Planning to Sell a Rental Property with Tenants? Here Is What You Need to Know

One Agency For Rent

If you are a landlord selling your rental property, it could be made complicated if it is presently occupied by tenants. Having people living in the house while conducting open inspections doesn’t have to be a deal-breaker, but there are a few important things you have to be cautious of so as to avoid problems.

Here are some helpful tips when selling a house with tenants.

Can I sell a rental property that is occupied?

Yes. However, you have to consider a few things to ensure you are being mindful of your tenants’ rights during the process and increasing your chances of a stress-free sale.

Your tenants’ rights when selling a property 

While many landlords choose to have their tenants remain in the property and pay rent as long as possible, others like to sell an empty house. Tenants’ rights are different from state to state, so it’s essential to get property advice from an agent who can guide you on all the requirements to ensure you are following the right laws. In general, however:

  • You have no right to evict a tenant if they have signed a fixed term lease
  • You have to send 14 days’ notice to leave at the conclusion of the fixed term lease
  • If terminating a tenancy that has extended from the initial term agreed, there will be a lengthier notice period but differs significantly by state, so be sure to be up to date.

Inspections when selling a house with tenants

In terms of advertising the property to prospective buyers, you need to give your tenants fair notice to vacate the house and to clean up. This means giving your tenants 24-48 hours’ notice, depending on the state where you’re located. Consider doing the following things:

  • Send more notice than is required where possible to keep your good relationship
  • Use a real estate agent with excellent organisation and communication skills
  • Offer inspections at scheduled times so as not to disrupt your tenants’ lives.

Can a landlord sell a house with an ongoing lease?

Yes, even a property with a fixed term lease. However, you must notify your tenants in writing of your intention to sell.  

As stated above, you have to give tenants a 24-48 hours’ notice prior to an inspection, depending on what state you’re located. If you have provided the required notice, you and your property agent can enter the house for an inspection no matter if the tenant has agreed or not, and without a tenant in attendance.

Advantages and disadvantages of selling a tenanted house

Consider the pros and cons when selling a property with tenants.

Pros

  • You will continue to get rental income while the selling process is ongoing
  • Potential buyers could be interested in a house that already has tenants
  • Having a property occupied gives investors the assurance that it has good potential
  • A furnished property always looks better and helps prospective buyers with determining the size of space

Cons

  • You’ll be required to send the tenant sufficient notice prior to inspections
  • Tenants may not show the house properly, which could harm the sale price
  • Tenants could be regarded as a nuisance by buyers who want to move into the house on settlement

How to maintain a good relationship with tenants when selling

Many tenants consider their lack of control over their living situation frustrating. As the landlord, it would benefit you not to alienate your tenants so that the process will go without a hitch and you can be assured that the house is generating income during the sale price. Here are some ideas on how you can do this:

  • Cut the rent to make up for the disruption caused by the open inspections
  • Tell them of your plan to sell as soon as you have decided
  • Give them adequate notice before inspections
  • Be open to inspection time changes whenever possible
  • Let them know about how the process is going so they can make plans

What if the tenant wants to leave when you sell the property?

In several states including NSW, if you fail to notify your tenants at the time of the signing of the lease that you plan to sell prior to the termination of their lease, they have the right to vacate when you notify them that you plan to sell the property.

Depending on your approach and financial circumstances, you might like to sell a house without a tenant. However, as stated previously, it is a good idea to make sure you are generating income for as long as possible. There is no specific time frame when you will find a buyer and settle, so an unoccupied house can be a major worry. Additionally, selling an already occupied investment property to another investor can be a significant motivation for buyers.

So if you want your tenant to stay put, take the initiative and be ready to offer incentives for them to stay like reduced rent.

Having an experienced guide is important if you plan to sell your rental property. Talk to a professional real estate agent to familiarise you on your responsibilities and your tenants’ rights on the issue of selling a rented investment property.