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Selling property whilst tenanted

Discussion in 'Property Management' started by James Hill, 29th Aug, 2016.

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  1. James Hill

    James Hill Active Member

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    Hi All !

    We have a PPOR that is currently tenanted on 12 month (Starts Jan-Dec2016) lease in NSW.

    Now we were wanting to try and sell the property in Oct 2017.

    Thus not sure what the best thing to do in this situation?

    If the tenants want to stay after dec 2016 for another 12 month lease - how would that work, as we plan to sell before the years out? Can you still do a 12 month agreement and cut it short by selling? Or do you need to do month-month instead of another new 12 monther.
    Is it a legal requirement to inform the tenant we wish to sell next year before they sign a new lease for 2017?

    Also love to hear your experiences with selling the place whilst still tenanted. If they are reasonable and tidy is it fine, or would you recommend asking the tenant to leave and leave it empty for the sale campaign?

    Thanks a lot all!
     
  2. Ricky Adelaide

    Ricky Adelaide PM in Adelaide -Elizabeth Salisbury Modbury Business Member

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    I am based in SA, but I think the first question you need to ask yourself is do you want to try and sell the property while it is tenanted? Who is going to be most likely to give you the best price for your investment if you do in fact sell A owner occupier or an investor- personally I would rather sell to a owner occupier who doesn't purchase with their head :) .

    If you think its going to impact your decision to get the best price as tenants can be a major problem if they don't work with you, I would be inclined to offer a shorter lease so you have the flexibility of getting your purchasers through easily but if you have really good tenants this may not be necessary.

    As for giving your tenants notice. Are your plans fixed in stone, and what happens if they leave now and you then need to find tenants to stay for possibly only a year.... if you then give the new applicants the same info ahead of time as well what will that mean to your efforts to release your property. I would sit tight until your plans are locked in and you have actually signed a sales agreement as you may have a change of heart or your numbers may look quite different in 12 months- as I said, how set in stones are your plans and how much notice are you required to give (only required to give notice when signing up a new tenant in SA if going onto the market in the first 3 months)
     
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  3. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    I have a feeling the tenants will be difficult if you spring a sale on them part way through the lease agreement. In some ways this is understandable.

    As @Ricky Adelaide stated above better to have your plans set in concrete (if their is such a thing :)) and strategise from there.
     
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  4. Perthguy

    Perthguy Well-Known Member

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    I did this last year in Melbourne. Initially there were a couple of issues with the tenant but we sorted them out and it worked out well. Having an existing tenant in place was a plus for the purchaser and the tenant wanted to continue renting the place.
     
  5. dabbler

    dabbler Well-Known Member

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    Have the lease end before you plan to sell.
     
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  6. James Hill

    James Hill Active Member

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    Thanks all!! Yes I think we will plan to sell after the new lease ends, thanks all for the comments and sharing your experiences!
     
  7. chylld

    chylld Well-Known Member

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    I had the same question last year, agent strongly recommended that we help the tenant move on first so that we can clean, paint and stage (furniture etc) the apartment to present as nicely as possible. The winning bidder mentioned to us that it was a bit smaller than they originally wanted, but the furniture really helped them to visualise how to best use the space.

    As for the tenant, maybe consider something small like offering to pay their removalist fees if they vacate early? Not sure how this works within the lease contract period though (mine was on periodic).
     
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  8. Scott No Mates

    Scott No Mates Well-Known Member

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    @James Hill

    There's no single answer as to what's best. It's possible to sell with a tenant in place but it reduces the pool of buyers to investors or those prepared to wait for vacant possession.

    If yhe lease has only a few months left to run it probably isn't a big deal except to the tenant.

    How is the rent: above /below market? Vacancies? Similar properties available?

    If the lease expires in December, what's wrong with marketing in October as settlement is 42 days/6 weeks + selling time?

    Incentives can be offered eg weekly cleaner or lawn mowing (becomes an expense rather than lost income).

    Will you be using the current managing agent to sell? Have they got anyone lined up for an off-market transaction?
     
  9. James Hill

    James Hill Active Member

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    Hi Chylld and ScottNoMates, Yes great points. Yeah I think I'll do the same as I'm leaning more and more to just keeping it simple and just let the lease run out till end of 2017 and get ready for selling in the new year. I probably will use the current realestate agents as they said they will offer a discount on the sale commision as we are clients already - would be ideal to have on off-market sale - but I don't think I can count on it
    Thanks a lot guys!
     
    Perthguy likes this.
  10. Mac Fields

    Mac Fields Well-Known Member

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    Depends on how well the tenants work with your PM and the selling agents, and how well the selling agent can talk with the tenant.

    I sold a unit that was tenanted. I reduced the rent by $20/week as way of compensation for the weekly inspections each Saturday (I insisted on this to keep the property visible to potential buyers) and I interviewed a heap of agents to understand which one could/would work best with a tenant (I didn't go with the agency that the property was rented through and I give credit to the agent for working with the PM and tenant to make it all work).

    I also asked to meet with the tenant over coffee about a month before the place was put on the market. I gave them first offer should they want to buy the place. I met with them a second time to talk through that I wanted to sell the place and introduced them to the selling agent etc so I felt all parties were comfortable with each other.
    This worked ok for me as the tenant was good to work with and the agent was an excellent communicator.

    For other IPs I own, I would move the tenants on before selling as I don't feel the property would be presented in a way that I would want to present it. I would so the same as @chylld above.
     
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  11. WallyB66

    WallyB66 Well-Known Member

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    Hi, I'm in similar situation with my IP at Bella Vista- decided to put tenants on shorter lease and will reno and sell in Jan '17. I figured maximising sale price was #1 priority,,

    Good luck, Wal