You’ve been renting out a house or apartment, but the investment is no longer serving your needs. How do you handle selling the rental property when you still have tenants living there? The good news is that it’s possible — and it can even be beneficial for you as the property owner.
Two ways to sell your investment property
When you’ve decided that you’re ready to put the rental unit on the market, you can either wait for your tenant’s lease to expire or sell it while they are still living in the house or apartment. Both options come with their own set of pros and cons.
- Wait for your tenant’s lease to expire.
If you wait until after your tenants’ lease expires and they move out, it gives you the opportunity to make repairs or upgrades that you’ve wanted to do without interrupting any tenants. Depending on how many months are left on the lease, this may be the most seamless option.
For buyers who want to move into the home themselves or have their own set of tenants in mind, it will be beneficial to show an empty property. However, those months you don’t have tenants while working on fixes are also months without income.
- Sell your property while tenants are still living there.
Conversely, you may choose to put the property on the market while tenants are still occupying the property. It may be appealing for investors to know there is a built-in rental income stream with the property and saves them the hassle of advertising for renters.
On the other hand, you’ll be relying on these tenants to ensure their space is clean and presentable. You are placing a lot of trust in the tenant who may not always be very reliable. It’s also best for the tenant not to be there during showings to potential buyers.
Become familiar with your lease
Having a lease that covers all the bases is important, as it protects both the landlord and the tenant in cases like selling the property. If you need the tenants to leave early — perhaps you need the property sold sooner, or the investors don’t want to purchase with existing tenants — you need to ensure that you adhere to the lease agreement you signed.
According to the American Apartment Owners Association, a landlord can break a lease, but they need to have a good reason. Laws vary state by state, but the best-case scenario is a month-to-month lease.
The lease will dictate how much notice is required for you to give the renter to vacate the property. The exact timeframe will vary legally.
In addition, state laws also govern the rules around keeping and returning a security deposit.
If they signed a year-long lease, look at what the early termination clause dictates. This clause could be you providing ample notice, or if the tenant has broken any parts of the agreement, that is grounds for ending the lease early.
Or you might be in a position where you need to be patient and wait out the rest of the lease. Communicate with the tenant and provide sufficient notice required by state law. In many cases, at least a 30 day written notice is required.
Be respectful of your tenants
Throughout the process of selling the rental property, keep your tenants in the know about what’s going on. Inform them that the property will be for sale and how it will impact their lease. You should also provide ample notice when someone will visit and when the property finally sells.
There’s no need for it to be stressful for anyone involved and keeping them in the loop will help alleviate questions or concerns.
Note: This guide is for informational purposes only. Meridian Trust does not make any guarantees about the sufficiency of the content in or linked to from this blog post or that it is compliant with current law. The content within this blog post is not a substitute for legal advice or legal services. You should not rely on this information for any purpose without consulting a licensed lawyer in your area.
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