Is Selling a Rental Property with Tenants Difficult?

Are you a landlord looking to sell your tenanted rental property?

Before putting the property on the market, there are a few things you need to be aware of to make sure you don’t infringe the rights of your tenant and ensure a smooth sale…

Is It Better to Sell a Property Tenanted or Untenanted?

There are pros and cons associated with each option. The most suitable method will depend on your personal situation, the property and the type of buyer it’s likely to appeal to.

Selling a rental property with tenants is beneficial as you can continue to generate rental income while selling the property, and it can also make the property more attractive to other investors. However, a tenanted property may be less appealing to owner occupier buyers, and your tenants may not make effort to present the property in its best light, which could affect the sale price.

In contrast, an untenanted property is generally easier to sell as you won’t need to worry about providing tenants with notice about inspections, and you’ll have easy access to the property to undertake any maintenance or renovations.

Can You Break an Existing Lease Agreement?

While the rules around breaking lease agreements vary between states and territories, generally, you cannot ask your tenants to vacate the property if they are on a fixed lease.

Unless the tenant decides to end the lease of their own accord, you’ll need to either sell it as a tenanted property, wait until the lease expires, or negotiate with the tenant to see if they’d be willing to vacate before the end of the lease.

If your tenant is on a periodic or continuing tenancy agreement, you can ask them to vacate the property, provided you meet the relevant notice period requirements for your location.

Managing Inspections When Selling a Rental Property with Tenants

Inspections are an integral part of the sales process, however, they can be inconvenient for the tenant so it’s important to plan them carefully.

When managing property inspections:

• make sure you provide your tenant with plenty of prior notice (usually a minimum of 24-hours written notice)
• limit inspections to a ‘reasonable number’ (e.g. two inspection times per week)
• try to be flexible when arranging inspection times and work around your tenant’s schedule

Maintaining a Good Relationship with Your Tenants

It’s also beneficial to maintain a good relationship with your tenants throughout the sales process by:

• informing the tenant of your intention to sell the property when they sign the initial lease
• notifying the tenant of your intention to sell before you begin the sales process
• offering the tenant a temporary rent reduction or one week of free rent upon sale as compensation for the inconvenience
• asking the tenant to put away any personal items that they wouldn’t want photographed or displayed on real estate websites
• ensuring you communicate clearly and frequently to keep the tenant informed throughout the process

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