Just like other investors, investment property owners aren’t created the same. Some might want to hold onto their investments for as long as possible!
For this clique of landlords, their goal is to continue earning a recurrent passive income for the entirety of their lifetime.
For others, however, it’s all about waiting for the opportune time. As a landlord, you may want to sell your property after a substantial increase in property value, attractive offers, or to grow your rental portfolio.
Other reasons may include diversification, paying off debt, relocation, retirement, or even a change in investment strategy.
Now imagine this: you have an attractive offer from a potential buyer. But the problem is – your rental property is occupied by a tenant. What options would you have? Kick out the tenant? Wait for the lease to end? Pay the tenant to move out? …..
If you’ve found yourself in such a scenario, you’re in luck! This blog will walk you through all the options you would need to look into for a successful sale.
Can Selling a Property Occupied by a Tenant Be Difficult?
Absolutely!
You see, you cannot just kick out a tenant from your property after they have established tenancy. That would be a form of ‘self-help’ eviction, which is illegal under tenant eviction laws.
The only legitimate way of evicting a tenant is if you have a ‘just cause’. For example, the tenant has failed to pay due rent, violated a term of the lease agreement, or engaged in criminal activities on the premises.
Other than such legal complexities, selling a property occupied by a tenant could also be complicated by other things, such as:
- Length of the lease. A lease between a landlord and a tenant is a legal contract. It can only end after the lease is up or after obtaining a court order. If the lease isn’t ending anytime soon, you may have to consider negotiating a solution with the tenant.
- Level of cooperation with the tenant. No two tenants are ever created the same. Some can be easy to work with, while others can be difficult to deal with. If you have a difficult tenant, they can complicate your chances of selling the property.
How Should You Deal With a Tenant Who Refuses to Leave?
Suppose you have a tenant who refuses to leave the property. The following are some of the options you may have in such a case.
- Offer to sell the property to the tenant. It’s possible that the tenant has fallen in love with the property and doesn’t imagine a life outside of it. Or maybe, they just don’t imagine themselves moving out at the moment. After all, moving is one of life’s top stressful activities.
Either way, offer to sell the property to the tenant. This way, you could benefit from selling the property, and the tenant could benefit from continuing to live on the property.
What if, however, the tenant doesn’t meet the financing criteria? In such a case, you could consider seller financing. This would allow you to wear the shoes of both the property seller and mortgage financier.
- Offer a lease buyout. This can be a good option to try and convince a stubborn tenant. Especially, if the lease is coming in the way of the buyout. A lease buyout would mean giving the tenant a cash incentive to break their lease early and move out of the property by a certain date.
The exact amount to give the tenant will depend on the exact circumstances. Including, time remaining on the lease, rental market demand, and lease termination rules, if any.
- Sell the home to prospective homebuyers. In a ravenous market, some home buyers might be okay with buying an occupied property immediately after the lease is up. However, please note that strategy might not work with conventional homebuyers for the most part.
- Sell the occupied property to prospective landlords. If selling to prospective homebuyers fails, another option would be to sell the property to budding landlords. The landlord would then assume all your responsibilities until the lease is up, including any costs that landlords don't notice. After which, it’d be upon them to either renew the lease or come up with a new one with their unique requirements.
3 Tips for Success When Selling a Property Occupied by a Tenant
The following are some of the strategies you can implement to make it easier for you to sell an occupied property.
Get the Timing Right
Timing is everything when it comes to selling an investment property. The right timing can help ensure you sell the property easily, at the right amount, and keep your investment safe.
An ideal scenario is just waiting for the lease to naturally end. This will make the process easy for all concerned parties, including yourself, the tenant, and the buyer.
Hire a Property Management Company
When it comes to rental investments, nothing beats working with a property management expert. A good property manager will not only help with the day-to-day operations of your investment property, but also with professional advice whenever needed.
Have a Backup Plan
Not everything may go as planned. The tenant may refuse to leave even after offering them financial incentives. In such scenarios, you’ll want to have a backup plan. A property management company can help you work out one!
Bottom Line
Self-managing a rental property can be anything but easy. Trying to sell it can prove to be much harder!
Luckily for you, an expert property manager can help you overcome any challenges you encounter along the way. And yes – however difficult it can seem, you may be able to sell a property occupied by a tenant.
Rent Easy has a reputation for providing rental property owners in Chesapeake with exceptional property management services. Get in touch today to learn more!
