I often speak with property owners who want to sell an investment property whilst it is tenanted as they wish to continue to receive rental income while the property is on the market for sale.
A property for sale with tenants who have a lease in place, may not be an attractive purchase for buyers who are looking for a home. This is because home buyers, generally speaking, are unlikely to want to wait months for the lease to expire and the tenants to vacate. So in this case, a seller may lose a portion of the market as soon as the property is advertised.
However, types of buyers, wanting to purchase a tenanted property in my experience, are as follows:
- Investors who wish to keep the property tenanted long term.
- Buyers who wish to renovate or rebuild at a later date and wish to continue the tenancy as a source of income while plans, council applications etc. are in progress.
- Buyers are land banking
- Buyers are or will be working interstate or overseas for a period of time and intend to return and take up residence in their new home.
There are a lot of considerations regarding tenancy and legal requirements which vary from state to state and which I won’t go into here.
Here are 5 points to consider when selling a tenanted property:
- Which agent and agency? – whilst it may be administratively easier to use a sales person from your Property Management Agency that has looked after your property and tenants, it is a mistake to equate this with a similar sales experience. This is because renting a property and selling a property are two very different approaches in terms of marketing as well as the legal aspects.
A rule of thumb is to think in terms what sort of outcome you would like and work backwards. Choose the agent that you think will get the best price for your property with the least amount of stress.
- Legal requirements or tenants rights: Once you have made the decision to sell and have chosen a Sales Agent, it is time to notify your tenants that you intend to sell the property, your method of sale and introduce your sales agent. This all can be done via your Property Management Company.
- Marketing essentials and the tenant: Marketing and advertising tools are required to sell your property such as photography, floorplan, a sign etc. involving photographing a tenants belongings. All require written consent. For potential buyer inspections, including open homes, tenants require 24 hours written notice. Your property management and your sales agent will have the relevant REIQ forms. Please note that these are basic legal requirements when selling a tenanted property. Although it’s common courtesy for tenants to be out of the property when an inspection is taking place, there’s no legal requirement for them to do so.
- Presenting a property for sale while tenanted: When a property is tenanted, there is little control over how the property will be presented to potential buyers. In my experience, most tenants generally do the right thing and ensure that the property is in a reasonable state for inspections. However there are often oversights such as the smell of the previous night’s dinner, dirty dishes at the sink or unmade beds and the like can have an impact on potential buyers. In fact, bad tenants could drive the sale price down significantly, so make sure the agent is one who knows how to work in with tenants to get on their good side.
- Working with a tenant: Remember tenants are people as well and I do my best to treat them as I would like to be treated. Give them as much notice as possible, send them a friendly reminder closer to the date. Where possible, I highly recommend the seller offers a rent reduction for the duration of the sale period to compensate for any inconvenience. Reducing the rent by say $25 a week in return for the tenants presenting the property as nicely as possible for viewings is a win – win for all parties.
So yes you can sell your property with tenants in it.
CAN I SELL MY PROPERTY WITH TENANTS ? by Jonzun Lee
Jonzun Lee is a trusted Brisbane real estate consultant and Licensed Real Estate Agent. Please contact Jonzun on 0418 885 708 for further information regarding your property needs.
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