Owning rental property is a great opportunity to get involved in real estate investing and create a recurring income stream. However, there may come a time when you decide to sell the house.
Perhaps you're entering retirement and no longer want to manage the property, or maybe you want to reduce the size of your investment portfolio. Although it's tempting to just place a "For Sale" sign in the yard, tenants who may still be under a lease agreement must be taken into consideration.
Here are several tips in selling a tenant-occupied rental to ensure a smooth sales process.
Remember to check your area's laws and regulations to see what options fit your situation.
Communicate Your Intent to Sell the House
Open communication is your best ally. Speak with the tenant as soon as possible about selling the house and then find out about the tenant's concerns. Many tenants won't object to looking for a new place if they are given adequate notice.
Give Advance Notice About Showings and Inspections
One major concern tenants may have is that showing times may be unreasonable or severely impact their daily lives.
Keep in mind that not every tenant has normal work hours, and very rarely will a buyer need to see the rental home immediately. So don't rush a buyer and the tenant into showings and keep communication open.
Set reasonable times for buyers to see the house. Let the tenant know how you plan to notify them about showings, inspections and appraisals. If the tenant knows that someone is coming over the next day or on the weekend, they will normally take the effort to make the house look presentable.
Review Lease Details
Lease terms dictate how to proceed with the sale of a rental home. A month-to-month lease gives more flexibility as sometimes owners only have to give the tenant a 30-day notice to vacate. This may be done immediately so that the home is vacant before placing it on the market. However, many homeowners want to keep getting rental payments until the house is sold.
If tenants have a fixed-term lease, owners are in a tougher situation but there are still options. Tenants can be told that the lease won't be renewed at the end of the term. That's often the best option for all parties unless, of course, the house must be sold quickly. In that case, owners may be able to enact the early termination clause in the lease. That clause stipulates the number of days a tenant has to vacate the premises after the closing transaction on the home.
Another option is to pass the lease over to the buyer if the buyer plans to rent out the house and wishes to keep the tenant as renters.
Offer Incentives to the Tenant
Incentives can help smooth over any hard feelings that a tenant may have over the situation. Owners may offer anything from gift cards to small cash compensation for every showing, appraisal or home inspection. These payments can be made after the buyer closes on the home.
Owners may also offer to reimburse tenants for moving expenses or even pay half of the security deposit for their new place if the tenants vacate the house early and in top condition.
You should review landlord/tenant laws in your area in regards to paying relocation costs. Even if there are no relevant laws, owners may still decide to go with the "cash-for-keys" option to get the tenant to move peacefully from the rental home.
Consider Your Options
The ideal situation may be that the tenant is eager to move and the house is being sold at end of their lease agreement. Whatever the case, it's best to get cooperation from the tenant so the sale is not compromised in any way and the closing transaction can proceed smoothly.
Owners should give careful consideration to the best way to handle tenants and choose the right option for all parties involved.
Debbie Drummond is a Full Time Realtor with over ten years experience in the Las Vegas Real Estate Market. She and her team of Real Estate Pros offer the highest level of service. If you’re buying or selling a Las Vegas home, call (702)354-6900 or email Debbie@LVHomePro.com. They’ll be happy to assist you in your move.