Things can change quickly and although you thought you would hold onto your property investment for a long time, you may find that circumstances have changed and you want to sell off your real estate asset.
But what if your rental unit still has a resident and the lease term does not expire until the next year yet?
There are several options landlords can take to avoid potential conflicts with a renter. This article will present some of the ways you can navigate this tricky situation successfully.
Challenges You Can Encounter When Selling an Occupied Property
It can be challenging for property owners to deal with a renter who does not want to move out before the tenancy agreement expires. Here are the issues you will likely encounter while trying to sell a rental property:
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Legal problems: You need to learn the state laws and policies concerning this situation to know your legal choices. You must take a deeper look at the specific lease terms and conditions since there are instances where renters can legally stay
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Varied factors: Selling off a property is not so simple since you need to evaluate the market demand, lease conditions, local laws, and whether your renters are willing to move out before the agreed lease term.
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- Uncertainty: Unpredictable outcomes can be expected since a buyer may need to use the property right away. Not every buyer will be open to waiting for a rental period to finish before they can occupy the unit they bought.
Month-to-Month Leases
The advantage of a monthly lease agreement is its short-term nature where you can send a notice to the renter at least 30 days ahead of time to end the contract.
Unlike a traditional lease where you have to inform the renter of your reasons if you want to end the lease contract, the monthly lease arrangement is temporary in itself.
Fixed Term Leases
Fixed-term leases tend to be longer in nature and apply to traditional lease agreements. Requesting a long-term renter to leave before the term expiry can be challenging, especially when the residents have responsibly paid their rental dues on time and performed their tenant obligations.
Uncooperative Renters
With renters who are not interested in moving out right away, selling your property can be a challenge since they don’t intend to leave before the lease expiry.
You can even meet resistance, which can make it hard to schedule property viewings. Some may even intentionally deface the unit to show their displeasure at having to move out before the contract ends.
Dealing With An Uncooperative Renter
Not all tenants will willingly leave the rental unit, so this situation requires patience and professionalism to handle. You should maintain respect even if the renters show an unwillingness to move out.
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You can consider the following options while dealing with an uncooperative renter:
Sell the Property to the Renter
If the renters are looking to occupy the rental property for a long time, then it can be hard for them to scout for a new rental unit to stay in. You can offer to sell the property to them instead.
You can enjoy the profits from the sale while they can live as long as they wish in the property. One of the challenges in this situation is if the renter cannot qualify for financing. You should carefully assess the financial situation and risks before making a decision.
Make a Buyout Offer
Another way you can encourage the renter is to provide a financial incentive. Offering cash may change a renter’s mind since it will give them the extra funds to cover the costs of finding a new rental and moving out. It can be expensive to transfer their belongings to another property.
Be Transparent to Homebuyers
If your property is in a strategic location and the local market demand is great some homebuyers may be fine with waiting until the rental term is over. This is an ideal scenario but always keep in mind that not every buyer is willing to take this stance.
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Sell the Unit to Other Investors
Homebuyers may not be as willing to move out since it is a place of residence for them. However, another set of buyers may see it as a positive sign that your rental is occupied. These are property investors who also want to earn passive income from renting out real estate.
Tips on Selling a Rental Property Occupied by a Tenant
There are several ways for property sellers to market a property occupied by a tenant. Here are some of those ways:
- Time the selling right: It is easier if you can advertise a property sale when renters are near the lease end to reduce potential problems with residents as much as possible. If the current local condition is a seller’s market, buyers often exercise more flexibility.
- Work with a property management company: Partnering with professional property managers eases your tasks since they can provide more support and have many resources. They can also help you find property buyers and even handle the sales negotiation.
- Engage the services of an excellent lawyer: Given the potential complication of selling an occupied rental unit, hiring an attorney is recommended to learn your legal options and avoid a lawsuit.
Bottom Line
Overseeing your rental can be a huge challenge if you are a DIY landlord. However, you can run into serious issues if you make the wrong move when selling a property that is occupied by a renter.
The best thing is to have a knowledgeable property management company like the State Property Management working alongside you to make the selling transition and handling of tenants smooth.
If you are looking to improve your property management business, contact State Property Management today!