How to Sell an Occupied Rental Home
There are many reasons to sell your rental, but the timing isn’t always perfect. Sometimes, the best time for you to sell is when someone is currently living there. So, how do you sell an occupied rental home? Read on to find out more.
Determine who you want to sell it to
Knowing who you’re trying to sell the house to will make a big impact on the rest of the process. Sure, in theory you can sell an occupied rental home to anyone, but different buyers lead to different processes.
- Selling to the current resident: If they’re interested in buying, then selling it to the current resident might be the easiest way to handle things. They’ve already moved in and know the house well, so the biggest hurdle would be their interest in owning rather than renting. This also avoids the issues that come with trying to show off an occupied home.
- Selling to another landlord or property manager: In this case, the current resident can stay and the lease transfers over to the next owner. You’ll still have to deal with showing the place, but you don’t have to solve issues with the lease.
- Selling to someone else: In this case, you’re going to have to deal with the lease and showing off the house while it’s still occupied. This gives you the largest potential market and therefore the best chance at a great offer, but has a lot of difficulties that come with it.
Once you’ve decided who to try and sell it to, how do you handle all of the details?
Keep in mind the resident’s perspective
For the current resident, this is going to be a huge problem. Showing a home off requires someone going through and looking at all the rooms. If you’re selling to potential residents, this is also you telling them that they need to move soon. Keeping that in mind, it’s easy to see why this process varies from annoying to infuriating. Do whatever you can to make this process as painless for them as possible and keep their perspective in mind. Having them be uncooperative will only make things harder for everyone.
Get a lawyer
It’s very easy to do something wrong in a situation like this, so have a good lawyer ready to help guide you. They can’t tell you the best thing to do all the time, but they can at least give you guidance to make sure you aren’t breaking the law or doing something that leaves you open to being sued later.
Dealing with the lease
If you’re not selling to the resident or another property manager, then you have to deal with the lease. You have different options depending on the specific situation you’re dealing with:
- Give notice on a month-to-month lease: For this, you just give the required notice and the lease will end. You usually don't have to tell the tenant why, but you may want to out of courtesy.
- Wait out the lease: If you have a fixed-term lease, the simplest thing to do is wait it out to the end and then sell it. If the time remaining is too long, however, it may not be worth it to wait.
- Use a valid reason to terminate the lease: If you have cause to terminate the lease, you can do that to sell an occupied rental property sooner. Just keep in mind that terminating a lease early over petty issues to sell the property may be legal, but can affect your reputation. Make sure it’s worth it.
- Trigger an early termination clause: An early termination clause will allow you to get out of the lease with relatively few issues. It’ll cost some money upfront, but that can be worth it to get the house on the market sooner.
- Pay the tenant to move out early: If all else fails, make the tenant an offer to vacate. Offer them money, help finding a new place or something else they want. They’re under no obligation to take it, but if you make a good enough offer, they're much more likely to take it and help you.
Make sure the resident is cooperating
If the resident isn’t cooperating, they can easily keep the place in less than great condition. This will make it much harder to sell, since looking anything less than immaculate will make the sell harder. This is where you can make some offers to the resident to keep it in good condition and not be present when it’s showing. As always, keep their perspective in mind. Try not to tell them about a showing at the last minute and, if you want them to leave for the showing, give them something compelling to do while they’re gone. It may feel like bribery to say “Go out for a nice dinner while I show off the place,” but if it’s a fair trade, they're more likely to agree.
Handle the sale much like any unoccupied home
All of this is on top of the usual issues of trying to sell an occupied rental. You still need to market it, list with local realtors and tweak things to show it off in the best light. The one advantage you might have is it looks more lived-in, but all the usual issues with selling a home still exist.
If you have a compelling reason to sell an occupied rental home, it’s difficult but can be done. Have you ever tried to sell an occupied rental before? Have any advice that we missed? Let us know in the comments!
Read more: How to Work With an Angry Resident