If you’re selling an investment property, you may be weighing up whether to sell with a tenant in place or wait until it’s vacant. Selling a tenanted property comes with real pros and cons. Here’s what to consider and how to manage the process if you go ahead.
The pros of selling with a tenant in place
- You’ll still receive rental income. If you rely on the rent as part of your income or to cover the mortgage, keeping a tenant in place until settlement means that income keeps coming.
- A tenanted property can appeal to investors. Not every buyer wants a tenant in place, since owner-occupiers usually want to move in, but investors often see it as a plus, since they won’t need to find a tenant themselves and benefit from rent immediately.
- You can offer the tenant first right of refusal. Some tenants are renting while they save for their own home and may jump at the chance to buy the place they’re already living in.
The cons of selling with a tenant in place
- Coordinating viewings can be difficult. Finding a time that suits both buyers and your tenant isn’t always easy, and some tenants may be reluctant to cooperate if they’re worried about their own housing situation.
- You have less control over presentation. An unoccupied home can be staged however you like. With a tenant in place, how well the property is presented for each viewing is largely up to them.
- The tenant may leave early. Once tenants know a property is being sold, some feel uncertain about their future there and look to end their lease sooner than planned. This could mean losing rental income before settlement.
Four things to be aware of when selling a tenanted property
- Tell your tenant you’re selling, in writing, as early as possible. Their day-to-day life will be disrupted by tradespeople and house-hunters, so the more notice they have, the more likely they are to be cooperative.
- Give proper notice before inspections. Most states require at least 24 hours’ notice before a property visit, though some require 48 hours, so check with your agent or property manager for your state’s rules. More notice than the minimum gives your tenant time to tidy up beforehand.
- You generally can’t end a fixed-term lease early without agreement. You can discuss ending the tenancy early with your tenant’s consent on a date you both agree to, but you can’t unilaterally evict them. If a lease is still running when a new owner takes over on a periodic (month-to-month) agreement, tenants are entitled to stay until it ends, or need to be given written notice per your state’s rules. This is typically 60 days, though it’s 30 days in WA and NSW, and 42 days in Tasmania.
- You need permission for interior photos and signage. You can photograph the exterior freely, but interior photos and on-site signage generally require the tenant’s consent. Most tenants understand this is part of selling and are happy to agree.
Working with your tenant rather than against them will help you maintain a positive relationship and avoid legal problems. Some landlords even offer a small rent reduction as a goodwill gesture to compensate for the disruption. A cooperative tenant who gives you easy access can help you sell faster.
Selling while tenanted means you don’t lose rental income during the process, but it does come with a few extra things to manage. Talk to your real estate agent about the best way to handle it for your specific situation.
New to property investing? Start with our guide on how to buy an investment property in Australia.