My husband and I became accidental landlords in 2011 when we moved from Raleigh to Charlotte. The housing market was not great (understatement), and there were so many homes for sale in our neighborhood it wasn’t feasible to sell our house for the price we wanted. So instead of paying a mortgage on an empty house every month, we decided to find a tenant and manage the rental ourselves until the market recovered.
Luckily, we had a great tenant. When the housing market trended upward, though, we decided to sell the house instead of continuing to deal with the headache of an investment property located three hours from our Charlotte home.
Many people are finding themselves in the same situation now, whether they became reluctant landlords like us or own several properties from which they draw an income but have decided to sell since the housing market is currently strong.
What happens when you find yourself in the situation of wanting to sell a rental but you have a tenant in place? There are only two options:
1. Wait until the lease expires and sell a vacant house.
If you want to sell the house empty, which in many ways is the simplest option, you have one major thing to consider: what does the lease say? North Carolina has strict laws protecting tenant rights, so make sure your actions are legal—consult a lawyer if you have questions. There is an obvious downside to selling a house vacant if you still have a mortgage: while the house is on the market, you’re paying for an empty house.
2. Sell with the tenant in the property
Many people decide to sell the house with the tenant in place in order to keep a rental income while the house is on the market. The downside is that in many ways you have no control over the condition of the house while it’s on the market or the willingness of the tenant to cooperate with real estate agents.
There’s a lot to consider either way, and it’s not an easy decision. No matter what you decide, here are some great tips for selling a house that currently has a tenant in place:
• The easiest thing to do is wait for the lease to expire. Make sure you are following the steps laid out in the lease to ensure the tenant vacates the property with no legal action against you. In our case, we decided to wait out the lease and not renew, but according to the contract we had to give our tenant a certain amount of time in advance of the expiration date in writing to let her know our intentions.
• Communicate with your tenant as soon as you decide to sell. Make sure you try to see things from their point of view. Moving is a hassle, especially if there are children of school age involved. Hopefully they will take the news well, and all will be fine. If you are working with a realtor, he or she can help the tenant find somewhere new to live in the area.
• Offer first right of refusal. If your tenant is financially able, maybe they would rather buy the house instead of going through the pain of moving. Your realtor can provide the tenant with recommendations for mortgage brokers and provide other assistance to get the process rolling.
• Consider offering the tenant a bonus if they cooperate with the sale. The bonus could be an extra $100 in addition to returning their security deposit when they move out and leave the home in good condition. You could also give them a gift card to their favorite restaurant once a month as long as the house is on the market for their assistance keeping the place clean and cooperating with showings. Selling your property might be a hassle for your tenant, too. Providing them with an incentive to help the process go smoothly may lower your overall cost if you get a more attractive offer quickly.
I personally know what it’s like to handle a tenant relationship while selling a home, and I have experience helping homeowners sell properties that are currently tenant-occupied. If you are considering selling your investment property, contact me today and we’ll set up a game plan to successfully manage the entire process.