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how to sell a house with rental tenants

A landlord’s guide to selling a rental property with tenants

February 17, 2020 8:00 am by Upside

If you’re selling real estate that also happens to be an investment property, it’s often made more complicated by having rental tenants living in the property. While it doesn’t have to be a deal-breaker to have people living in the house while you show prospective buyers, there are a few important things to look out for that can trip investors up.

We’ve put together this guide to selling a house with tenants to help you along the way.

Can I sell my house with tenants in it?

The simple answer is yes, but there are a few things to consider to make sure you’re observing your tenants’ rights during the process and improving your chances of a smooth sale:

Your tenants’ rights when selling a property

While many landlords prefer to keep their tenants in place and paying rent as long as possible, others prefer to sell an empty property. Tenants’ rights vary by state, so it’s important to get real estate advice from an agent who is able to advise you on all the requirements so that you can be sure you’re observing the right laws. However, generally:

  • You can’t make your tenants leave if they’re on a fixed term lease
  • You need to give 14 days’ notice to vacate at the end of a fixed-term lease
  • If ending a tenancy that has continued beyond the original term agreed, the notice period will be longer but varies considerably by state, so make sure you have up-to-date information.

Inspections when selling a tenanted property

When it gets to the point of advertising the property to potential buyers, your tenants need to be given fair warning to be clear of the house and to have tidied up. This means tenants need to be given 24-48 hours’ notice, depending on which state you’re in. It’s a good idea to:

  • Give more notice than necessary where possible to maintain a good relationship
  • Make sure you have a real agent with great organisation and communication skills
  • Consider only offering inspections at set times so that the tenants’ lives aren’t disrupted

Can a landlord sell a property during a lease?

As the property owner, you have the right to sell your property even if it is during a fixed-term tenancy agreement. However, you must provide written notice to your tenant/s of your intention to sell.

As mentioned above, you also need to provide 24 to 48 hours’ notice before an inspection, depending on which state you’re in. If you’ve given proper notice, landlords and property agents can enter the property for an inspection regardless of whether the tenant has agreed, and without a tenant present.

Sample letter to tenant of intent to sell property

*Date

Address

Dear __,

This letter is to notify you of the intention to sell the residential premises situated at __.

The premises will be placed on the market on __.

In the state of __ it is required that I provide ___ hours of notice before showing the premises to any prospective buyers. I will make all reasonable efforts to give you additional notice before an inspection and agree with you the dates and times of the inspections.

I appreciate your cooperation through this process and upon sale of the rental property I will be transferring the lease and security deposits to the new owner.

Please don’t hesitate to reach out if you have any questions.

Sincerely,

_____*

Pros and cons of selling a property with tenants

There a several pros and cons to consider when selling a tenanted property:

Pros:

  • You’ll still receive rental income during the selling process
  • Prospective buyers could be attracted to a property that is already tenanted
  • Having a tenant living in the property assures investors that it has good potential

Cons:

  • You’ll need to give the tenant adequate notice before inspections
  • Tenants may not present the property in its best light, which could negatively impact the sale price
  • Tenants could be seen as an inconvenience for buyers who want to occupy the property on settlement

Tips for maintaining a good relationship with tenants when selling

For many renters, one of the frustrating things is the lack of control over their living situation. As the landlord, it’s in your best interest to keep your tenants on your side so that the process will be as pain-free as possible and so that you can ensure your property generating returns for as long as possible during the sale process. Some ways you can do this include:

  • Reduce the rent as compensation for the disruption of having open for inspections
  • Let them know that you plan to sell as soon as you’ve made the decision
  • Give them as much notice as possible before inspections
  • Be flexible with inspection times wherever possible
  • Communicate about the progress of the sale so they can make plans

What happens if a tenant wants to vacate when you sell the property?

In NSW and several other states, if you haven’t let your tenants know at the time of signing the lease that you intend to sell before the period of their lease is over, they are within their rights to leave when you let them know that you intend to sell the property.

Depending on your strategy and financial situation, you may prefer to sell a vacant property – but as we mentioned earlier, ensuring that you’re making money for as long as possible can be key. You don’t know how long it will take to find a buyer for your house and settle, so a vacant property can be a significant burden. Plus, selling an already tenanted investment property to another investor can be a big incentive to buyers.

So, if you want to keep your tenants in your rental property, be proactive and prepared to offer a deal like reduced rent so you can incentivise them to stay.

If you’re planning to sell an investment property, it will be important to have an experienced guide. Get in touch with one of our professional real estate agents to help you understand your responsibilities and your tenants’ rights when it comes to selling a tenanted property.

Upside

Upside is an Australian-owned, full-service real estate agency with one low fee and no commission. Our standard is other agents’ ‘extras’, delivering vendors a complete agent managed service including a full appraisal, open home management, copywriting, photography, signage and advertising. It's the way real estate should be.

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