As much as you want to hold on to your rental property for the long term, there may come a time when you need to sell it. Or perhaps the property appreciation has more than doubled and you want to earn a neat profit from your real estate asset.
This is a great opportunity to generate returns. However, what if you still have active tenants staying in your property?
This article will provide property owners with plenty of options to sell their rental units even when it is still occupied by renters.
What are the Challenges of Selling a Property Occupied by a Tenant?
Legal Problems
Your lease agreement will always be honored and if you don’t include any clauses and conditions that allow you to end the contract in case of a property sale, then under the law, tenants can stay on.
You cannot evict them if they have held their end of the agreement, such as paying the rent on time and performing their duties.
Special Cases
Situations for selling can be unique, so things will be on a case-to-case basis since you need to study the market condition, period of leasing, nature of the agreement, local regulations, and the willingness of the tenant to cooperate.
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Variable Outcomes
Results may not be the same as the way you picture things to go. Ideally, the buyer would wait until the rental term period is over but this is often not the case. Many buyers will want to get a hold of the property right away, either to reside in, sell off, or renovate for business or personal use.
Month-to-Month Leases
A monthly rental arrangement gives you more flexibility since renters can move out after receiving an advanced notice of 30 to 60 days.
The temporary nature of month-to-month leases already informs both parties to the lease contract that either the landlord or tenant can end the lease as long as the required notice period is provided.
Fixed-Term Leases
When dealing with a fixed-term lease, you will often find it harder to manage since renters can legally stay as long as they continue to make rent payments and adhere to the property policies and terms of the rental contract.
How to Handle Uncooperative Tenants?
Managing renters who are unwilling to cooperate when you are marketing your property to buyers can be a tough situation. The renters may cause damage intentionally and turn off potential buyers since they don’t want to move out yet.
When Tenants Refuse To Leave the Rental
Another issue you may encounter is residents refusing to move out but there are alternatives you can offer or strategies you can apply such as:
Sell the Unit to the Renter
Have an open discussion with your tenants to find out what they want and the reason they refuse to end the lease early. If it is because they cannot picture living in another neighborhood or rental unit, you can offer to sell the rental space to them to reduce potential stresses.
This is a win-win arrangement since you can earn returns from your property investment while the renter can settle in the place they are comfortable in. However, even if the renters are willing to buy the unit, they may find it hard to get approved for financing.
Consider a Buyout
Another effective method is to offer cash to the renter as compensation for ending the lease agreement early. They may be more cooperative about setting a date for moving out when you provide them with some funds to spend on moving-out expenses.
Market to Homebuyers
Finding a good property to reside in can be challenging for homebuyers. You can consider marketing to them since they might be open to waiting for a longer move-in period.
If the demand for properties is high while available residential units are few, then this might be a good strategy to take.
Try Selling to Other Investors
An occupied rental is looked at as a favorable scenario for real estate investors. Advertising your rental space to this group can result in positive outcomes.
What Are The Easy Ways To Sell A Tenant-Occupied Property
Time the Property Sale
Marketing your unit when the leasing period of the renters is fast approaching is a better method. You can reduce potential disagreements and provide enough time for the renter to seek other rental places.
Make sure that the market condition is favorable to sellers so you can dictate some terms, such as when the property can be handed over.
Engage the Services of a Property Management Company
Hiring a property manager can cause less friction in terms of managing and selling the property simultaneously. The company can provide useful insights concerning selling the property, handling the tenants, and even finalizing the sale process.
Consult an Excellent Lawyer
As much as possible, you want to prevent any legal problems, so it is advisable to arrange a consultation with an experienced lawyer, so you know your options and can be guided on the right actions to take.
Arrange a Backup Plan
Not all your plans can proceed without issues. As they say, some of the best plans can go awry. It is best to have several alternatives on your list.
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What if the renter won’t be open to a buyout? What if financing a property is not an option for the tenant who might be interested in purchasing the rental? It is best to always prepare yourself for whatever situation that can happen.
Bottom Line
Even if tenants are residing in your rental, you can still proceed with marketing your rental space. You can also consider partnering with a dedicated property manager for greater support.
If you’re looking for a trusted property management company, contact Schambs Property Management today!