As a landlord, it can be a difficult decision to decide between selling with your current tenants still in the property, or without. Here are a few impacting factors that you may want to consider:
Current Circumstances Of:
- Your Financial Position: Can you afford to continue meeting mortgage repayments, utilities etc; without your tenants rental income?
- The Property Type: The type of property influences the type of buyers you can expect to be interested, and their likely preference on tenants. For example – a well positioned unit that is ideal for renting out, may attract investors, who may wish your tenants to stay on post sale; whereas a family home, close to schools, may be more likely to be purchased by an owner-occupier, who would prefer a property that offers vacant possession.
- The Tenant Type: The cleanliness and flexibility of your tenants
Pro’s of Selling with Tenant:
- Your rental income continues and utility bills are covered during the selling/settlement process.
- A tenanted property shows an investor that a property is leasable and can be attractive as they will see immediate rental returns, if the tenant chooses to stay on under the new landlord.
- You do not need to wait for obligatory notice periods to begin marketing property; and do not have a 60 days notice to vacate (if vacant possession is requested), to impact the property settlement period.
Con’s of Selling with Tenants
- Tenants can be a turn-off to owner-occupier’s, who would have to wait for a lease to expire to take occupancy; therefore, reducing the buyer pool.
- You cannot guarantee how your property will be presented by your tenants, for marketing photos and open for inspections. This can be concerning if your tenants are particularly untidy – as a bad first impression may impact on your sale. A cluttered property may also make it difficult for a potential buyer to imagine their belongings in the property.
- While a tenant must legally allow access for inspections (provided they are given 24 hours’ notice), and an agent will usually request for them to step out during the inspection; they are not required to leave, this is only a request out of courtesy. A bad comment from a disgruntled tenant to a future buyer can also be of concern.
Speak To The Experts
Don’t forget – your advocate / agent deals with both tenanted and untenanted properties on a daily basis and can provide a wealth of knowledge on this front, so don’t be afraid to have an open conversation with them. They will be able to help clarify the expected buyer types and the best approach they recommend for your property, when dealing with tenants.
Keeping Tenants on Side When Selling
If you do decide to keep your tenants on while selling your investment property, there are a few steps you can take to keep them happy and therefore, make the process as smooth as possible:
- Open Communication: Be honest; let your tenants know that you plan to sell before taking your property to market. The more time they have to prepare, the more likely they are to be accommodating and flexible. They may also want to make the first offer on the property!
- Do Your Part: While most tenants will assist with tidying up, at the end of the day this is your property and your responsibility. Therefore, you may want to consider covering the costs of a cleaner and gardener to do a once over at the start the campaign; or maintain once weekly throughout the campaign. Not only are you ensuring great buyer first impressions, this will be positively noted by your tenants, that you are also trying to be helpful.
- Offer An Incentive: After a long day at work, it is hard to stay motivated to tidy up for multiple inspections each week. Offering your tenants a simple $50/$100 off their weekly rent for the inconvenience caused, can help ensure they keep the property clean and welcoming for potential buyers.
- Inspections: Ensure your tenants are advised well in advance of all inspection dates and times – this should be a standard practice for agents to handle this on your behalf, however it is worthwhile confirming with your advocate or selling agent that this is being done. It always best to try and stick to a maximum of 2 set open for inspections per week (instead of numerous private inspections), so the tenant has time to prepare in-between and they don’t feel bombarded by inspections.
- Lease: While you may face a loss of rent – at the end of the day giving your tenants the option to break their lease, may be better than having a disgruntled tenant jeopardizing the sale.