21 Jun 13
While most investors buy rental properties as a long-term investment, circumstances can change and they may need to sell a rental property to finance another venture, reduce debt or for some other reasons. Selling a rental property is quite different from selling a private home, especially if there are tenants occupying the property. The presence of this third party in the transaction can be an asset if handled well or a liability if their needs are not considered.
Vacant Possession or with a Tenant -- For or Against
If the tenancy agreement is due to end, some sellers wait until the property is vacant before putting it on the market. As a marketing strategy, there are good and bad points to this decision. The positives are that the property can be completely cleaned, and will stay that way for all inspections. There will be no restrictions on inspections as prospective buyers can view the property at any time.
The negatives are that often, buyers like to see a property furnished so they can see how much room there is. In the case of a rental property, an investor has to find a suitable tenant before the property gives a return on investment. If it remains vacant for several weeks, rental income is lost while the investor is still paying the mortgage.
The most important thing that the real estate selling agent can do to ensure a smooth sale is to communicate effectively with not only the property owner, but most importantly, with the tenant. Good tenants in a rental property that is on the market are a great asset, especially if they intend to stay should it be purchased by another investor.
Don't Let the Tenants be the Last to Know Their Home is for Sale
Before any advertising is done, the agent should visit the tenants, advise them of the owner's intention to sell and that they are required to make the property available for viewing. Assure them that they will be involved in those parts of the process directly affecting them and their lifestyle. After all, it is their home. It is quite possible that during this discussion, they may put in a suitable offer on the property.
Marketing decisions that will affect the tenants include the number and timing of inspections, and whether the property will be sold by auction or private sale. Keeping the property clean and presentable for inspections will also need to be discussed. This can be difficult at times for the tenants, so recognise their efforts with some simple incentives like movie tickets or dinner at a restaurant.
Many selling agents forget that putting a tenanted property on the market is a stressful and disruptive time for the occupiers. They focus on the marketing campaign and forget the role the tenants play in the whole process. Open communication and empathy will keep everything moving smoothly along.