The best way to sell a rental property is to let the lease expire and put a vacant home on the market. This option avoids many potential difficulties, but is not ideal from a financial standpoint, since an empty rental brings no income and still has expenses.
Whether your renters are difficult or dream tenants, if they are under a lease when you are ready to sell your property, it poses a few challenges. That said, it’s not anything that can’t be overcome with some effort and know-how.
Clear Communication is Key
When faced with selling a tenant-occupied home, the key is to have clear, honest communication with your tenants. It may be your investment property, but this is the place they call home. Just because the real estate market is heating up again doesn’t mean they should expect to move before their lease is up, much less cooperate with you to sell the house.
Offer First Right of Refusal
The first, and most logical action, might be to ask the tenant if they would like to buy your home. Some states guarantee tenants first right-of-refusal when a home goes on the market, so it’s vital to be familiar with your area’s specific laws.
Have Some Compassion / Manage Emotions
This will likely be an unsettling time for your tenants, which is why you need to do what you can to keep emotions in check. Ask them how you can help make the process easier for them.
One of the worst things that can happen is to create an angry renter. This becomes a wildcard, one that can cost you financially. That’s why you should take every effort to be kind and accommodate your tenant.
If the tenant’s purchase of the home is not a viable option, tell them exactly how long they will have to vacate once papers are signed.
If you have some flexibility with how long it takes to sell your home, focus your efforts on finding like-minded real estate investors. It’s can be a great selling point, plus you might not have to ask the renter to leave.
Since you would be focusing on a specific subset of the buying market, this may take longer, but remember: you have a renter in place, presumably paying your mortgage in full. Unless other financial factors are in play that precipitate the need to sell quickly, the issue we are trying to manage also happens to involve an important financial asset to you — the tenant!
Offer Financial Incentives
Rents have dramatically surged in many areas. Sometimes offering to pay the difference for a few months is the easiest way to get a tenant to move on. While offering your renters money to move may seem odd or counterintuitive, it could very well be worth your while, particularly if the move helps you achieve a windfall that is much larger than what you offer them.
When you have a buyer lined up, closing dates are notoriously uncertain. If you agree to have your tenant stay at the residence as long as possible, you want to make sure the property will be in a state that doesn’t jeopardize the transaction.
Other financial incentives that keep the property safe and tenants on your side include:
- Cash to persuade your tenants to keep the home clean and help them move out
- Discounts on monthly rent until the date of sale
- Refunded cleaning deposits
- Gift cards to make up for lack of privacy
Giving tenants options and incentives for relocation can be an asset when selling a home. An angry tenant facing homelessness is not going to cooperate with you or anyone trying to help you sell.
Play By The Rules
When possible, rent on a month-to-month basis if you plan on selling your home. Give notice as required that the home is for sale, preferably with more time than legally mandated. Each state has different landlord-tenant laws, and they generally don’t favor landlords. So, speak with tenants first, but make sure notices and agreements are put in writing and use certified mail to deliver documents.