Selling any real estate can be a hassle, however selling a tenant-occupied rental property in northern Fulton county has its own set of challenges to overcome. You may be interested in selling your rental home to cash in on your rental property’s equity. You may be looking to perform a section 1031 exchange to purchase a like-kind property while avoiding paying capital gains taxes. Either way, there are several things you need to know before you reach out to your real estate agent.
What is the easiest way to sell a rental property?
The most straightforward route would be to wait until the end of the lease agreement to begin the selling process. The length of time this will take depends on the terms of the lease agreement. Typically residential rental agreements are 1 year long, 6 months long, or month – to – month. Generally, this is a great option for short term leases. Unfortunately, with long term leases, many landlords can not afford to wait for the tenant’s lease to run out before they sell their rental property.
While it is perfectly legal to sell an investment property that still has an active contract and is occupied by a tenant, you must still take into account several considerations. The most important things to assess are the lease agreement terms and the tenant’s potential reaction. Have the tenants been paying rent on time and following all of the stipulations drawn out in the rental agreement? Will they be upset at the prospect of packing up and moving? Will they cooperate with showing the property?
Tenants can be a good thing!
Most, if not all, of the United States’ jurisdictions, give the current tenant the right to continue to occupy the property for the remainder of the lease, even after the sale. In some situations, having a tenant in good standing continues to occupy the home after the sale is in your favor. Many investors are happy to inherit responsible tenants as there would be no break in rental income. However, if your tenant is behind on payments or would otherwise impede the process, other options are available.
Removing tenants is an option (when done legally)
One of the best courses of action to incentivize tenants and smooth out the selling process overall would be the “Cash for Keys” method. In this approach, a landlord would pay the tenant to break the lease agreement and vacate the property early. This is especially useful for landlords looking to sell their property quickly. Depending on the relationship with the tenant, a landlord could offer to help them move, pay their security deposit, or contribute to their first month’s rent at a new place.
It is important to keep in mind that the “Cash for Keys” option has a slight risk associated with it. If the current tenant chooses to ignore the revised terms of the lease and remain in the property, the new owner can be forced to evict the tenant. This can put the original owner at risk of being held legally responsible by the new owner for all costs associated with the eviction. Eviction can be a long and expensive process and should be avoided if at all possible.
Working with tenants while selling
If the tenant will be continuing to occupy the property beyond the closing date there are a few things you can do to ensure the selling process goes smoothly. You will want to make sure the tenant is informed of showing times at least 24 hours (possibly different according to lease agreement) prior to the appointed time. Be sure to check that showing dates and times will work with the tenant’s schedule, and it is a good idea to ask the tenant to leave the property for the duration of the showing.
Keep everything clean
If you do not already provide landscaping services for your rental property, now is the time to invest. You will want to make keeping the property show-ready easy for the tenant, who may be less than enthusiastic with the process in general. You could even offer to hire a cleaning service prior to showings to ensure the rental property looks it’s best inside and out. The tenant doesn’t hold any stake in the property, so it is imperative that the seller takes responsibility to ensure the property is show worthy.
We are here to help
Selling a tenant-occupied property can be a real challenge. If you have any questions or concerns regarding this journey it is important to speak with a reputable, qualified real estate law firm. The Law Offices of Sam Maguire Jr. P.C. are available to guide you through the process whether it’s for business law services, commercial real estate law or residential transactions we can help you every step of the way.