Property rentals are a lucrative type of real estate investment that is supposedly low risk, high reward, and easy to manage. It works in a straightforward concept: The tenant pays the landlord a specific amount every month as rent. All the rules, regulations and the amount to be paid are usually written in a contract where both parties agreed.
While every landlord expects smooth flowing in their property rental business, it is always not the case. There are a handful of tenants who aren’t mindful of their obligations and the rules inside the property. Some even cause damages to properties that are costly to repair. These and more terrible reasons are pushing landlords to sell the property with existing tenants.
How To Sell Your Tenant-Occupied Property?
But, is it possible and legal to sell a property with existing tenants? To answer the question, yes it is very possible, however, landlords need to know first the tenants’ rights when putting an occupied property on sale. Laura Agadoni of Landlordology published an article about the rights of every tenant living in a property that is for sale.
Tenants’ Rights When Selling an Occupied Rental Property
There are many reasons why you might sell a rental property.
Some of the most common reasons are:
- Cash: You want to cash-in on your property’s equity.
- Cut your losses: The property isn’t performing as well you like, and you just want out.
- Accidental landlord: You inherited the rental property and have no interest in being a landlord.
- You’re moving: You’re relocating, don’t wish to be a long-distance landlord, and/or plan to buy something closer to you.
- 1031 exchange: You want to trade it in for something else.
- The end is near: You’re retiring or just want to get out of the landlord business altogether.
Handling Month-to-Month Agreements
If your tenant is renting on a month-to-month basis, all you need to do is give your tenant proper notice. This involves mailing or delivering a letter to your tenant 30 days before you’d like them out, usually in respective to the rent due date.
The required notice period varies from state to state, so be sure to look up your state’s policy here.
You don’t need a reason to terminate a month-to-month agreement, hence why it is called a “no cause” termination. It’s one of the main benefits of having a month-to-month agreement. You don’t have to tell the tenant why they need to vacate unless you want to.
Handling Fixed-Term Leases
Fixed-term leases require a more delicate touch and don’t normally terminate just because a property changes ownership.
Here are five options for handling a tenant with a fixed-term lease:
1. Wait Until the Lease Has Expired
If you have a tenant in good standing who is renting the property under a lease situation, the easiest method for you is to wait to sell the property until the lease is up and your tenant has moved out.
While landlords have full control of the property, tenants also have their rights that must be respected and taken into consideration. Tenants must be given proper notice at least a month before selling the property. Depending on what type of agreement landlords to their tenants (month to month basis or property lease) they deserve to know the landlord’s painful decision of selling the property as part of their absolute right.
We already know that we can legally sell a property with tenants still occupying the property, the next question that should be answered is how to sell a tenant-occupied property. Trulia wrote an awesome article answering this very important question.
How to Sell a Tenant-occupied Property
Know your rights—and the tenant’s, too.
Whether you’re tired of landlord life or want to take advantage of a seller’s market, there are plenty of reasons you might need to learn how to sell a tenant-occupied property. Sure, it’s your house to sell, but having renters does affect the process. Violating lease agreements or angering a tenant could slow things down, so you’ll want to approach selling your tenant-occupied property with care and plenty of research.
Selling a Tenant-Occupied Property
One of the biggest challenges of figuring out how to sell a tenant-occupied property is that there are so many variables. Here are a few different ways to approach the sale, depending on your situation.
If Your Tenant Has a Month-to-month Lease
Month-by-month leases are typically the most flexible rental situations. Depending on your state and city, you may only need to give your renters a heads-up 30 or 60 days before you need them to hand over the keys. Make sure to provide notice (in the manner required by your lease) to your tenant detailing when the agreement will end.
Landlords can typically terminate month-to-month leases without cause or explanation, so you aren’t required to tell your tenant about the sale. However, any housekeeping measures you need to take (think: preparing for inspections or open houses) may go more smoothly if you keep your tenant in the loop.
If Your Tenant Has a Fixed-term Lease
Longer leases can slow down the process of selling a tenant-occupied property a bit. Unless your lease includes an early termination clause, your renter has the right to live on the property until the lease is up—assuming he or she is paying rent and hasn’t violated the lease agreement.
The bottom line is, if a renter is following the rules and paying regularly, they don’t lose their right to call your house their home just because you want to sell. It may be best to wait until the lease has expired before selling your tenant-occupied property. Read full article here…
Depending on the type of agreement landlord and tenants made, there are a handful of reasons why landlords end up to a painful decision of selling the property despite still being occupied by tenants. As owner, remember that violating the lease agreement or angering tenants by not considering their rights could slow down the process and might pose problems in the selling process. Do some thorough research and patience in dealing with tenants to avoid delays in selling.
For tenants renting on a month-to-month basis, start by giving at least 30 days heads up before getting the keys to your property. Tenant with fixed-term lease agreement, it is best to let them to finish the lease term, especially if the tenant hasn’t violated any of the items in the contract.
Ann O’Connell of NOLO explains further the legal process of selling a property rental with tenants still occupying the property as well suggested some quality tips in making the most out of your property selling.
I’m a Landlord Selling a House: How Do I Handle Renters Living in It?
Legal and practical considerations when selling a house or property that you’re currently renting out.
Having someone living in your home, condo, cottage, or other property while trying to market the property for sale market necessitates extra consideration. For purposes of advertising and showing the property to its best advantage, you’ll want to take into account both the tenant’s rights under the lease or rental agreements as well as state or local law, and your own needs as a seller.
(Then again, maybe the tenant wants to buy the property! Before going through the effort of putting the house on the market, don’t forget to ask.)
Can I Sell a Property With a Tenant Living in It?
This is usually the first question that arises when a landlord wants to sell. The simple answer is yes, you can sell a property with a tenant still living in it. In fact, the laws in most, if not all, U.S. jurisdictions give the tenant the right to remain in the property for the term of the lease, continuing on after the sale if the tenant’s lease remains in force.
In some situations, having the tenant remain during and after the sale may be fine with you. You will, however, want to consider the advantages and disadvantages to selling the property while it’s occupied. If you don’t think the property will appeal to buyers with a tenant living in it, other options may exist.
Should I Try to Get the Tenant to Leave Before Putting the Property on the Market?
It’s entirely possible to market a property as an occupied one with a valid lease in place. This may actually be an attractive option if the property is an apartment or condo or would make a good investment property.
Many investors are happy to pick up a property with an existing tenant who is up to date with rent and has a long-term lease in place. However, if the current tenant owes money or is paying below-market rent, you may want to consider other options.
You can try to negotiate with the tenant regarding the length of the lease. Offering money in return for the tenant agreeing to modify the lease and move out early is a common approach. That way, you can either have the tenant clear out in time to completely clean and perhaps stage the property, or you can market the property as “vacant upon closing.” Read more tips here…
It is clear that every landlord and owner can legally sell the property even if tenants are still occupying it. However, landlords must completely respect tenant’s rights is essential. If letting them complete the lease’s duration, landlords can negotiate with the tenants by offering money for the remaining duration of the lease agreement. That way the owner can now mark the property as vacant upon closing. Follow the above tips and decide for yourself if you would want your tenant to vacate the property first before listing, or have it listed first before informing them about the decision.
As landlord, now that you know that you can actually sell your tenant-occupied property rental, and you know exactly what are the things to take into consideration to avoid problems, the next step is to have it listed in various property listing sites. If you don’t know exactly how to do it, Dependable Homebuyers can help you sell your property rentals with existing tenants. To know more, visit https://www.dependablehomebuyers.com/tenants/ and let’s get started.
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