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The Landlord’s Guide: Selling A Property Occupied By Tenants
For whatever reason, you may have decided that it is best for you to sell a property or properties with tenants currently occupying them. That can bring up a lot of questions between you and the tenant. A tenant may love the property, be paying rent on time, and is taking care of it but now they might be asking themselves what’s next. Are they going to get evicted since the property is being sold? Will the new owners charge a lot more? Where will I move if I have to? And the list goes on.
As the landlord, you have the ability to make it a smooth transition to the new owners so that everyone, including your tenants, remain happy. It is very possible to sell the property without your tenants even knowing about it. If you have great tenants, you should try to avoid scaring them by putting that “For Sale” sign in the yard. If and when you decide to tell them, they should be aware that they have rights and the new landlord can’t just evict them. The current lease has to be honored as long as renters are following all of the terms. For example, if renters are two months into a one-year lease, they can stay for another 10 months provided they are abiding by the lease (making payments on time, maintaining property, etc.).
Landlords also have the option of giving the tenants enough notice, waiting until the lease is up, and terminating the lease. Then, after they move, you can market the property more easily. Below is a quick list of pros and cons of each method:
Selling While Occupied
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Pros: The property can be attractive to investors and while it is for sale you are still receiving rent payments. Investors are more likely to buy as-is so you don’t have to spend time on repairs and updates. On top of that, the tenants can remain and don’t have to worry about moving out right away. Hopefully, the new landlord keeps them for as long as they want to live there.
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Cons: Showing the property can be harder because you have to coordinate with the tenants. It’s also not likely the property will not be ready for showing 24 hours a day. Making repairs can be more difficult as well.
Wait For Lease To Expire
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Pros: Showings are easier with an empty house, as are repairs and updates. It will be easier to coordinate closing as well because you won’t have to worry about when a tenant is moving out and when the buyer wants to move in.
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Cons: While the property is vacant, no rent is coming in and you’ll have to continue paying all the bills. A property not bringing in any income may be less attractive to investor-buyers. Lastly, you have to make sure your tenants are given enough notice according to the law in your state. Tenants being forced to move may not be happy and stop caring for the property like they should.
However you decide to do it, it is best to consult an attorney to make sure procedure is being followed correctly. Both tenants and landlords have rights and treating each other fairly and lawfully is the key to a successful relationship and a smooth transition. Great tenants can be hard to find so treating them well and making sure their needs are met is extremely important throughout this process. If you have any questions, concerns, or are interested in selling your occupied rental properties, feel free to reach out at any time!