Selling tenanted house

Discussion in 'The Buying & Selling Process' started by CheckMate, 12th Apr, 2020.

Join Australia's most dynamic and respected property investment community
  1. CheckMate

    CheckMate Well-Known Member

    Joined:
    4th Dec, 2015
    Posts:
    88
    Location:
    Sydney
    Hi,

    I'm currently selling my investment property which is tenanted till the end of January 2021.
    I received an offer from OO with a strict condition to move into the house straight after the settlement (June this year).
    The agent talked to the tenants to see if there is any sort of compensation they're willing to take in order to move out of the house early. But the tenants don't want to hear about any monetary incentives and like to stay in the house till the end of their contract.
    They are lovely young couple and I do understand and respect their decision. However this sell is very important to my financial situation and I didn't receive any other offers from investors.

    Are there any options or strategies to solve the issue? Or I'm stuck with it?

    Thanks!
     
  2. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    4,020
    Location:
    Perth, WA
    Throw more money at them. Everyone has their price.
     
    Empire, Perp, punti and 8 others like this.
  3. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    4,879
    Location:
    Qld
    The only way out is to offer more money.
    Otherwise the tenant stays.
    It cost a friend $10K to persuade tenants to leave when they wanted to move back into their property unexpectedly.
     
    AxeLy, Perp, Dan L and 1 other person like this.
  4. CheckMate

    CheckMate Well-Known Member

    Joined:
    4th Dec, 2015
    Posts:
    88
    Location:
    Sydney
    I understand.
    The problem is I'm already loosing money on this sale and 10k is relatively high amount to the sale price. I'm willing to give 5k, but the tenants even don't want to start hearing about the money.
     
  5. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    4,879
    Location:
    Qld
    The problem is that the tenants are in control.
    Sounds as if they know it.
     
    AxeLy, Perp, Dan L and 2 others like this.
  6. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    10,095
    Location:
    Brisbane
    You could offer the tenants $10k and see if they are interested. If not, then you will have to wait for another buyer. And the next buyer may offer more than $10k less.
     
    AxeLy, Empire, Perp and 1 other person like this.
  7. jaydee

    jaydee Well-Known Member

    Joined:
    25th Mar, 2016
    Posts:
    188
    Location:
    Perth
    You are selling a tenanted property which Purchaser must have known about at the time they made an offer, however, they made their offer "subject to vacant possession".

    Two options: either induce the tenants to move, or induce the Purchaser with a discount to buy with tenant in place.
     
    AxeLy, Navjit, Perp and 3 others like this.
  8. CheckMate

    CheckMate Well-Known Member

    Joined:
    4th Dec, 2015
    Posts:
    88
    Location:
    Sydney
    Thanks for your suggestions.
    I will reevaluate the situation with my agent again.
     
  9. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    4,020
    Location:
    Perth, WA
    I remember advising on matters where my tenant clients were offered $10 and $15k to move out. I presume it was worth it to the owners in the scheme of things.
     
  10. Mel Morgan

    Mel Morgan Sydney Property Manager Business Member

    Joined:
    6th Jun, 2017
    Posts:
    1,018
    Location:
    Sydney
    I recently negotiated for a tenant to leave early (similarly their fixed term ends in January 2021). I explained that they would have to move in 8 months time anyway, during peak summer season where there would be less supply on the market, no room to negotiate, busier removalists, plus less flexibility on their move date. If they left now, they could choose their vacate date (within a few weeks), and especially now there are some rental bargains out there.

    Gave them a few weeks free rent on the end and a cash rebate and they were happy to go.
     
    AxeLy, Propin, The Gambler and 4 others like this.
  11. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    10,095
    Location:
    Brisbane
    @Mel Morgan was your tenant leaving early due to losing a job, or linked to Covid?
     
  12. kierank

    kierank Well-Known Member

    Joined:
    10th Oct, 2005
    Posts:
    7,703
    Location:
    Gold Coast
    I know of a tenant who was paid $50,000 in 2008 to vacate a property that was being sold (12 month leave in place).

