People who own a rental property at times will consider selling the property for whatever reason. If this is your situation, it may be that you bought the property years ago and are now tired of managing it. Or you bought at a low point in the market, and now the market values have gone up, and you feel it is a good time to sell it. Or, you used to live in the property, then you bought a new one, moved in to it, but still kept the old property and rented it out instead of selling at the time, because market values were not high enough to make sense for you to sell. Or you simply want to cash out on the rental and move those funds to a different investment, such as a different type of real estate, a similar property closer to you geographically, or a different financial investment altogether.
And because it’s a rental property, it may be tenant occupied.
So what should you do? You have a tenant living there. Should you give the tenant notice to vacate so you can sell the property, or should you sell the property with the tenant still residing there?
Either way is actually workable, and depends on your individual situation. To determine the best way to go, here are a series of questions I would ask about the situation:
- Is the tenant on a term lease, or a month-to-month lease? If the tenant is on a term lease, it’s best to honor the contract with the tenant and sell the property with the tenant still living there, while informing the tenant that the property will be for sale, and the lease will be transferred to the new owner.
- Is the tenant agreeable to showings with the intent to sell? A discussion with your tenant is the best approach. If the tenant is cooperative, you can work together and list the property for sale while the tenant still lives there. Your agent will work together with the tenant to make sure the tenant has at least 24 hours notice for access to his or her home.
- Is the property in significant disrepair? If this is the case, it might be more profitable for the tenant to be served notice to vacate so that some repairs can be done and the property can be cleaned up and shown and sold for more money than a tenant occupied property that shows very poorly and is very cluttered and dirty.
- Do you need the rents to continue until the property is sold, or can you cover the mortgage for a 1 to 3 months while the property is vacant and being marketed and sold? If your mortgage on the property is high and the rental income is needed during the marketing and selling of the property, then keep the tenants in place and have your agent work with this situation. If you can cover the mortgage for 1 to 3 months while selling, then it may be a good investment to vacate the tenants and work with a cleaner slate.
Tenant occupied properties can range from a small to large apartment building to a condo or a house. Tenants are typically understanding and cooperative, if you give them plenty of information and updates on the situation. The more you share, the better they will feel and the less anxiety they will have about changes to their living situation. Keeping them updated is the job of your Real Estate Agent handling the sale. My usual situation is working with cooperative tenants who will allow me to show their home with 24 hours notice, and will move out with 30 or 60 days notice.
I have also had the situations where the tenants were uncooperative with showing the house they were renting and the properties were cluttered messes, so they moved out after finding new homes, and then the properties were cleaned and sold to new happy buyers.
In summary, if you own a rental property, and you are giving serious consideration to selling it to pull out the equity for a different purpose, you can definitely do it either way – with the tenant still there, or asking the tenant to vacate. Either way works. The choice to do it one way or the other depends on your particular circumstance. Explore each option. And discuss alternatives and plans with a qualified, professional Real Estate Agent who is familiar with this type of investment property.