Having a rental property with existing tenants can make the process of selling that property even more complicated. You’ll have to advertise the property and conduct showings while being mindful of the rights and needs of your tenants.
In this article, we explain what happens when a property is sold and share five tips for selling a property with existing tenants.
Can You Sell a Rental Property With Tenants?
As a landlord, you can sell a rental property with tenants living there if you don’t violate your existing lease agreement or your tenant’s rights. It’s important to remember that you’ll need to handle the sale of the property in a way that is fair to your tenants. Before selling your property, here are some pros and cons to consider.
Pros of Selling a Tenant-Occupied Property
Attractive to investors: A property with existing tenants is a big selling point for someone looking for an investment property. Already having tenants means that the new owner won’t need to advertise the rental or wait to start generating income.
Already staged: Tenants living in your property are likely to have the property furnished. This helps potential buyers see what the property could look like while it’s being lived in, and may make the home more desirable.
Cons of Selling a Tenant-Occupied Property
Unhappy tenants: If your tenant isn’t thrilled about the prospect of a new landlord, it may make certain parts of the process difficult, such as scheduling showings.
Poorly maintained property: If it’s been a while since you’ve done a rental property inspection, you may find the property in a less-than-ideal condition. This can make advertising the property difficult, and leave a negative impression on potential buyers.
What Happens to an Existing Lease When the Property Is Sold?
When a rental property with tenants is sold, the existing lease is transferred to the new owner. The lease terms, including the rent amount and duration of the tenancy, remain the same unless the new owner and tenants agree to make changes. The new owner is bound by the existing lease terms and cannot ask the tenant to vacate the property or increase the rent until the lease is up for renewal.
However, if the existing tenants have decided to move out instead of staying, you can create a lease amendment to modify the lease termination date. A lease amendment is a legal document between the landlord and tenant that can modify the terms of an active lease agreement.
To create one, you can use platforms like Avail that offer free lawyer-written lease amendment templates. All you need to provide is the tenant’s name, the effective date, the part of the lease being amended, and signatures from all parties.
The document will then be emailed to your tenants to download, sign, and return for your counter signature. The amendment will be legally-binding once everyone has signed.
How to Sell an Occupied Rental Property
If you’re selling a rental property with existing tenants, here are some tips that can help ensure a smooth selling process.
1. Be Transparent With the Buyer
Being upfront with potential buyers can improve the chances of a successful sale. Clearly state in your listing description that the property is tenant-occupied so that interested buyers are aware.
Prioritize sharing the details of any existing lease agreements and management processes (such as the rental property management software you use) to transition everything smoothly.
2. Communicate With Your Tenants
Communicate your plans with your tenants as early as possible to give them time to make a decision on what they want to do. Let them know you plan on selling the property and what to generally expect from the process.
Any prospective buyers can also help keep your tenants informed once they’ve officially purchased the property. They can send a landlord introduction letter to introduce themself, share contact information, and list out any changes they plan to implement.
3. Make Showing Times Convenient
Tenants need at least 24 hours (or more, depending on local landlord-tenant laws regarding notice of entry) for showings. This advanced notice also gives them time to prepare the property, which may help make a stronger impression on a buyer.
When you schedule a showing, be considerate of your tenant’s schedule as well. For example, if you know that your tenant works from home three days a week, avoid setting up tours during those days.
4. Make Sure the Property Is in Good Condition
The condition of your property can greatly affect the outcome of your sale. If too much maintenance has been left unaddressed or there’s an excess of property damage, a buyer may change their mind.
An easy way to keep the property in good condition is by hiring professional services for tasks like landscaping and interior cleaning. These services can also be more reliable and consistent than enlisting your tenants’ help.
5. Ensure There Are No Lease Violations
If your tenant is staying after you sell the property, make sure any lease violations are resolved before your sale is finalized. This includes collecting any overdue rent payments since a delinquent tenant can affect the outcome of your sale.
Where to List a Rental Property With Existing Tenants for Sale
When you’re ready to list your rental property, you can visit a real estate listing site to find potential buyers like Realtor.com®. Through their platform, you can find prospective buyers and include important information like property type, available features, the history of the property, and more.
Realtor.com® also offers other tools like Seller’s Marketplace to help you sell your property without listing it, or find a qualified real estate agent in your area to help your sale with UpNest.