As with any asset, there may come a day that you as a landlord may want to sell one or more of your rental properties. A common question that arises when it comes time to sell is, “Can I sell my rental property with tenants still in place?” The simple is yes, however, there are a few caveats to be aware of if you decide to go this route. In this blog post, we outline the benefits and costs associated with selling your rental property tenanted as opposed to vacant.
1. A sale is subject to a lease agreement
Our first piece of advice is to be aware that a sale transaction is subject to a lease agreement. This means that when you sell your occupied rental property, you are also essentially selling your lease agreement. The new owner must honor all of the terms and conditions of your existing lease. If you are planning to sell, you may want to avoid long lease terms.
What are the benefits of selling a rental property that has a tenant in place?
- There are no make-ready costs. Put simply, when selling an occupied unit, you as the owner don’t have to move the tenant out or make any repairs or renovations before the sale.
- There are no vacancy holding costs meaning you will not be incurring costs during the time before the sale closes like you would if you were selling a vacant property.
What are the costs of selling a rental property with a tenant in place?
- When selling a tenanted property, you have a reduced pool of prospective buyers because you will be selling to real estate investors. While the Colorado rental market is booming, you may still find a smaller group of buyers than if you were to sell to the more traditional, homeowner occupied buyer.
- Tenant cooperation is necessary. We recommend that you only sell if you have established a strong relationship with your tenant. Tenants don’t generally appreciate having their home sold or shown to potential buyers. You may consider offering them an incentive, such as a discount on rent, to ensure they are on board with the sale.
2. Your lease agreement should allow for showings
Be sure you are writing into every lease between you, the landlord, and your tenant that you have the right to show the property with a reasonable notice period. This safeguards you from any issues that may arise down the line if you decide to sell the property any time during the lease.
If you are a rental property owner, now is a great time to sell in Colorado! The rental market is booming and there is a strong buyer pool of investors. Let Grace Property Management serve as a resource for you, we can help buyers buy and sellers sell in Colorado. Give our team a call, we’re happy to help however we can. 303-255-1990