With the economy still in slow mode, some property investors are having to sell their rental properties to reduce their debts or raise cash – but are finding that this can be very tricky if they still have tenants in place.
“In fact tenants can make or break your sale if they decide to be difficult,” says Greg Harris, CEO of Chas Everitt Property Rentals, “which is why most estate agents would recommend that you should wait for the current lease agreement to expire before you list the property for sale”.
“This may be especially important if you have disgruntled tenants or they are really unhappy at the thought of having to hunt for a new home and move to somewhere less familiar and possibly more expensive. The last thing you want is to let them put potential buyers off, by making it difficult to access the property for viewings, for example, or by leaving it messy and dirty, or by hanging around during viewings with a long list of complaints”.
“Once a tenant has actually moved out, it does also give you an opportunity to clean the property thoroughly, repaint, tidy the garden and make repairs if necessary so that you can present it to potential buyers in the best possible condition and attract the best offers.”
However, he says, waiting for a rental unit to be vacated before it is listed is not always possible in terms of the seller’s finances. “It can take months from the time the home goes on the market until it’s sold, and there will of course be no rental income during this time if the property is empty”.
“In fact more often than not, owners do have to sell with their tenants still in occupation, and in such cases your best option is to let them know about your decision to sell as soon as possible, and keep them up to date as regards the progress of the sale”.
“You should also check your lease agreement, because it may contain a condition that the property may only be listed for sale in the last three months of the lease period”.
“We have found that most tenants will be very co-operative as long as they feel they have been treated fairly and with consideration, and not left in the dark about a matter which does, after all, have a significant bearing on their future as well as yours.”
Harris says that if you have enjoyed a good relationship with your tenants you may even be able to incentivise them to help you sell the property quickly. “If they will be staying on after the sale you could, for example, lower their rent for the next month or two in return for them making an extra effort to keep the place really clean and tidy for potential buyers”.
“Alternatively, if they have decided that they would prefer to move elsewhere rather than stay on a new owner as their landlord, the incentive might take the form of assistance with their moving costs, or with the deposit on their new home”.
“In short, the success of dealing with a tenant during a sale is usually less about the message itself, than about how the message is delivered.”