When entering the rental landscape, a standard question people ask themselves is, for how long? Is this the job that will last a lifetime? Is this a property you can manage for the next thirty years, forty? Maybe it is. There are plenty of reasons that people decide to sell their rental property. They can be looking at a new one that they are interested in and don’t want to juggle too many properties. Maybe they are ready to retire, or simply cannot afford the property anymore. As a landlord, you could just be ready to let go and move on. Whatever reasons you have are personal, and that is okay. Now that the decision has been made, you have to ask, how do you sell a property with existing tenants?
Step One: The Homework
Wild laws are everywhere, which is why before any big decision (or small one, to be fair) you should check to make sure. You don’t want to put a new fence on your property only to find out that kind of property guard is illegal in your area. While that may be an extreme example, checking with a local lawyer will help you in the long run. There may be laws about how far ahead you need to tell tenants about your plans, or how to tell them.
Step Two: The Confessional
Perhaps the most emotionally taxing part of this effort (excluding the taxes, or the general hellscape that is selling a property) is admitting to your tenants that you’re planning to sell. It may be great news for you! To them, however, they may be hearing ‘I’m kicking you out’ or ‘I’m abandoning our lease’ whether that is what you are saying or not. Arrange a time to meet and sit down with your tenants, as they are going to have questions. There are a few topics that will need to be covered, such as but not limited to:
- Are you asking them to move, or move early?
- Are they interested in buying the property for themselves?
- Are you selling the home with the lease as is?
- Will the next landlord expect them to move, or will that be worked out?
The smoother this conversation goes, the better. You are telling tenants that you are selling their home, it can feel like pulling the rug out from under them. You can either give them the time to prepare as they truly need, or comfort them with the knowledge that they get to stay right where they are if they so wish.
Step Three: The Premiere
Showtime needs to be scheduled when you have tenants trying to go about their relatively day to day life. You can’t simply intrude on them whenever you feel like it – this is still their home and may be so for the foreseeable future. As a landlord, you still need to respect privacy laws (and code of simple human decency). It is important to have a protocol for how the home will be displayed to potential buyers and when. Work with your tenants to have a schedule and tell them the expectations for what the property should look like when being shown.
Consider providing an incentive to the tenants. If they’re showing signs of being disgruntled and unruly, give them a reason to abide by your needs. That means rewarding them for keeping the property clean and appealing when showing and being cooperative. This could be something as small as a gift card to the local grocery store, a discount on their rent, or other tokens of appreciation.
Selling your rental property doesn’t need to work in the tenants’ favor. The process is for you, not them, but getting what you need and want from the sale will be easier with the tenants on your side. If you follow the right steps, maybe everyone can be happy.
Have you ever sold an occupied rental property? How did that go? Let us know in the comments!