Selling a tenanted apartment - Melbourne

Discussion in 'The Buying & Selling Process' started by Traveller99, 21st Feb, 2020.

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  1. Traveller99

    Traveller99 Well-Known Member

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    I'm wanting to sell an apartment that I've held for 10 years (block of 50 units) that is currently tenanted to early next year. Tenants signed on a few months back on a 15 month contract.

    It's an underperforming asset that I'd like to move on from and reinvest elsewhere. Recent sales in the building show some nice gains and I'd like to take advantage of this.

    The current tenants keep the place up to standard but of course have recently signed on.

    25% of the building is rented with the remaining owner occupier so it looks like my market pool might be limited if I pursue selling this before the tenants move out.

    Would I be better in waiting till late spring and negotiating with the current tenant a few months before they are due to move out or start such negotiations now in the hope it encourages them to move on sooner? Is this bound to cause problems?

    I've only bought, and never sold, so the process is somewhat muddy for me, and I know the laws are changing in July.

    Any advice is much appreciated.
     
  2. wylie

    wylie Moderator Staff Member

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    If you think the time to sell is now, you could offer them cash to move? The figure would need to cover their moving costs plus extra.

    We had tenants beside us to were paid $10k to move and allow the house they were renting to be sold empty. That was a lot of money maybe close to ten(?) years ago.

    I'd think minimum a couple of thousand would need to be offered. I'm guessing moving costs $1+ even for the cheaper movers.

    If they know they will be moving at the end of the lease anyway, they may jump at taking a bit of cash and moving early. And they may not.
     
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  3. The Y-man

    The Y-man Moderator Staff Member

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  4. Lil Skater

    Lil Skater Well-Known Member Business Member

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    It really depends on the tenants and what they’re like to deal with.

    The laws are changing, but that only really limits inspections and that there will be compensation payable.

    If it’s more affordable to sell tenanted and they generally keep it clean and tidy a good approach could be to offer them two weeks free rent for their cooperation. First week paid upfront, second week when the contract goes unconditional. This is to entice them to keep the property clean and work with the sales agent.

    Obviously the longer left on the lease will impact who purchases, but I’d suggest speaking with a sales agent about the demographic in the area and their experience to see what’s best for timing. :)
     
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  5. wylie

    wylie Moderator Staff Member

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    We sold once, knowing the lawyer tenant wanted to move as well, but he held the upper hand. We offered him the final four weeks free of rent if he helped the process. We both signed this agreement.

    It was a win for us and a win for him. He got the move he wanted without breaking his lease. We got a good price for the property as he kept the house very tidy while the rent flowed until we had a contract and then the rent stopped for the final four weeks.

    Another property we had real estate agents renting. They did everything they could to make it difficult. Left dirty dishes in the sink and dirty clothes strewn around the floor for open houses. I'm sure they were doing this because we listed with another agent. Very silly of them. I wouldn't touch them or recommend them with a barge pole now.

    So, it very much depends on who might buy, whether you have good tenants and likely higher price if you move them on and dress the property, vs keeping the rent flowing.

    Perhaps you could offer that if an owner occupier buys, you'll give them the final four weeks rent for free and that gives them time to find another place. If an investor buys, they have a locked in lease. You'd need to get this locked in and signed.
     
  6. Traveller99

    Traveller99 Well-Known Member

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    Thanks for your assistance.
     
  7. Traveller99

    Traveller99 Well-Known Member

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    Thanks. Appreciate it.