Nearly every real estate investor will need to sell a rental property at some point. You might want a new property, need cash, or to get out of the landlord business altogether. No matter your reason, below we go through some typical process of selling rental property.
Traditional Ways of Selling Rental Property
Selling a vacant house is relatively cut and dried: stage it, landscape it, list it, and wait for the offers.
With a tenant still in the property, the process isn’t as straight-forward. To begin, you’ll want to take a look at the lease you have in place.
You can sell the property with a tenant in it; but this is isn’t as easy.
If your renters are living under a month-to-month lease, and you want to sell the rental property vacant:
- Give your tenants written notice.
- Remind them to remove their belongings by the last day.
- If they don’t move out at the scheduled date, start the eviction process.
Some landlords install an early termination clause in the lease. These clauses stipulate that the lease can be broken under certain circumstances, like (a) lease terms not honored, (b) major neglect of property, or (c) landlord’s need/desire to sell. We don’t often recommend this with a good tenant in place
When your tenants have a fixed-term lease without an early termination clause, tenants have more rights and landlords have less flexibility. If you absolutely must sell your occupied rental property, here’s a complete guide to your options.
Make sure you’re doing everything by the book according to the local/state landlord – tenant laws. Each state has different regulations on notice required for property showings and move out dates.
1. Wait for Lease Expiration
As long as your tenants are paying rent and following the lease rules, they have a right to stay through the lease term; that is, unless the lease has an early termination clause (see above). Your first option would be to wait for the lease to run its course, at which point you can inform your tenants of your desire to sell and give them adequate notice.
Pros: You’re honoring the lease you signed, earning rent while you wait, and making a clean break with fewer hard feelings, most likely.
Cons: You have to wait to sell. If it’s a seller’s market with 9 months left on the lease, that could be lost capital.
2. Pay Your Tenant to Vacate
Tenants might be open to negotiation: a settlement in which you pay them to move. This can ease the pain and expense of moving while creating an incentive for the tenant to move. Before you choose this option, come up with a calculated figure based on:
- Moving Costs: Offer to reimburse your tenants for their moving expenses.
- Rent Difference: If a comparable home nearby has slightly higher rent, offer to pay the difference for the months left on your lease.
- Cover Security Deposit: Moving into a new place, your tenant will need to pay the first month’s rent with a security deposit. You could offer to pay their security deposit for the new place.
- A Ballpark Number: If a quick sale of your home promises a huge return, you might be willing to pay your tenants a sweeter sum to encourage them to move.
Pros: Money talks, as the saying goes, and a cash offer could encourage a faster move and ease any tensions.
Cons: Depending on the circumstances — e.g., time left on lease, local rent prices, moving costs — you might be shelling out a big chunk of change to get tenants to move.
3. Sell Your Rental Property to Your Tenant
If you have a good tenant who not only loves your home but is eventually looking to buy. In this case, why not offer them the property? It’s a goodwill gesture — in that you’re coming to the table with an offer for them to stay rather than leave — and would lead to a relatively quick and painless sale.
If your tenant is unable to get traditional financing, you can always offer seller financing, in which you receive regular payments from the buyer that take into account interest, payment schedule, and default situations. Seller financing usually occurs over a short period of time until the tenant can secure a mortgage.
Pros: You’d be selling to a person who already knows and loves the house … and no one has to move.
Cons: If your tenant needs seller financing, you’ll need to already own the home outright, and the buyer can always default on the loan. Also, your tenant — shifting into buyer’s mode — might request changes or extraneous repairs to the home as part of sale.
4. Sell With an Active Lease
Another option is to find a buyer who’ll purchase your tenant-occupied investment property with a current lease in place. The new owner would allow the tenants to live in the home through the lease period, after which it would be up to the new owner to keep the tenants under a new lease or make other plans.
Pros: You’re quickly cashing out of your investment and handing over the reins to a new landlord. It’s a relatively smooth transaction for the buyer, seller, and tenants.
Cons: This is not the type of sale you can just list on the MLS. Your buyer pool is limited to investors or those patient enough to let a lease expire until they either move in, renovate, or write a new lease. These buyers can be difficult to weed out.
5. Sell Your Rental Property to Another Investor – Us!
We take all the usual hassle out of selling rental property.
- There is no waiting. We close when it’s best for you.
- No need to pay your tenant to vacate. We simply take over the lease.
- There is no bank approval, we pay cash.
- It’s less expensive than paying realtor commissions.
We close when you want to. We do not charge any fees. You aren’t required to do any repairs. We have streamlined the process to ensure it is as simple as possible. We’ll give you a fast, firm, and fair offer on your rental property. Contact us today for a free, no-obligation consultation.
The key to selling rental property the right way, is what is best for you. Even if we don’t buy your rental property, we’ll help you determine what is best for you.