Selling A House with Tenants
It's stressful being a landlord at the best of times, but when the time comes for you to sell your investment property and move on, the stress can feel palpable. You've probably spent time getting to know your tenants and have built a relationship with them, and most humans don't deal with change all that well.
Springing the "guess what, I'm selling your residence out from under you" conversation can feel like a big deal, even if everyone involved knows that isn't really what's happening. If you own a home with tenants in it that you want to sell, what do you need to know and address?
You can still sell your house even if there are tenants living in it ...
The good news is this: You have the legal right to sell your property, even if there are tenants living there. It's your house and your decision to make, and if you want to sell it, that is well within your purview.
That said, there's a good way to go about selling your home with tenants, and there are a lot of ways that generate resentment and a lack of cooperation and that generally are not pleasant or fun for anyone involved. You do have the right to sell your house; your tenants have rights, too. To make this a tolerable process for them -- and, frankly, to get the place sold faster and for more money -- you'll need to solicit your tenants' cooperation.
... But in most states, they can stay through the end of their lease
One of the rights that your tenants have is to stay in the property until the end of their lease. This applies to both month-to-month leases and fixed-term leases for longer periods of time, such as six months or one year.
Selling a rental house with a month-to-month lease is relatively easy; refresh your memory as to the terms of your lease agreement and give your tenants the appropriate notice that you will not be renewing the lease when it ends. This could be anywhere from 30 to 60 days, depending on how your lease is written.
Selling a rental with a fixed-term lease can be a bit more complicated. It's possible that your tenants' lease might not be up for several months, and if you really can't wait for them to vacate before buying, then you'll need to work with them throughout the sales process, and they will stay on in their residence after it's sold.
Depending on how long is left on the lease, you might be able to just wait until it's up, gives your tenant the appropriate amount of notice that you won't be renewing the lease and need them to vacate, and then put the home up for sale. Simple! Unfortunately, in some circumstances, the tenant may have more than six months left on the lease, and you may truly need the house to sell as quickly as possible.
If you can't wait until the lease is up, you'll need to have a conversation with your tenants about the sale. This should probably be an in-person conversation, followed by a formal letter -- but the in-person conversation will give you an idea of what you'll need to do to incentivize your tenants to be cooperative, which could mean the difference between an immediate sale or a listing that lingers and lingers.
Decide how you're going to market the property
You can market the home as both; that's also an option. There are some traditional buyers who won't be moving immediately and won't mind waiting out a lease, so limiting yourself exclusively to investors isn't necessarily your only possible path forward, especially when the lease is less than 60 days from expiring.
Work with your tenant on appropriate showing times
It's important to remember that you are the person in this relationship who desires the sale. Your tenants probably have a lot of feelings about it, few of them positive; they are likely anxious about the future, unsure of where they will move or whether they will have to, sad about the loss of their residence, and more. So if you want them to cooperate to the best of their abilities, you will need to make this process as easy as possible for them.
The first thing to do -- and possibly the most important -- is to ask your tenant about their schedule. When would it be convenient for them to open their residence for showings, and when are the incredibly inconvenient times? Do what you can to limit showings only to the times that tenants have indicated are convenient for them. Buyers who are motivated will be willing to clear their schedules to see a house that might be a fit, so you can feel free to give your tenants some control over the scheduling.
Offer to pay for cleaning, lawn maintenance, or both
One way you can show your tenants that you care about their experience in this process is to help them out by hiring cleaning or lawn maintenance help -- or both -- to help them keep up with the showings and alleviate some stress. Yes, it's going to cost you some money, as will a few of these suggestions. But is it better to spend some money upfront and sell the place more quickly, or to pinch your pennies and allow the home to languish on the market for months? At that point, you may as well wait for your tenants to vacate if you're not willing to do anything to hasten the process.
Provide 24 hours' notice for showings
Different states have different requirements for how much notice you need to give tenants about showings, but a good rule of thumb that's acceptable in all states is to provide them at least 24 hours' notice. Make sure that all buyer's agents know this is the case, and don't acquiesce to pleas to squeeze someone in at the last minute. It could be illegal, it will very likely leave a bad taste in your tenant's mouth, and you could wind up with an uncooperative tenant on your hands as a result.
Arrange for the tenant to leave during showings
Send them on a mini-holiday for the open house
Help the tenant find a new place to live
Even if you don't have any other homes that might be suitable for your tenant, you might know other landlords or property managers in town through your own business. Reach out to them and mine your network to see how you can best situate your tenants. They'll thank you for it later!
What if the tenant is behind in rent?
There are a few ways you can tackle this problem. You could tell the tenant you will forgive their outstanding rent if they agree to move out immediately. You could try to put them on a payment plan that will help them get current by the time the sale happens. Or, depending on how far behind they are, you could start the eviction process -- which isn't fast or easy, but if there are no other options, it may be your best one.
Consider 'cash for keys'
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