Selling your investment property with a tenant in place can present some challenges that many property owners don’t anticipate. Recently, my real estate business has seen quite an increase in the number of investors who are seeking to sell their properties with tenants in place. My best guess as to the reason behind this phenomenon is that these particular investors believe that now (not 3 months from now) is the best time to attempt to procure a buyer. That said, it is imperative for sellers to consider the following when attempting to sell with a tenant in place:
- Is your current tenant paying a fair market rent?-Most buyers aren’t interested in purchasing an apartment that they can’t move into but if you are lucky enough to find an investor, a market rent tenant will make your property more appealing. (2 of our recent owners are renting for values way below market)
- Does your tenant have a lease?-I know this seems like a silly question but you would be surprised at the number of renters out there who are renting on a verbal "month to month" basis. The attorneys whom I work with the most have indicated to me that it can be more difficult to vacate a "month to month" tenant with no lease than one who has a lease with a definitive end date. (1 of our owners has no written lease agreement outlining terms of "month to month" arrangement and tenant will not allow access to the unit…another has such an agreement and tenant is still manipulating the terms to hinder showing and sale).
- Does your current lease allow you to request that your tenant vacate within a certain period of time?-Some standard leases include a clause that allows an owner to give a tenant 30 days notice to vacate in order to sell the unit. In my experience, that clause is most often stricken from the lease.
- Does your current lease provide for showings prior to the tenant vacating the property?-It’s also VERY difficult (nearly impossible…it does happen) to sell a property without showing it to a prospective purchaser.
- Do you have a signed, written agreement (in addition to a lease) with your current tenant outlining showing times and date to vacate once a sales contract is executed?-Make sure you have access and any agreement you have is clearly stated in writing and signed by all parties. As stated above, even a written agreement doesn’t necessarily protect you from a tenant making a sale nearly impossible.
- Have compassion for tenant’s position-In addition to having a clear understanding with your tenant as to the future of the property, you must also make sure you hire a real estate professional with compassion for the tenant’s position. Scheduling of appointments and correspondence with the tenant needs to be handled delicately.
- Know that your ‘easy-going" tenant can become Mr. Hyde at any moment-They either fear that they are going to be or they actually are being displaced and likely before they thought they would. As warm and kind as your tenant may be now, trust me when I say that can change in a flash. All the more reason to have everything in writing.
Some are fortunate enough to have a cooperative tenant and others not so. If you are among the latter, be patient as you may find yourself simply waiting for that "nice" tenant of yours to move out before you can sell.