We often gets calls from landlords looking to sell their investment properties. While it is 100% possible to sell a tenanted property, there are some key differences that you need to understand. Here’s what you need to know:
- If your tenant is in a lease, the tenant has a right to stay. It doesn’t matter if the new owner wants to move in, the lease obligations transfer to the new owner until the end of the lease term.
- If the tenant is month-to-month, the new owner may move into their space. 60 days written notice (from the first of the month) must be provided and the new owner must occupy the space themselves (or rent it to a family member) – they can’t simply kick the tenant out and rent it to someone else.
- If you’re thinking of selling in the near future, don’t sign new leases. You’ll get a higher price for your house if you are targeting both investors and end users who want to live in one of the apartments themselves. Having a vacant apartment is an attractive feature for many Buyers.
- If you’re NOT thinking of selling in the near future, increase your rents every year. The amount of rent your tenant pays will directly impact the sale price of your house. Because the lease transfers with the property, a tenant who is paying below market rent will mean the new owner will take in less income than they would with a comparable property, and that will make your house less valuable (read: lower price). Always charge market rent to a new tenant, and always increase rents annually by the amount allowed by law.
- Tenanted apartments are harder to sell. The law requires that you give a tenant 24 hours notice before showing their apartment, meaning you miss out on all the last minute showings and potential Buyers.
- You have a right to show your home to potential Buyers, provided appropriate notice is given. While it isn’t convenient for a tenant, it is absolutely your right. Don’t let your tenants bully you into restricted showing times, but always be respectful of the tenant. A cooperative tenant will go a long way to making the sale happen faster.
- It may be more difficult to market a tenanted property – you might be restricted in the photos you can take, you likely won’t be able to clean or stage the property and the tenants may not be cooperative with open houses. Make sure you’re working with an agent who is used to selling tenanted properties.
If you’re thinking of selling your income property in the future, give us a call to discuss what you can do today to make sure you get top dollar for your house when it comes time to sell.