There's no doubt that selling any property is a complex and time consuming process, but it becomes even more challenging when you're selling an investment property with tenants living in it. While investment properties provide large long-term returns and a regular income, they tend to be trickier to sell than a property you're actually living in. Consider the three factors below before putting your investment property on the market, to combat some of the uncertainty and stress involved in the process.
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1. Rental Agreements
Selling an investment property isn't as straightforward as a residential one, as you have to be wary of your tenants' contract. If the tenants have a fixed-term rental agreement in place, you will usually have to wait until it expires before you can sell the property as vacant. There might be an option for an early cessation to the contact. If this is the case, be sure to get the agreement in writing.
If your tenants are not on a fixed-term rental, you will need to give them ample time to find other accommodation. Each state has a different statutory requirement for this notice, ranging from 30 days notice in writing in New South Wales to a 60 day written notice in Victoria. Be sure to ask your agent if you are unsure of the amount of notice you are required to give, in order to maintain a good relationship with your tenants.
Along with the tenants, buyers are another group of people to take into consideration before you put your property on the market. Some buyers will require the property to be vacant when contracts are exchanged, and they will often insist that this is guaranteed within the contract of sale. On the other hand, if your buyer is also an investor, they might prefer that the property be sold with a tenant in place. In either case, make sure you are fully informed of the tenancy situation before you make any decisions about putting your property on the market.
Once you are aware of your contractual obligations, it's a good idea to discuss the best approach with your real estate agent. The property could go either way -- it could sell better if it's tenanted, to appeal to investors, or it might do better vacant yet well furnished, to appeal to potential homeowners. The right approach is dependent on the local market, which is something that an experienced agent can advise you on.
Arranging viewings for an investment property is more complicated than doing so for a residential home because you have to liaise with the tenants, along with potential buyers. Remember to be mindful of the fact that while the property belongs to you, it is also someone else's home. The best way to arrange inspections is to communicate regularly with your tenants and make sure that they agree on all inspection times prior to the arrangement being made.
It is a good idea to agree on weekly windows of opportunity in advance, so you can plan viewings without having to constantly check if the times suit the tenant. Give the tenant as much notice as possible to avoid leaving them no time to tidy the house up and stow their personal belongings away.
Keeping your tenants onside is the best way to avoid any issues and to make sure the property looks its best for buyers. Some people find that it works well to offer tenants some kind of incentive to make the selling process run smoother. For example, you could offer them a week of free rent to thank them for the inconvenience and to incentivise them to ensure the property is as clean and well presented as possible.
Not living in the property that you put up for sale undoubtedly brings about a number of logistical challenges. But taking the above steps into consideration will be sure to smoothen out the process and take some of the stress out of it. Make the extra effort to build a rapport with your tenants to avoid any conflict and to ensure they are cooperative during inspection times. If you are using an agent to sell the property, make sure you find one that you trust. Finding an agent with a proven track record of successful sales of rental properties is also a good idea.
Zoe Pointon is the co-founder of real estate startup OpenAgent.