Selling an IP with tenants

Discussion in 'The Buying & Selling Process' started by PropertyInsight, 9th Nov, 2017.

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  1. PropertyInsight

    PropertyInsight Well-Known Member

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    I am planning to sell an IP by June 2018, when my fixed loan expires and becomes a variable one. Currently, the rent agreement will expire in Jan 2018 and will put a new tenant in after that. It means that new rent agreement may last up to Jan 2019.

    I wonder what your experience in selling an IP with tenants occupancy. Is it better to get rid of tenants during marketing period to make the property more extractive to buyers?
     
  2. D.T.

    D.T. Specialist Property Manager Business Member

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    There's a tip on the forum about this already: Tenancy Tip Thursday - Selling an investment property

    But general gist is selling with a tenant has a lot of cons:
    - Trying to arrange photography around the tenant and their belongings
    - Trying to arrange home opens around the tenant and their belongings
    - Excluding owner occupiers from your target market

    Doesn't really have that many pros other than not having to wait another X months til lease finishes.

    Also, check for what the period of notice is in your state. Here in SA, if you list the property for sale within 3 months of the lease starting without disclosing those intentions at the beginning then the tenants can walk away without penalty.
     
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  3. Heinz57

    Heinz57 Well-Known Member

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    There is the issue of your income stream drying up while you market the property tho'.

    In an area with lots of investment properties a tenant with a long lease could be more attractive.

    Depends on the tenant, but if you could bribe them to tidy up a bit maybe get a cleaner and gardener in. But awful crappy / oversized furniture can't be disguised.
     
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  4. fantail

    fantail Well-Known Member

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    As mentioned by others, there are pros and cons to selling with tenants in place and you'd have to make up your own mind as to what might work out better for you.
    If you decide to sell while tenants are still there I think it's a matter of finding out what might assist your tenants during the marketing campaign and the inconvenience of the open for inspections - something monetary like discounted rent during the campaign or perhaps no rent payable for a week or two? Or perhaps pay for a cleaner the day before each open for inspection? or tell them you'll pay for someone to help them pack when they move out. Whatever it is, I'd suggest that it needs to reflect the inconvenience to your tenants.

    We were in the same position when we decided to sell an IP (SE Qld) earlier this year and had long term tenants half way through their lease. We told them at the outset that we'd compensate them for any inconvenience and because the place sold quickly and the tenants would need to move out, that would be a BIG inconvenience so we ended up paying for their entire moving costs - expensive but win-win.
     
  5. PropertyInsight

    PropertyInsight Well-Known Member

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    If the rent agreement has not expired, can I give 60 days to vacant notice to the tenants so that I can sell an IP without tenants?
     
  6. Xenia

    Xenia Well-Known Member

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    No you can’t give 60 days to end a fixed term contract and as a landlord you can’t break the lease either.

    Best thing to do is advertise property for sale in last 3 months of lease.

    I’m assuming because you Have asked this question that there are no renovations or anything to be done to the property that will need the tenants to be out.

    I’m also assuming that the tenants are keeping the property reasonably clean and not in a state that is going to put off future buyers.

    I would recommend last 3 months of tenancy so that you can terminate the agreement should it be sold to an owner occupier Or continue the lease should be sold to an investor.

    We usually give tenants all open inspection times up front.

    There is a procedure to notify tenants that the house is now for sale and they are legally obligated to make the house available for open inspections.
     
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  7. Xenia

    Xenia Well-Known Member

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    I will also add that even though sometimes properties do get sold to investors and leases are continued, no sales agent worth their salt would deliberately Market a property to investors. All advertising should be done to target homeowners.

    Home owners give the property a competitive advantage and drive the price up even if investors do purchase it.
     
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  8. Xenia

    Xenia Well-Known Member

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    So yes it can and should be sold with tenants still in there where possible unless you want to sabotage your cashflow
     
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  9. D.T.

    D.T. Specialist Property Manager Business Member

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    Not in the real world
     
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