Tips on how to sell a tenanted investment property
When it comes time to freeing up some of that hard-earned equity by selling an investment property, how do you try and best ensure that the existing tenant is an asset and not a deterrent for your sale?
Unfortunately, when selling an investment property that is tenanted there is no way of 100% guaranteeing a seamless sale as there are so many unknown variables. If your property is likely to attract a higher percentage of owner occupiers with potentially ‘deeper pockets’ and you can financially afford to cover any repayments (without the rental income) during the sale process and through to settlement period, it may be advisable to vacate the tenant in order to allow your agent ‘round-the-clock’ access to sell the property. Like many investors who rely on the rental income to assist with the monthly payments, this may not be an option.
Here are some of our suggestions on how you may just be able to have the best of both worlds and keep your tenant on side during the selling process.
1. Make sure that the agent you have engaged to sell the property takes to time to meet with your tenant in person prior to photography etc being booked in. This will allow your selling agent the opportunity to meet and greet your tenant(s), explain the sale process in detail, cover any concerns that the tenant may have and to best ensure that the property presents for photography. It can also allow the selling agent an opportunity to assist in organising any prompt repairs (e.g. kitchen cabinet door hanging off the hinges)… Note; your selling agent does NOT have to be the managing agent. You want to ensure that the selling agent is the best for the job and this may NOT be the managing agent.
2. When selling a property, you will likely go to much effort to best ensure that the property presents its best at all times as it’s in your financial interests! However, your tenant has no financial interest in your sale and therefore the tenant may not care if the property doesn’t present as well as it should to best ensure that your final outcome is the best it possibly can be. So, maybe it’s worth considering giving the tenant a financial interest in the sale – this could include something like gifting the tenant 1 weeks free rent as an incentive to assist in straightening up the property prior to photography, or to offer an ongoing rental discount over the weeks that property is actively marketed for sale. Although you have no obligation in doing this, this minimal investment could see you reap the rewards!
3. Make sure that your selling agent gathers an understating of your tenant’s situation and their intentions after the sale – this can prove important when dealing with prospective purchasers. If your tenant enjoys living in the property and intends to stay/renew their lease once the lease expires, your selling agent needs to discuss this with the tenant prior to presenting the property to market. It is also important for the selling agent to know if the tenant intends on vacating early, or has no intention of staying on past the expiry of their lease. Should the lease be expiring in only a few months, this may also mean that the property could offered to market with vacant possession (assuming that the lease expires after the proposed date of settlement).
4. Try and work with your tenant when scheduling dates and times for open homes. If your tenant works night shift and you book for a 9:30am open home, the tenant would certainly be unimpressed and could possibly miss their alarm and still asleep in one of the bedrooms when your selling agent arrives for the open home. It is not enforceable to have a tenant vacate the property during an inspection, however it is certainly advantageous. Work with your tenant so that they pop out for ~45 minutes during the open home (or private inspection). You could arrange for your selling agent to have some free coffee cards for a local café on hand – this could be a great incentive for the tenant to vacate during the inspection.
5. Thank your tenant after each inspection. Make sure your selling agent shows gratitude and respect towards your tenant – it is their home… You have the right to sell your property, but don’t forget that tenant also has rights and can make the process really difficult if they choose to do so. One of the best examples we have experienced in recent times with one particular tenant is that the first time we met him at the property he was enjoying a cold beer, sitting on his balcony late one afternoon tending to his collection on bonsai’s. He had clearly spent a good few hours making sure the property was neat and tidy prior to our visit, so we suggested that the vendor owner purchase a case of beer for us to gift to the tenant as a gesture of good will. This was left for the tenant with a small note on the kitchen bench saying “thanks for having the property neat and tidy for us today – check the fridge”. At around 7pm that evening, we received a picture message from the tenant – it was a picture of the tenant enjoying one of the beers with a big thumbs up… This wouldn’t work for everyone, however in your best interests your selling agent should be able to steer you in the right direction.
6. Keep your tenant updated… You don’t need to let them know everything but keep in mind, they have an emotional investment in this transaction. The thought of having to move with the least amount of notice will be constantly on their mind, so do the right thing and give them enough information to keep their mind at ease.
Disclaimer: All information herein is general in nature and NRJ Services Pty Limited T/A Award Group Real Estate recommends that any interested parties rely upon their own research and enquiries.