As a real estate investor, you may want to sell your rental property. There could be many different reasons to do this. For instance, you may want the money, you could be interested in a different property, or you may just want to exit the rental business.
When selling rental property or an apartment building, there are two main situations that you may have to deal with. First is selling an unoccupied rental property. This is often as simple as staging the property, landscaping it, listing it, and then selling it to the highest bidder.
Second, the tenant may already be occupying the rental property that you want to sell. In this case, you can either give them notice to vacate if the terms of the lease are on a month to month basis.
If on the other hand, the term of the lease is more long term, then you will need to revert to the clauses in the lease that permits you to terminate the contract when there is a valid reason, such as the need to resell the property.
As you do all this, ensure that you are conversant with tenant-landlord regulations in your state to be certain that you are operating within the law. If you are utilizing the services of a licensed rental property management company for rent collection from tenants or property maintenance, they could also prove helpful in this regard.
Now let's take a look at some best practices to follow when selling your rental property.
One option that you have when selling property that is already rented is to wait for the lease to expire.
The benefit of this is that you will still be earning income every month. Furthermore, note that as long as the tenant is observing the terms of the lease, they are permitted to stay and use the property until the lease expires.
That is unless there is a termination clause in the lease which you can take advantage of.
If you are dealing with a fixed lease, a good way to get your tenant to vacate is to offer them incentives. Money is a great motivator. You can offer to pay for their moving costs. You can also pay the security deposit for their new house or you can pay the difference in rent if it is higher in the new place.
People can be understanding when approached with respect. If you explain your situation well, your tenant could be most cooperative.
Another option for selling your rental property is to sell while the lease is still active. The buyer would become the new landlord and they will either wait for the lease to expire before they can draft a new lease or they will take over the property, renovate it, and use it to their liking.
The benefit of this is that you don't have to wait for the lease to expire and you can get your money's worth without having to go through the motions of vacating your tenant.
The downside is that the pool of buyers willing to buy a property that already is rented and be patient enough to wait for the lease to expire is limited.
Keep in mind that many buyers and real estate investors will already know the value of the property in a certain location.
There is, therefore, no point in trying to overprice the property to get a better deal. Instead, get your numbers right and offer the property at a reasonable price. This will help get a good buyer much quicker.
If the tenant is satisfied and comfortable living in the house, and they have no problem buying the property or want to invest in real estate, then it is a good idea to sell the property to them.
Firstly, you will be selling to someone you already know and who trusts you. The tenant will also feel as though the money spent on rent has not been wasted.
If availability of funds is not an issue, then you can receive payment for the property upfront. Otherwise, there is always the option of financing where payment is done in instalments. If the latter option is chosen, make sure that the interest, default, as well as the payment schedule is taken into consideration.
There could be multiple reasons why you want to sell your rental property. The top tips given above can help you navigate the process. It is important to be fair to both your tenants and the buyers. Moreover, make sure that as you sell the rental property, you are operating within the ambit of the law.