    The buyer (a business associate) paid $25,000 and the seller contributed $25,000.

    At the time, I thought they were mad. Twelve years later, I still do.

    The tenant was the smart one IMHO.

    in other words @CheckMate, see whether your buyer will share some of the financial pain.
     
    Last edited: 13th Apr, 2020
    AxeLy, Redwing and Hetty like this.
  13. Mel Morgan

    Mel Morgan Sydney Property Manager Business Member

    Joined:
    6th Jun, 2017
    Posts:
    1,018
    Location:
    Sydney
    The owner actually wanted to move back into the house, so nothing to do with covid.
     
  14. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    10,095
    Location:
    Brisbane
    Had tenants not wanted to move, would the owner have had to keep them? I'm unsure of the rules in different states.

    Well done though on negotiating the outcome. We've never penalised any tenant who's requested to leave early. Some would say we are soft, but I like to think we are understanding.
     
  15. Mel Morgan

    Mel Morgan Sydney Property Manager Business Member

    Joined:
    6th Jun, 2017
    Posts:
    1,018
    Location:
    Sydney
    They could have flat out refused to move and without any other breaches the owner would have had to keep them.

    Tenants requesting to leave early (break lease) is a different kettle of fish!
     
    AxeLy, Perp, wylie and 1 other person like this.
  16. MB18

    MB18 Well-Known Member

    Joined:
    25th Sep, 2018
    Posts:
    548
    Location:
    NT
    Unless there is a principle at stake (which nothing above suggests there is) they will have thier price.

    What is the place renting for? If they are paying $500pw then 5k probably wont spark much enthusiasm.

    Perhaps negotiate with your selling agent to cut thier fee and add that onto the tenants incentive, afterall they are not getting paid anything if the tenants won't move by the sounds it.
     
  17. Rose89

    Rose89 Well-Known Member

    Joined:
    16th Mar, 2018
    Posts:
    49
    Location:
    Nsw
    Yep,
    I probably wouldn’t move for 5k either the hassle is just to much. Maybe 10k and the property manger help find them another similar rental for easy transition.
     
    The Gambler and Perp like this.
  18. Mel Morgan

    Mel Morgan Sydney Property Manager Business Member

    Joined:
    6th Jun, 2017
    Posts:
    1,018
    Location:
    Sydney
    I think you have to frame it as: $5k to move x months early since having to move is inevitable at the end of the fixed lease, plus there's more flexibility now than down the track. I think that becomes a lot more compelling.
     
    wylie and The Gambler like this.
  19. CheckMate

    CheckMate Well-Known Member

    Joined:
    4th Dec, 2015
    Posts:
    88
    Location:
    Sydney
    Thank you all for your advises!
    The issue was resolved by reducing the offer price by $5k and by buyer's agreement to buy the property with tenants in place.
    The tenants will be required to move out at the end of their tenancy lease.
     
    Empire and Propin like this.
  20. summer

    summer Active Member

    Joined:
    28th Jan, 2020
    Posts:
    27
    Location:
    ACT
    I'm not a property owner but thought it might be useful to offer a renter perspective...I need to be offered more than 10K to move. Moving is expensive and stressful. You have costs like electricity and gas disconnection and re connection fees, moving (last night I moved it was $2500 to move a a small distance with only a very small amount of items). Then you have attending opens homes etc, redirecting mail, cleaning of the place you are vacating, packing and unpacking items, and a bunch more moving related things.

    I know Mel has some good suggestions on having to move anyway, but even if I knew I had to move out in Jan 2021 in peak competition season for rentals, Id rather stay until because I have time to plan (and budget) for that move and organise my life around it.
    As a renter Id need a minimum of $15k to even consider moving and it still wouldn't be an automatic yes for me. I guess I really just dislike moving/find it stressful.
     
    Empire likes this.