Having a rental property can be a significant and steady source of income. Depending on the contract, an owner will receive rent payments from tenants. Over the years, the property can also increase in value. However, no matter how lucrative and thriving the income seems to be, some reasons drive owners to sell their properties.
Selling a home can already be challenging. But what if it is a rental property, will it still be hard to sell? The answer to this is it depends on the situation. What if the home is still occupied and tenants are currently living in it?
You probably have a number of questions in mind, and in this article, we will discuss a few basics about rentals and what are the things you can do if a tenant is still living on your property, especially when you have decided to sell it already.
Types of Rental Agreements
The type of rental agreement you have with your tenants is an essential factor. Identify what type of rental situation you are in first.
- Month-to-month agreements
It will be easier if you and your tenant follow a month-to-month contract. Even if it’s occupied, you may proceed with listing and selling the home. You just have to be sure that you give them ample time and proper notice. This means that you have to inform them via mail 30 days before your target date. This will serve as your notice period, and as the owner, you have to respect the rent due date as well.
With month-to-month agreements, you do not really need a reason for terminating the contract. It’s actually one of the advantages of such contracts.
- Fixed-term Leases
If you and your tenants are under a fixed-term lease, it requires a more complex process. You cannot just terminate the contract just because a new owner is coming.
Of course, it also means that advertising and showing the property can be quite challenging because the current tenant has his rights covered by the agreement. You also have to consider the existing law in your area when it comes to this situation.
Nonetheless, in some cases, having a tenant can be beneficial. Other interested buyers can easily visualize living in your property. At the same time, some do not appreciate the idea and can break the deal off.
What Can You Do if Your Property is Occupied and You are Under a Fixed-term Lease?
- Check When the Lease Expires
Wait until the contract expires. You and your tenant entered an agreement, and you have to respect it, especially if they are a good tenant. However, suppose your tenant has violated anything on the contract. In that case, you can decide to terminate the lease as long as you follow the proper procedure in giving out the notice.
Here are some of the common and valid reasons that can lead to contract termination:
- Damaging the property
- Causing inconvenience or nuisance to neighbours
- Violating the no-pet condition
- Failing to pay on time
- Conduct illegal activities on your property
- Consider Cash for Keys: Pay Your Tenants to Move Out
Suppose you really need the property back because you have a buyer that made you a great deal. In that case, you can negotiate with your current tenants and offer them a settlement. Since your existing contract has not expired yet, a common strategy that landlords use is called cash for keys. It is quite an expensive strategy but totally worth it to consider.
You can help your tenant by helping them pay for the moving costs and cover half of the security deposit and first-month rental costs. This is a huge inconvenience for them so try to be as helpful as possible as their landlord. However, you have to remember that the tenant can and has the right to turn down your offer. This leaves you to wait until the end of the contract.
- Ask if Your Tenant Might be Interested
Before going through the tedious process of selling the property and doing all the negotiations, check if the tenant himself wants to buy the property. Offer the property to your current tenant. If they agree, you can start discussing financing arrangements in purchasing the property.
However, suppose the tenant does not hold a good standing in paying monthly rentals. In that case, you can tell the tenant to look for a financing firm themselves.
Tips to Sell Your Rental Property Smoothly
- Be Familiar With the Existing Laws in Your Area
Tenants have the rights, and so do you as the owner. Take the time to learn the laws applicable in your area to be sure you are not violating any regulations in place. Work with professionals so you can get the proper advice you need.
- Tell Your Tenants Your Plans
It would not hurt to meet your tenants and tell them about your plans for selling the property. In this way, they can let you know about possible inconveniences and this allows you to work around those they have mentioned.
Let them know that you totally understand their side and that you will do what you can to reduce its impact on them.
- Respect Their Privacy
The best way to market a property on sale is to allow showings. However, these should be scheduled and must have the consent of your existing tenants. Give them advanced notice, and it will be rude just to show up unannounced. Ask them for their preferred schedule and give them at least 24 hours’ notice when a possible buyer is about to view the property.
There are a lot of things to consider when selling a property with tenants living in it. Be sure to know your rights and respect theirs as well. You also have to consider many factors and be sure you do not violate anything on the contract with your existing tenant. Keep the communication between you and your tenant open and let them know of any updates. Set their expectations and avoid unpleasant surprises, which can cause inconvenience on their part.