Sell your house with a tenant? Homebuyers during the subprime mortgage meltdown turned into “accidental landlords” when unable to sell their underwater property. You’re a veteran landlord ready to call it quits, or tired of problem tenants. Maybe you want fast cash to relocate or pay for life expenses. Selling tenant occupied property presents unique concerns. This blog discusses identifying the right buyer and how to deal with the tenant accordingly.
We Buy Houses (With Tenants!)
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Who can you sell this house to for maximizing profit?
Different houses attract different buyers and maximizing profit means selling in line with the expected buyer’s preference. As such, identifying the excepted buyer is critical. There are two prototypical home buyers: owner occupants and real estate investors. Single-family houses, vacant and in livable condition, appeal to everyday owner occupants who can move in and not worry about tenants or renovation. Multi-family houses, two to four units, attract professional landlords concerned with cash flow rather than beautiful/peaceful living quarters. “Ugly” houses catch the eye of investors with the time, money, and skill to renovate. In assessing your potential buyer, consider “holding costs” such as HOA fee and taxes. High HOA fee/taxes can turn off landlords by reducing profitability. Some communities have rules against renting ruling out landlords. Once you identify who will pay the most for your house, prepare the property in accordance with their wishes.
Owner occupants want move-in ready property.
What to do with the tenant in your house suited for an owner occupant?
Perhaps you ended up with tenant in a $500,000+ luxury home, condo with a $1,500+ HOA fee, or a townhome with a 6-month new owner rental restriction. The buyer willing to pay most for these properties is the owner occupant, but unfortunately, they will not buy it due to the tenant making occupancy impossible. To sell this property for highest price, the tenant must vacate. Once the tenant leaves you can make cosmetic upgrades that appeal to owner occupants and show the property more effectively. Tenants have little motivation to prep the house or cooperate.
To remove the tenant, do not renew the lease and at the end of term give a notice to vacate. If you’d prefer not to wait for the lease to conclude, talk to the tenant about moving out early. Negotiate a lease reduction and offer financial incentives like moving costs and cash for leaving early. Concerns about not collecting rent while the vacant house is pending sale can be misplaced because you will sell for much higher. If you absolutely cannot afford to make property payments while the sale is pending, you may have no option but to sell with the tenant present. In this situation, get the tenant on your team by being honest about the sale. Make sure the lease stays month-to-month so the owner occupants can move-in quickly and incentivize the tenant to keep the property clean and cooperate with showings.
What to do with the tenant in your property suited for a landlord?
Just because a buyer is a landlord does not mean he wants your tenant. Consider whether the tenant is an asset. Tenants that pay market rent and maintain the property are valuable to landlord buyers. Remember to keep lease, rental application, and rent receipts to prove it. Locking in a good tenant into a 12-month lease can be beneficial, for example, in Section 8 where the government
Real estate investors care about monthly cash flow.
subsidizes market rent. Nobody, even professional landlords, want a problem tenant. Your best bet to maximize profit is to remove the tenant. Options include eviction, not renewing the lease, or paying the tenant to leave.
Whether selling multifamily property with the tenant present or not, keep in mind professional buyers are not interested in paying for expensive finishings. For landlords, the property needs to be adequately livable. Tenants – since they do not own the property – will not give the care and attention to make finishings worthwhile.
We Buy Houses (With Tenants!)
Call Us (954) 676-1846 or Fill Out This Form For Your FAIR Offer.
