Selling a tenanted property can be a smart financial move for property investors. Picture this: you get to keep the rental income flowing in while simultaneously showcasing your property to potential buyers. It’s a win-win proposition that holds immense appeal for both sellers and buyers alike.
Can You Pull It Off?
The answer is a resounding yes! However, before you dive in, there are a few things you should think about. You’ve got to be careful and make sure you’re respectful of your tenants’ rights while also increasing your odds for a smooth sale.
Should You Take the Plunge?
This is where your personal preferences come into play. To make an informed decision, weigh the pros and cons of selling a tenanted property. This evaluation will guide you in determining whether this real estate venture aligns with your goals and aspirations.
When it comes to selling a tenanted property, it’s important to consider the following:
Pros:
- Continuous Rental Income: You’ll continue to receive rent throughout the selling process.
- Attracting Investors: If an investor is eyeing your property, they’ll likely appreciate the presence of a tenant at settlement, eliminating the need to search for a new tenant post-sale.
- Immediate Returns: Investors can start earning rental income immediately after settlement.
Cons:
- Notice Requirements: Legally, you must provide your tenant with 24 hours’ notice for property inspections outside of designated inspection times, potentially causing delays.
- Property Presentation: You have limited control over the property’s presentation, and tenants may not maintain it to your standards.
- Buyer Inconvenience: Tenants may be seen as an inconvenience for buyers seeking vacant possession upon settlement.
If you’ve made the decision to sell your tenanted property, here are some essential tips to keep in mind:
A) Know Your Legal Obligations:
Throughout the sales process, it’s crucial to understand your rental agreement, especially concerning notice requirements to vacate. These regulations may vary from state to state, so it’s important to become familiar with the laws and regulations specific to your state. For instance, in South Australia (SA), you must provide tenants with a 60-day written notice in accordance with the state’s legislation. Further details can be found here: SA Government – Guide.
In general, tenants possess the following rights:
- Fixed-Term Lease Protection: Tenants in a fixed-term lease cannot be compelled to vacate the property prematurely.
- Notice for Periodic Lease: Tenants on a periodic lease must be provided with appropriate notice to vacate.
- Maintenance Expectations: Tenants are required to maintain the home in a reasonable condition, but they are not obligated to assist in preparing the property for sale.
- Advance Notice: Tenants must be given the necessary notice before the property is listed for sale and before any inspections or viewings.
- Privacy Protection: Tenants can refuse entry for photography if they deem it a breach of privacy.
- Reasonable Viewings: Entry for viewings must be reasonable; typically, two viewings per week are considered reasonable.
- Lease Continuation: The new buyer must honor the existing lease and provide appropriate notice if they intend to terminate the tenancy after the lease term expires.
B) Open and Early Communication with Your Tenants:
Maintaining a positive and transparent relationship with your tenants is paramount. Understand that, for many renters, the uncertainty of their living situation can be frustrating. As the landlord, it’s in your best interest to keep your tenants on your side to ensure a smoother process and ongoing returns on your property during the sale. Here are some effective strategies to achieve this:
- Rent Reduction: Consider reducing the rent as compensation for the disruptions caused by open inspections.
- Prompt Notification: As soon as you’ve made the decision to sell, inform your tenants promptly.
- Advanced Notice: Provide your tenants with as much notice as possible before scheduling inspections.
- Flexibility: Be accommodating with inspection times whenever feasible, respecting their schedules.
- Regular Updates: Maintain open lines of communication about the sale’s progress so that your tenants can make informed plans and feel more in control of their living situation.
C) Elevate Your Property for Sale:
When preparing for sale, you should remember that someone calls your property “home.” Navigating this situation requires sensitivity and consideration toward your tenant and their personal space.
In terms of marketing, you can display a “For Sale” sign on the property, provided it doesn’t disrupt your tenant’s peace, comfort, or privacy. Additionally, when capturing photographs or video footage for advertising, respect your tenant’s right to refuse the inclusion of their personal possessions in these visuals.
Open houses can be disruptive for tenants, especially with multiple viewings scheduled, and challenging for property owners who may have limited control over the property’s presentation. To improve this situation, consider weekly flower deliveries to brighten the property, offer pre-open house cleaning with tenant consent, and provide incentives like discounted meals or movie tickets to appreciate tenants’ cooperation. These steps ensure a smoother experience for all and leave potential buyers with a positive impression of your investment property.
D) Seek a Professional:
If you’re uncertain about the legal intricacies in your area or require professional guidance, engaging the services of a local real estate agent is your ticket to a smoother, more supported selling journey. Whether you have burning questions about selling a leased property or need assistance in managing your current tenants, our OC experts are here to make it happen for you!
