Whether you have one or two investment properties or a big and complex portfolio, the fact is, you’ve gone into the property game with a clear goal in mind: to make money.
Sometimes, for a range of reasons, you may make the decision to sell one of your investment properties.
When it comes time to offload your asset, your number one concern should be ensuring the property appeals to a wide variety of purchasers, so it sells quickly and you achieve a great sale price.
This, of course, can be tricky with a tenant in place.
In a perfect world, this means selling without a tenant living in the property, so you’re able to freshen it up and style it in such a way that it attracts both fellow investors and owner-occupiers.
The latter group is especially important, because they buy with their hearts, not their calculators (like investors).
You’ll give your chances of getting a great price a real boost if you can lure these guys in with romantic, lifestyle-driven styling that sees them disregard their budget.
However, this is not always possible.
Sometimes you’re forced to list the property for sale while the tenant is still calling it home – and while this isn’t ideal, there are some strategies you can employ to make the process much easier for everyone involved.
Can you end the tenant’s lease early when you sell?
First and foremost, you might be wondering: can you ask the tenant to leave?
In most states and territories, there are laws and regulations that govern how tenants must be treated if and when you decide to sell your investment property.
Generally, you’re not allowed to evict a tenant when you’re selling.
That said, there’s nothing stopping you from approaching the tenant with an offer to vacate.
I know an investor who listed their rental property in a suburb where owner-occupiers were the biggest group of buyers.
She approached the tenants and offered them $1500 cash to vacate the property 4 months early.
They weren’t quite ready to leave, but accepted the offer as it more than covered their moving costs – and they knew they would need to move in 4 months time anyway, when their lease ended.
Regardless of whether you want to ask them to vacate or not, your first step should be to double-check your legal rights and responsibilities with your property manager, so you don’t fall foul of the relevant tenancies act in your state.
How long do the tenants have left on their lease? What kind of notice is required for inspections?
Being on good terms with your property manager is important, but it’s even more crucial that they (or you) have a respectful relationship with the tenants themselves.
This is one of the reasons why choosing a great property manager is so vital to your success as an investor.
If your property manager proves themself to be less-than-useful in these kinds of situations, it may be wise to look elsewhere for your other properties.
Be upfront and honest with your tenants
Make the time to have an honest conversation with your tenants, even if it’s via your property manager.
Explain your reasons for selling, and assure them that you’ll do everything you can do avoid too much disruption to their lives.
You may find they’ve been thinking of moving on anyway.
There have even been cases of tenants making an offer to purchase the properties they’ve lived in long-term when they hit the market, so letting them know you’re planning to sell work out in your favour.
If they want to stay put until the property changes hands, take a friendly, collaborative approach so you can all work well together – the tenant, the property manager, and yourself.
First and foremost, remember that while it may be your property, for the duration of their lease it is the tenant’s home.
They are entitled to quiet enjoyment of the premises.
If you’re planning on holding open for inspections, check with the tenants as to which day and time would best suit them – they’re far more likely to cooperate when it comes to tidying up and making themselves scarce before the inspections if you’ve consulted them and scheduled it at a time that doesn’t interfere with their usual routines.
If the tenant is concerned about having sticky-beaks wandering through their sanctuary, you can alleviate some of these worries by arranging for the selling agent to take photo contact details for each person who attends the open for inspections
You can also sweeten the deal by offering them a rent reduction if they keep the place in tip-top condition while it’s on the market, along with promising to write them an excellent reference for their next property.
Thoughtful gifts don’t go astray either – it could be a homewares voucher to help them furnish their new place, a few nice bottles of wine.
You may even wish to pay for professional housing cleaning, as both a thank you to the tenant, and also to ensure the property presents in “tip top” shape during inspections.
What if your tenant doesn’t cooperate?
If your tenant decides to be difficult and refuses to keep the place clean or cooperate with the selling agent when you list your property for sale, there may not be much you can do about it.
This is where hiring a great salesperson comes in – they’ll be able to help prospective buyers see past the clutter and the un-mopped floors to the real value that lies beneath.
Armed with a rental appraisal and vacancy rates for the area, they should have the skills to sell even the most unkempt home.
At the very least, they should throw back the curtains, open the windows and burn some scented candles to present the property in a more flattering light.
Leanne Jopson is National Director of Property Management at Metropole, and has 20 years’ experience in real estate.
Leanne brings a wealth of knowledge and experience to maximise returns and minimise stress for her clients.