Advantages and Disadvantages of Selling with Tenants
Posted by Rebekah Hutton on Tue, Nov 2019
If you’ve been considering selling your investment property recently you may find yourself tossing up whether it’s better to sell with tenants or wait until the end of a lease and the property is unoccupied to sell your property. Selling with tenants brings both advantages and disadvantages that we’ll explore to help determine the best option for you.
The advantages of selling your home with tenants:
– Continued cash flow. Probably the biggest benefit is that you continue to receive the rental payments and put yourself in a stronger position maintaining cash flow which can counterbalance the cost of selling your home.
– The new buyer will not need to find tenants. The benefit for an investor buying a home that is already tenant occupied means it saves them the trouble of trying to find a good tenant themselves. This can be extremely attractive as it saves both time and stress for the new buyer and means they already have a reliable source of rental return as soon as they buy a home and clear the settlement. However, this advantage only applies to investment buyers and is not relevant if the new buyer is planning on living in the home themselves. Therefore, it’s important to consider if your home will likely appeal to investors.
The disadvantages of selling your home with tenants:
– You are required to notify tenants before any inspections, usually this includes notifying them 24 hours in advance. This can result in the process of last-minute inspections extremely awkward, difficult and not always possible. Therefore, the ability to control and allow potential buyers to inspect the property is unfortunately limited.
– You can be heavily restricted on when you sell a home if tenants are currently occupying the property. In most cases the tenants will be on a fixed lease, so you will be required by law to give them at least 60 days of notice for them to move out, or often wait until the lease has finished. This make settlement negotiation difficult with a potential buyer who may be looking to move into the home quickly.
– You don’t have the full flexibility to stage and style the home as you would like. Statistics have shown that staging the home can increase the sale price by up to 10%. Unfortunately, if tenants are currently occupying the home you can’t change their style or move out their furniture, so you are generally limited to selling the home in the current condition.