Selling a Rental Property with Tenants Onsite

Selling a Rental Property with Tenants Onsite

Depending on your state, the tenants have a few important protections that you’ll need to help your client navigate, and there are lots of ways to make the move itself a little less hectic.

Selling The Rental Property

There are lots of reasons you might want to sell an active rental property. If you’re client is moving to a different area, it might make sense to sell the rental to help them avoid the hassle of having a long-distance tenant.

Once your client decides to sell their property, your client will need to inform the tenants. In almost all cases, selling the property does not automatically terminate a lease agreement. You’re client should want the tenants to feel respected so that you’re not managing a conflict during the sale of the property.

Removing Month-to-Month Tenants

Tenants that pay month to month agree to “no cause” termination. In other words, your landlord client can terminate the agreement without giving a reason, so long as they give 30 days notice (or at least one rent paying period, depending on your state’s laws). Once your client provides notice, it’s up to the tenant to hand over their keys and leave.

Nullifying Fixed-Term Leases

A more typical tenant arrangement takes the form of a lease. Most leases go for one or two years, which can make moving with an active lease difficult. If the tenant has a fixed-term lease, your client will need to make an arrangement with them to move out early.

Option 1: Wait it Out

If you have time on your hands, the path of least resistance is to simply wait until the lease expires. Your client should inform the tenant early on that their lease won’t be renewed, so that they have plenty of time to make other arrangements.

Option 2: Buy Out Your Tenant

Your client may be able to get their tenant out early by offering to compensate them for the trouble of finding a new place. This option may help the tenant cover the cost of a first, last, and deposit on a new place, simplifying their transition. You might also research the cost of a move to determine how much money your client should offer your tenants.

Option 3: Make an Arrangement

Many landlords make successful arrangements when selling a rental property. Look into transferring the tenant’s lease to the new owner of the property if it’s successfully sold. Make sure that all parties (the buyer and the tenant) are fully on board with the new arrangement to avoid issues down the road. This may include allowing the buyer to perform a tenant credit check or criminal background screening.

In some cases, a tenant may be an ideal buyer themselves. Consider a financing arrangement that lets the tenant invest their monthly rent into the purchase of the property.

Option 4: Evict Your Tenant

As a last resort, your client may have to consider eviction if the tenant has violated the terms of their lease.

Listing and Showing an Occupied Unit

Once your client and their tenant have come to an arrangement, it’s still too early for your client to wash their hands of landlord responsibilities. There are a few things to do during the selling process.

Tenants may or may not be understanding of your need to show the unit while it’s occupied. A tenant might refuse to clean the apartment or leave during a showing, which can complicate your marketing or staging. In most states, you need to give at least 24 hours’ notice before showing the apartment to potential buyers. Don’t hesitate to make an informal arrangement with the tenant – a token of your appreciation in the form of a gift certificate can motivate a tenant to cooperate with your sale.

Finalizing the details

Handling these types of situations can be difficult for both the landlord and the renter, so these steps can help make the situation less tense and easier for both tenant and property owner. Once you’ve determined the best course of action and everyone is in agreement, you can rest assured knowing you’ve done your due diligence when it comes to selling a rental property with tenants on site.