How do I sell my investment property (rental property) when tenant is still occupying the home? Or, does the property have to be vacant to proceed with a sale? Those are great questions and I'll shed some light on how investors sell their properties.

Selling an investment property possesses its own unique sets of challenge yet as long as they're planned for, these challenges can be mitigated. Here are 3 ways to sell a rental property.

How do I sella Home with a Tenant in It?

  1. List the rental property for sale while tenant(s) occupy the property.
  2. Wait for the lease term to end. give proper notice, tenant vacates and then list the rental property for sale.
  3. Approach the tenant to see if they'd like to purchase the property and remain in the home.

Though there are many other scenarios that could take place and wish they all could be all covered, for the sake of this article we'll focus on those three. If you have specific questions, please leave them in the comments or send us an email to info@barnettassociates.net and we'll be happy to assist.

List the rental property while tenant remains in the property.

When selling a tenant occupied property, tenant rights must be observed through the entire process. Its recommended to start by calling your real estate broker (I'd like to interview for the position), review the current lease and understand the terms contained in that lease, review all deposits associated with the tenant as those will transfer to the new owner, open a discussion with the property manager (if you've hired one to manage that property) so they're informed. You're now ready to get the property listed and advertised for sale.

It should be noted that tenants can feel like they're being displaced during this process, can have reservations regarding showings and allowing strangers in their home, and can have a sense of panic of where they're going to live if the new owner doesn't wants to owner occupy the property. If a property manager is involved then the news of selling can be delivered by them yet if the property is self managed, I recommend a bit of empathy when delivering the intent to sell / non-renewal.

To avoid pitfalls and to have a good working relationship with the tenant, set up a meeting with yourself, tenant and real estate broker. This step can answer a lot of questions the tenant will have regarding photos and advertising, property access and showings, leases and tenants rights as well as exchanging contact information for good communication.

The property can then be listed, shown to prospective buyers, and have a smooth transition of ownership.

Wait for the lease term to end, give notice, tenant vacates and then list the rental property for sale.

Start by reviewing the lease and know when the lease ends. With hopes, the lease terms ends in the not so distant future and aligns with the optimum time to sell in Snohomish County. Then notify the property manager (if there is one) and your real estate broker of your intent to sell.

This type of rental property is like selling any other vacant home with advertising and showings. What the difference is if:

  • The property investor wants to end their real estate investing;
  • Or, does the property investor want to conduct a 1031 Exchange

What is a 1031 Exchange? In short, a 1031 exchange is a selling & purchasing process which investors can utilize to defer taxes on the gains made on a property by rolling those gains into another property. More details on 1031's in the future.

Approach tenant to see if they'd like to purchase.

Ask the property manager to start a conversation and ask the tenant if they'd be interested in buying the home.

If tenant says yes: Have the tenant contact us and we'll take the reigns. This way, we can explain the purchasing process, provide financing recommendations and lender contact, how to write and present a purchase and sale offer, and guide them through the purchase to a successful closing. One thing to consider, is the reason many tenants rent is because they don't have the financial ability to move forward with a purchase.

If tenant says no: Then you can proceed with one of the two previous options for selling. Just remember that if the lease terminates at the end of the lease term, and does not automatically roll month to month, then you can give a 60 day notice (before the end of the lease term) of non-renewal. Otherwise you would have to give a 90 days notice to sell.

Hope this helps with your decision on how to sell a rental property whether it is tenant occupied or vacant.