Selling a property and maintaining rental income can be challenging for property owners.
A tenant’s stay in a property while it is for sale is of great importance, but it is important to consider what is involved in keeping them there.
Analyze the sales market
A real estate market evaluation is necessary before making any decisions. Check your answers to these important questions.
- The market is either a buyers’ or a sellers’ market?
- Can potential buyers obtain financing and what are the interest rates?
- What is the market like where you have an investment property?
- What is the investment potential of this property?
- In this current market, will your property attract buyers?
“Hot” seller’s markets are characterized by fewer properties and more buyers. The property should be put in the best possible condition and sold as quickly as possible in a fast-paced seller’s market. Keeping a tenant in a property under the right conditions may help maintain a more solvent financial situation if there is a problem in the seller’s market and it takes a long time to sell a property. Whether it is a good investment property also depends. Another good reason to keep a tenant is to keep the property in an area that attracts investors more than homeowners.
Conduct an analysis of the current tenancy
Ensure that the rental agreement is in order before you decide to sell the property with a tenant occupying it. Do you want to rent the apartment on a month-to-month basis or on a lease? When you sell the property, if it is to be owner occupied, you can inform the tenant if the lease expires soon or if it is a month-to-month agreement. Another problem may arise if it is still a long-term lease. Perhaps you should reconsider selling or consider finding another investor to buy the property.
There is a possibility that the tenant would be interested in purchasing your rental property in the future. Ensure that they are credible, have the purchasing power, and complete this evaluation in a timely manner if this is the case. Consider whether it is worthwhile to keep the tenant if they cannot purchase the residence.
Having determined the market is favorable for selling, you must take the following into consideration:
- With the current residents, can the property realistically be sold.
- When a tenant occupies a property, how does it look?
- Are they going to take good care of the property so it remains marketable?
- Is the listing agent going to be cooperative with showing the property?
- Is the company willing to cooperate with necessary maintenance and inspections?
Assess your financial situation
To determine whether you should sell or wait until the sales market improves, it is helpful to sit down and make a realistic assessment. It’s important to determine how many months you will be able to sustain the property with or without rent if the situation warrants selling. Make sure to include any “financial incentives” that you may be able to offer to the tenants in order to get them to cooperate. Next, combine that with the current tenancy and sales market.
Answer the following two questions.
- When the property is vacant, can you sell it in today’s market?
- If the property is currently occupied by a tenant, can you sell in the current market?
Tenant-to-tenant sales
The lease agreement, especially with the tenant, must be in writing if you decide to keep the tenant in the property while it is on the market for sale. Tenant-occupied properties have been subject to too many “he said, she said” disputes, resulting in litigation between the tenant and the seller. Discuss the listing process with your property manager and sales agent. When a tenant cooperates, rewards are often helpful, but only after the tenant has cooperated.
Get in touch with us to find the right solution for your needs. A successful sale of an occupied property requires professional advice, clear communication with all parties involved, and realistic expectations.