Selling a Property While It’s Tenanted Can Add Extra Nuances to the Selling Process
Selling an investment property can be a much more complicated process than selling a home you occupy. Every seller wants a seamless selling process, but when you’re selling a tenanted property things can go south pretty quickly, especially if you have different standards and don’t communicate openly and frequently.
If you have a tenant in place, you might wonder whether it’ll be easier for you to give them notice and then try to sell the property. Here are some pros and cons to selling your property while you’re renting it out.
The Pros and Cons of Selling Property While It’s Rented
- You still receive rental income throughout the selling process (which may be longer than you anticipate), which can be great especially if your property isn’t valued as high as you thought it would be.
- If an investor is interested, he or she might be especially keen considering there is already a tenant in place.
- If you list your property and then change your mind (due to unforeseen circumstances or a change of heart), you don’t have to go through the process of finding another qualified tenant.
- Legally, you must give your tenant 24 hours notice if a potential buyer wants to inspect the property outside of scheduled inspection times.
- You don’t have as much control over the cleanliness or order of the house(which could be a problem if your standards are drastically different).
- If a buyer wants immediate occupation upon settlement, a tenant might be a turn-off due to potential move-in delays.
How to Seamlessly Sell Your Property While It’s Tenanted and Avoid Legal Trouble
If you’re selling a property while it’s being occupied by a tenant, the number one thing you can do to keep the process seamless and avoid issues is communicate, communicate, communicate. Follow these steps to make the selling process easier on everyone involved:
- Inform the Tenant as Soon as You’ve Confirmed Your Plans
Don’t forget that the sales process can be stressful for your tenant, who isn’t used to having people coming in and out of the home with sometimes little notice. Respect his or her privacy by giving adequate notice and informing him or her of your plans as soon as you make the decision.
The more honest you are, the more likely you’ll receive the cooperation you’re looking for. If the tenant will be going out of his or her way frequently or you feel it’ll really help the process along, consider reducing the rent or providing some sort of incentive.
Reducing the rent or offering an incentive is another way to potentially keep a tenant who wants to start looking for a place as soon as he or she hears that you’re selling.
If your tenant does want to move out, make sure to document the process, especially if he or she is moving out before the lease is up and you have agreed to things not outlined in the lease. Also, don’t forget to check with your state to find out what rights the tenant has in terms of breaking the lease if you decide to sell. Regulations vary from state to state and in some states, tenants can break the lease without penalty during the selling process.
- Give Your Tenant The Appropriate Time with a Notice to Vacate
You have to adhere to your rental agreement throughout the selling process and you must make sure to follow your state’s legislation, especially in terms of giving enough time for a tenant to vacate. This would be necessary in an instance where a buyer wants to take occupation upon settlement or you don’t want to sell until the property is vacant.
- NSW—30 days written notice (fixed-term agreement) or 90 days (periodic agreement)
- QLD—4 weeks written notice
- VIC—60 days written notice
- WA—30 days written notice
- NT—42 days written notice
- TAS—28 days written notice
- SA—60 days written notice
- Clearly Communicate Inspection Information
Be sensitive to your tenant regarding inspections and make sure you communicate the dates, times, and your expectations well in advance. This is incredibly important especially if you’re relying on him or her to manage wet weather challenges during inspection times and he or she needs to take extra steps to ensure the property stays presentable.
Don’t just set an inspection time and expect your tenant to fall in line. Try to find a time that’s ideal for all parties and is still suitable for buyers.
Remind your tenant that you might have some buyers who want a private showing outside of inspection hours, but that you will always give 24 hours’ notice. Ask if there are any times of day that are really inconvenient and try to avoid setting up appointments during those times.
With open lines of communication and sufficient notice, you can seamlessly sell your investment property while it’s tenanted.
You might also find this article helpful, “Is Your Home Suitable to Sell on Auction?”
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If you have questions about selling your home or would like to speak to a real estate agent, contact us today. We’d be happy to offer advice.