7 Tips For Reselling Tenant Occupied Properties
Today, many homeowners are faced with the task of selling houses that have renters occupying them. This can be both advantageous, and present unique challenges to those attempting to find buyers. So what are these factors, and what can you do to rent a house fast? More importantly, how can you get top dollar for your investment?
A large number of property owners are contemplating selling their houses, regardless of whether or not they have tenants residing within them. Some are income property investors restructuring portfolios. Others are regular homeowners that become accidental landlords because they needed to move, but couldn’t sell their homes due to negative equity until now. Some are mortgage debt investors that have had to take over occupied properties. Furthermore, there are those busy buying and flipping houses.
A tenant occupied house can be incredibly attractive on the market today. There are plenty of investors and money chasing good rental properties. Some may find that having a good tenant in place drives up the value of their home because it is already proven to be able to produce income, and can begin delivering returns and cash flow right from the real estate closing. However, this doesn’t mean there aren’t challenges and special considerations to make.
Recognize the Challenges
The first step in successfully selling a house with tenants is to anticipate the challenges. This includes dealing with buyer concerns, challenges in making the property available for showings, managing tenants, and transferring paperwork and finances.
Create a Plan
After defining the above challenges, and determining the best way to sell a home with a tenant, homeowners will be best served by creating a plan. Map out what needs to be done, and when. Keep a checklist to make sure you are staying on track. Go beyond the signed sales and purchase contract.
Successful Marketing Strategies & Tactics for Tenant Occupied Units
Marketing rented homes can be a little different than vacant or owner occupied ones. Sellers should keep in mind that, while rented homes may be very attractive to many real estate investors, they may benefit from different pricing and sales channels than many expect. The MLS and Realtors may still be viable, though others might find going direct to real estate investors ready to buy with cash immediately the most profitable.
Most of all, remember that regular home buyers will have concerns about being able to move in and use the property as a residence, and investors will want the lease details to determine profitability.
When it comes to selling a rental home fast, homeowners also need to be cautious of overpricing. Pricing is the most important determining factor in gaining visibility, generating interest, and attracting offers. There may still be a number of cash buyers in the market willing to invest in single family homes as income producing assets, but this doesn’t mean they are going to over pay. Taking into account the income approach as well as the comparable sales approach, when setting a price, can be wise. However, recognize that many will use financing, and that changes the figures. Keeping the door as wide open as possible can often be the best strategy for selling fast.
Communicate Expectations to Tenants
Tenants can either be a huge help in selling a house, or the complete opposite. Expect them to be fearful and concerned. Most won’t know how the process works, and many will be afraid they are about to be kicked out or have rents jacked up. Communicate early, transparently, and let them know what to expect from the process. Will they have to move? Will their leases keep them secure and in place and with the same payments?
Access & Showings
Landlord/tenant law can vary widely across the United States. However, most landlords should be able to enter their properties at any reasonable time, with given notice. Still, showings to prospective buyers will go far smoother if efforts are made to accommodate renters’ schedules, and concerns.
One of the trickiest parts of these transactions can be leases. Don’t fall for agent hype that local rents are now higher. Make sure you check real rents, not just asking rents before trying to kick a tenant out, or not renewing their leases. Beware of trying to force tenants out unfairly. This can have many risks. Expect them to fight back if you do. At best, this can mean no rent coming in and vacancy. It could also lead to severe property damage, preventing you from showing and selling.
In the past, some landlords have tried pulling a fast one on buyers. This has included misrepresenting rents and deposits or preventing walk-throughs to check that renters have moved out prior to closing. This can led to big lawsuits, even if you think you’ve gotten away with it.
Remember, title companies will require estoppel letters to verify this information. Lenders will want copies of rent rolls and proof of property income and leases. Deposits are to be transferred to the new buyer at the real estate closing. Factor this in to numbers and have the money available. This also applies to prorating rents.