If you are considering selling a property that you’ve been using a rental property, there are a lot of questions that you will need to ask yourself, your realtor, and any other number of people. However, one of the most commonly asked questions that I’ve received is about whether or not you should have a rental property vacated before you list it for sale.
Sellers are often torn about whether or not to have tenants out of the way before they try to sell a property. After all, if the property takes some time to sell, you’re going to be missing out on the income that the property has been generating for you. However, if you leave tenants in place, you run the risk of hurting the likelihood that your property receives a good offer.
In most cases, I encourage clients to have properties vacated. However, there are some exceptions to that rule. There are two main questions that you will need to ask before deciding whether or not to evict your renters before selling your property. First of all, what type of property is it? Secondly, is the person who is purchasing the property likely to live in any part of it? Understanding different property types is key to making the right decision about what to do with your renters.
Apartment Complexes
Obviously, apartment complexes are their own animal in the world of real estate. There aren’t a lot of apartment complexes, which means there aren’t a lot of owners. However, if you have an apartment complex in your portfolio and you want to resell it, you may be wondering what you need to do with your tenants.
This is one of the rare cases where you should try to ensure that as many of the units are occupied. The person who is going to purchase your apartment complex is most likely looking for his or her own investment opportunity. While there is a chance that the buyer may decide to occupy one of the units, the most important thing that they’re looking at is the monthly revenue generated.
Potential buyers will thoroughly review your financial records of the apartment complex. They also don’t want to deal with the hassle of finding tenants for every unit. If you own an apartment complex and you want to sell the building, you’re better served by having as many units as possible filled.
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Duplexes, Triplexes, and Fourplexes
There are a lot of duplexes, triplexes, and fourplexes in the Bay Area. Obviously, these facilities are smaller than apartment complexes. Additionally, you may be living in one of the units yourself, as many of the owners of these facilities use one unit for a personal residence.
The decision to leave tenants in place or remove them will largely depend on what the new owner plans to do with the space and the location. If your duplex, triplex, or fourplex is near a highway, an airport, or another noisy area, there’s a good chance that the buyer won’t want to live in it. Instead, he or she is probably looking for a space that they can fill with renters. Conversely, if you own one of these complexes in a quiet residential neighborhood, the buyer may want to live in one of the spaces.
Much like apartment complexes, buyers who want to rent the space out in its entirety want to have tenants in place. However, if you’ve been charging less than market prices for rent, they may want to start with a clean slate. This obviously puts a lot of variables in place, so you will need to consider the details of your particular property.
If tenants plan on living in one of the spaces, you’re better served by having the space empty. Tenants will leave clutter lying around and will probably sensationalize any issues with the property. Remember, if you sell the property, they know that they are either going to start paying more rent, or they’re going to need to find a new place to live. These tenants, who have to have 24 hours’ notice before you and a prospective buyer come to view the space, will make it harder for you to sell the property than it would be without them. With that in mind, those tenants won’t help you sell your property to someone else.
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Single Family Homes
Finally, the most common type of rental property is a single-family home. I always encourage my clients to have tenants out of the property before listing it. This serves a variety of purposes. First of all, does the buyer plan on living in the property or using it as an income-generating property. If they’re going to live there, they want to see the home unoccupied, staged, and ready to live in. If they’re buying the property as a rental, the same issues that we discussed with duplexes, triplexes, and fourplexes apply.
Your buyer won’t have a hard time finding a renter for a single-family home. Additionally, he or she probably doesn’t want to be limited by the rent that you have been charging your tenants. Having tenants in a single-family home when trying to sell the property will make things exponentially harder than they need to be.
Should you have your renters out of the property before you try to sell it? There are simply too many variables to just provide a yes or no answer to that question. In some cases, such as selling an apartment complex, having renters in place conveys the fact that the property is ready to generate income for its new owner. However, in other cases, those tenants can serve as a major deterrent to any potential buyers. Spend some time thinking about the property from a buyer’s perspective and make an informed decision about what you should do with your property.
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