost certainly easier for you to logistically facilitate the sale of an investment property when it's unoccupied. You don't have to arrange viewings on a timetable that's suitable for the tenant, you can ensure it's always clean and in pristine condition, and you can stage it perfectly to allow potential buyers to see the very best side of what you have to offer.
However, sometimes the logistical hassle involved with selling an occupied investment property is worth the effort.
Buyers who are looking for an investment property often find the prospect of having a tenant already in the property as a valuable plus point - especially if they've been living there for a while and have an excellent track record with payments.
Additionally, some buyers who are looking to purchase your property may not be ready to move in immediately. In these situations, the idea of waiting a few months for the existing lease to expire may not be an issue for the new buyer, and in some circumstances, it can actually be a bonus that gives them time to prepare the implementation of any renovations they have in mind.
