Property Management Blog

Can You Sell a Tenant Occupied Property?

Bob Preston - Friday, December 23, 2022
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Thinking about selling your San Diego investment property? 

There are several good reasons to do this. Maybe you need some cash for other endeavors, and you want to get that home sold before the market shifts and selling becomes more challenging. Perhaps you have other ideas for where you’ll invest. Perhaps you’ve decided to diversify your portfolio or you’re conducting a 1031 exchange. 

Whatever your reasons for moving on, selling an investment property is your prerogative. Selling an investment property that has a tenant in place, however, can present a bit of a unique challenge. Unless you’re selling to another real estate investor, your buyers might purchase your home with the intention of moving in right away. 

What to do? 

Let’s take a look at how you can sell a tenant occupied property and what kind of rights your tenants have when you do sell the home. 

Provide Tenants with Notice of Your Intent to Sell 

Tenant communication is going to be critical during the sales process. Your residents deserve to know that you’re planning to sell the home they’re living in. You don’t want them to be surprised by a For Sale sign suddenly appearing on the front lawn one day. 

Put your intentions in writing. 

Send a letter to the tenants in your property, notifying them of your intent to list the property for sale. Several details will need to be provided in this letter, including: 

  • A timeline of what will be happening. Tell your tenants when the home will be officially listed on the market. 

  • Information on notice periods for showings. You’re legally required to provide notice to your tenants before you schedule a showing. 

  • Potential bonus incentives. You need your tenant’s help in selling your property. If they’re willing to cooperate by keeping the home clean and by vacating the property during showings or open houses, you might consider offering a discount on rent while the home is on the market. 

  • An offer to buy. You never know. If your tenants really love your home and they’re in a place to buy it, maybe they’ll make you an offer. 

Start the communication early, and remain open and available for any of the questions they’re likely to have.

Understand and Protect Your Tenant’s Rights 

While you do have the right to sell your occupied rental property, your tenants also have some rights. 

In most circumstances, your tenants will have the right to stay in the property until the end of the lease term. If there are still six or seven months left on the lease, that’s quite an obligation, and it may inhibit your ability to sell the property quickly. 

Consider negotiating with your tenants to leave early, if you’re hoping to sell a vacant home. You can offer financial incentives, or maybe you have other rental properties that they might be interested in seeing. See what they’re willing to do. Ultimately, they don’t have to move until their lease is up. But, for the right price, they may be willing to.

How to Handle Property Showings in Occupied Homes

Selling your tenant occupied San Diego rental property will come with a number of challenges, and one of the largest obstacles may be showing your property while tenants are living there. Most real estate experts would agree that it’s better to market and show a home that’s free of personal belongings, clutter, and a sense that someone else is living in the home. 

But, you have to work with what you’ve got, and right now, you’ve got a tenant living in the property. 

Your tenants may be anxious about this sale and what it means for them. Be sensitive to that, and do whatever you can to accommodate them during the showing process. If you want them to cooperate (and you do), make this process as easy for them as possible. 

  • Talk to tenants about their schedule. This will tell you when showings will be most convenient. Limit your showings to only those times that the tenants are generally away from the house. If they work during the day, schedule the showings during their working hours. If they tend to travel on the weekends, keep your showing schedule to Saturdays and Sundays. This helps tenants feel like they have some control over the situation. 

  • Consider paying for landscaping and cleaning. You’ll need your tenants to keep the property looking good, and hopefully they’ll be willing to do that. You may want to offer a cleaning service every week or two. Send a landscaper to mow and weed so that your curb appeal is outstanding while you’re selling your property. 

  • Provide as much notice as possible ahead of showings.

If you have a good relationship in place with good tenants, this doesn’t have to be difficult for either of you. Talk through the concerns your tenants may have. Discuss a strategy to ensure that you’re able to show your property with minimal disruptions to your tenants. 

Work with Tenants on Move-Out Plans

Relocation assistance is required if you ask your tenants to move out through no cause of theirs. You’re not evicting them for nonpayment of rent or lease violations. You’re evicting them or not renewing the lease agreement because you’re selling the property. 

California law sets your relocation assistance at the equivalent of one month’s rent. 

You can also work with tenants to find a new place to live. If you really want them to move out before the end of the lease term, consider offering cash for keys. You can take back your property with a month or two of notice if your tenants are willing to accept your relocation assistance. Offer more than the one month’s rent if it will help them move on peaceably. 

Maybe you’ll sell to another investor who is delighted to buy a tenant occupied property. However, you can’t be sure who will purchase your property. Prepare for what you’ll do when you want to sell your rental home with a tenant still living there. 

Advice from Property ManagerIt’s always a good idea to get some support and advice from a San Diego property manager. We can help. Tell us about your situation and we can make some recommendations. Contact us at North County Property Group.

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