While selling a rental property that has residents may be a plus in some regards (for example, the new property owner won’t have to find new tenants—that equates to instant income in their eyes), in many cases, people will prefer a vacant property. Selling a rental property with tenants can make a real estate transaction a bit more complicated because the property owner must consider a lease, the tenants’ rights if they are under a lease, etc.
Many times, the way in which a property owner decides to go about selling a rental property with tenants has a lot more to do with where the property is actually located and the local real estate trends in the area. In our area of Marysville, whether you’re better off selling rental property with tenants or selling rental property without tenants very much depends on the buyer. Home values in Marysville are higher than most of the rest of California, simply because of the high demand and the “perception” of quality among buyers.
Many times, California movie stars, professional athletes, or the somewhat “wealthy” elderly types will look to purchase property in our area due to the exciting “scene.”
Understanding the Market in Marysville
The Marysville real estate market has shown a dynamic shift in recent months, and it may impact how or when you decide to buy or sell a property. Here are two key market changes you should know about to help inform these decisions.
- The impact of interest rates
Interest rates play a significant role on property purchases in Marysville. If you are considering the timing of your purchase, understanding the interest rate environment can give you some context. Although mortgage rates have relatively become higher in recent months, they are still historically low, meaning many people have immediate confidence to follow through on their purchases.
- The competitive rental pricing landscape
In order to generate consistent rental income, landlords in Marysville have to price their properties right. Overpricing can lead to lower occupancy, while under-pricing decreases the profitability of your rental property. Market research and analysis of historical pricing as well as comparable properties can help landlords set pricing that renters will immediately accept.
Legal Considerations When Selling a Rental Property with Tenants
Both landlords and tenants need to understand tenant rights and lease agreements. Tenants have rights that protect them, so they are not taken advantage of, such as the right to a habitable living environment, quiet enjoyment, etc. It’s very important to understand what rights your tenants have. In addition, you should also understand what’s outlined in your lease agreement. A lease agreement is essentially your contract with your tenant that details, among other things, the amount of the lease, the duration of the lease, and the tenant and landlord’s (that’s you) responsibilities. Knowing what these documents are will help prevent disputes from arising. Plus, I’m sure future you would appreciate not having to deal with the stress headache that is a tenant-landlord dispute.
Communication is key in every relationship and is no less so in a tenant-landlord relationship. Feeling out your tenants can prevent a lot of potential problems – who knows when they could occur. Some landlords like to assume a more supervisory role (think superintendent) and perform regular “check-ins” with the rental property. Some tenants may not appreciate that however and may prefer to keep things more professional and less “hands-on”; they will contact you if there is an issue. All in all, it’s important to get a feel for what your tenant wants and develop your relationship from there.
Sometimes it can’t be helped – you have to sell the property to someone else. If you need to sell the property, that’s alright – just don’t make it a nightmare experience for your tenants. It’s fair for them to be able to stay in the property they’ve invested their time and hard-earned money in if, say, the new owner happens to be the reincarnate of a troll (and not the happy Dre Pop Trollz kind either). Try to work out a deal that is intuitive for everyone: let the tenants stay for a “reasonable” amount of time (as per the Attorney General’s Guide for Landlords in these situations), then have everyone go on their way. If that doesn’t work, the next best alternative has to depend on the terms of the deal you’ve made with the buyer. Try to look out for everyone in this situation but don’t let yourself get unfairly shortbriefed either. Overall, you’d want to make sure your tenants are moved out and the property is transferred to the new owner when you move on.
Preparing Your Rental Property for Sale
It’s important for both landlord and tenant to maintain the property while it’s still occupied.
- Regular maintenance: Good for the landlord because it maintains the quality of the time.
- Routine inspections.
- Maintenance is fixed on a mutually agreed-upon schedule.
- Very well staged: If people live there, it’s still super important to make it look good.
- Really good if occupants are very good at coordinating with teaching staff.
- Conduct first viewings: First walkthrough after an occupant has vacated.
- A lot of the time, it’s not really possible because most people here are students who don’t have the flexibility to take on additional jobs.
Marketing Your Rental Property
Marketing a rental property with existing tenants is a new challenge, but it’s certainly also an opportunity. Online platforms such as Zillow, Realtor.com, and social media can reach many potential buyers. These websites provide room for you to write all the particulars: a walkthrough of the home and its features, current rental income, and how great the tenants are. There are many people who are interested in rental properties who want the cash flow but are afraid of not having a tenant (vacancy). There are surprisingly many “first rental property” owners out there who would love to get into a property that is relatively “figured out.” Even more broadly, there are many investors, or would-be investors, who would like just a taste of real estate in their portfolio.
Contrary to the first tactic, the only difference between this section and the last is that you are trying to market this home to locals. Many of the locals are familiar with Zillow and Realtor.com. However, this also includes local real estate websites that feature properties like many mom-and-pop real estate agencies have. Even community Facebook Owners, or local bulletin boards, might have a link where you can post the property for free.
Selling Options for Rental Properties with Tenants
Old-fashioned selling often involves a long list of things to do and the need to do them in sequential order. Once the homeowner finds a great agent or broker and successfully lists the property, they need to keep it in “show” condition for weeks or even months. Then, finally, real potential buyers start to trickle in. But, after that, there will probably be negotiations back and forth about the final sales price. Deciding to sell real estate in this manner requires a huge commitment that many homeowners have already decided not to do for personal reasons. It’s just a big hassle.
If the property really needs some significant work done, it may not even be possible to sell it the old-fashioned way, even if the homeowner wanted to sell it to an owner-occupant. In this case, the home seller really needs to get an offer for the home as-is, without making any repairs or improvements. And that’s just what we are capable of offering you here at Fort Collins Cash Home Buyers.
So, then, what is a real alternative? Selling to an investor! Most investors buy property with cash or with short-term (or even long term) private money. Working within this loosely-regulated sector of the finance industry, an investor company can come in and look at the property to see what is needed immediately and sometime in the future. The seller will walk the property with cash buyers once (not with a long list of looky-loos.)
Conclusion
The cash buyer will generally ask you some pretty basic questions about the property and what you think it might need in the way of repairs or capital improvements.
After that, the cash offer writer may offer some suggestions on what kind of repairs need to be done, if any, and what the purposes are for such repairs. Is the property, for example, in need of a good bit of deferred maintenance? Or, are there significant “capital improvements” that need to be done? Capital improvements are big-ticket items like roofs, electrical systems, HVAC, and kitchen renos.
Anyway, I digress… The cash offer writer will eventually get you an offer within, say, a week. And then, if you like the offer, sign on the dotted line and he will send you his buyer’s earnest money. It will take some time to get the title transferred over and the new homeowner’s insurance taken care of (whichever company the buyer chooses). Then, after all of this is generally when the cash offer buyer receives the actual “grant deed” from you, according to a schedule that you have already set up with the cash offer writer.
Once everything has been taken care of by the buyer and his team, you then proceed to “close” at the closing company’s expense. And then, it is in the closing company’s process where all of your proceeds are finally sent via direct deposit to your bank. Cash-In-Hand baby!