Selling Tenanted Property
Having had a number of properties for sale over the years that have been tenanted I thought I would discuss the choice vendors have to make when selling, do they sell with the tenants in or should they serve notice and sell without. Let me point out that retaining tenants during a sale certainly keeps the rental income coming in. Also, unless the property is dirty and untidy, it will usually present better with furniture and household items making it look lived in and camouflaging wear and tear.
However, there are times when a tenant in residence could be a financially less rewarding scenario.
Tenants who do not want to move can put a lot of obstacles in the way of a sale. They can limit and postpone inspection access almost at whim in spite of legally having to provide ‘reasonable access’(what is ‘reasonable’ to one person may not be ‘reasonable’ to another). By the time this sort of obstacle is sorted out, valuable time has been lost and many purchasers have moved on. If the market is not trending up, this can result in a lower sale price as the market drops before the property can be sold. Most rental incomes can’t compensate for this kind of loss. Furthermore, if the seller is using the money for another financial project, delays in having the money available could cost them the project or render it more expensive if bridging loans are required.
Disgruntled tenants can also highlight the property’s faults in order to put off prospective purchasers and while many owners are happy to absent themselves from the property to allow the agent to show the purchasers around at their leisure and improve their selling prospects, tenants have no such motivation to leave the property and many more to stay watchfully present.
Sometimes, property owners have no inkling that tenants will behave badly in the event of a sale, but there is a bit of basic research investors can do to try and determine whether their tenants will play ball. Ask the property manager how easy it has been for the agent to get access for periodic maintenance inspections or for tradespeople who have been contracted to carry out work on the property. Tenants who have been slow to concede access for activities such as repairs that will benefit them are highly unlikely to come to the party when they think they will ultimately lose their home to a successful purchaser.
Thankfully in all my years selling property in Upper Hutt, I have met very few of the latter!