If you are selling an investment property, you may question whether to put it on sale with or without a tenant in it. Selling a tenanted property has pros and cons. Here’s what to consider and how best to manage the selling of a tenanted property.
You’ll still receive rental income
Selling a property with tenants can make financial sense as you’ll still receive a rental income. If you rely on the rent as part of your monthly income or to cover an existing mortgage, you may want to keep a tenant around until it’s sold.
A tenanted property is appealing to investors
Not all buyers are keen to buy a tenanted property as it may mean they won’t be able to move in immediately. However, for investors, a property that comes with a tenant is appealing. They won’t have to try to find a tenant and will benefit from rent immediately.
You can offer the tenant the opportunity to buy the property
Some tenants plan to buy their own home and are renting until they find one. That’s why it’s a good idea to offer the tenant the option to buy. Many tenants like the home they are renting and may jump at the opportunity to own it.
Coordinating property viewings can be difficult
Trying to coordinate a time that suits both the buyer and the tenant can be challenging. Some tenants may give you the runaround to try to delay the sale and buy them more time to find alternative accommodation.
You have less control over how the house is presented
An unoccupied home can be decorated in a way that makes it appealing to buyers. In real estate, this is called ‘staging’. When you have a tenant in the house, you have less control over how the house is presented to buyers. Some tenants will cooperate and tidy the home before buyers visit; others won’t.
The tenant may leave early
Once a tenant knows the property is being sold, they may feel insecure about whether they will have a roof over their head when a new owner takes over. This may prompt them to try to quit their lease early, leaving you without rental income.
How to manage the selling of a tenanted property
If you plan to sell your property with a tenant, here’s how to manage the process.
Communicate your intention to sell
Inform your tenant of your intention to sell. The sooner the tenant knows the property is being sold, the sooner they can search for another place. It also prepares them for upcoming buyer viewings and repair work you plan to carry out.
Adhere to tenant legislation
The legal rights of the tenant must be respected when selling a property. A 1-2-month notice period is common for fixed-term agreements. Once a fixed term agreement ends, you can switch to a periodic (month-to-month) agreement. A minimum notice period for property inspections also applies. This varies between 24 hours to seven days, depending on the state.
Negotiate to break the lease
If you or your tenant would prefer to end the lease early, negotiate a timeframe that suits both of you. With no tenant in the property, you have easy access to show buyers around whenever you need to. You also have the chance to renovate and conduct repairs without inconveniencing a tenant.
Selling a property while tenanted means you don’t lose rental income but comes with some challenges. Discuss these with your real estate agent who can advise you on the best way to handle it.