Selling your investment property with a lease in place this Spring
Selling an investment property with a tenant in place can be a complex process. However, with careful management, it can be a successful transaction that benefits both the seller and the tenant.
As a landlord, there are several things to consider when deciding to sell a property with a current lease this Spring. Here are some tips to guide you through the process:
Look at the numbers
The first step is determining whether the numbers make sense to the seller. Conducting a desktop analysis to get a sense of the property’s market value and its potential return on investment is crucial. This analysis will help you decide if selling with a tenant in place is the best financial move.
It’s important to compare the potential sale price with and without the tenant to ensure you make an informed decision. Oftentimes selling with a tenant in place makes the property attractive to investors, but not for owner-occupiers.
Assess the tenant’s willingness to cooperate
Having a good relationship with the tenant is crucial in these situations. The property manager may be responsible for day-to-day management, but the agent handling the sale should take the lead in building a relationship with the tenant. This involves discovering what is happening in their lives and how a potential sale could benefit them. For instance, if the tenant is looking to move to a different area, they may be interested in terminating the lease early without any penalties. The seller could also offer to cover the cost of a cleaner during the campaign to help them.
If the tenant is uncooperative, going to market with them in place may be challenging. A poorly presented property with limited access will likely negatively impact the level of interest you might receive.
In some cases, tenants may approach the seller with interest in purchasing the property. While this can be an attractive proposition for some sellers, it is often not in their best interests. The tenant may make an offer lower than market value, justified by the fact that an agent’s selling fee would not apply.
Obtain an independent appraisal
To ensure the seller gets fair market value for their property, it is best to obtain an independent appraisal. An appraisal provides an unbiased assessment of the property’s value, helping set a realistic asking price.
Market the property effectively
When marketing a property with a tenant in place, clear communication and strategic planning are essential. Highlight the benefits of the existing lease to potential investors, such as immediate rental income and a reliable tenant. Ensure the property is presented well in marketing materials, with high-quality photos and detailed descriptions. Additionally, coordinating with the tenant to schedule viewings that minimise disruption can help maintain a positive relationship and ensure the property is shown in the best light.
Maintain transparency and communication
Throughout the process, maintaining transparency and open communication with the tenant is crucial. Keep them informed about the sale process, potential viewings, and any changes that may affect their tenancy. Respect their privacy and rights as tenants while ensuring they understand the benefits of cooperating with the sale. This approach helps build trust and can lead to a smoother transaction.
Prepare for a transition
Finally, prepare for a seamless transition once the property is sold. Ensure all legal requirements are met, including transferring the lease agreement to the new owner if the tenant remains in place. Provide the new owner with all necessary information about the tenancy, including lease terms, rental payment history, and any maintenance issues. This preparation helps facilitate a smooth handover and ensures the tenant’s experience remains positive.
*This information is general in nature and does not take into consideration your individual circumstances. Please contact us for further information.
