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Blog Articles

20 Mar

How to sell a tenanted property (and limit the pain)


Is the thought of selling your rental property stressing you out? Here's my advice on how to make selling your rental as pain-free as possible.

How to sell a tenanted property (and limit the pain)

Over the past few years, it's safe to say things have gotten tougher for landlords.

The ability to claim depreciation tax is gone, loan to value ratios have increased, and there are new healthy home guidelines to comply with.

But by the same token, over the past few years, house prices and rental incomes have increased significantly.

So things kind of even out.

Still, with the latest move from the government to extend the bright line test from 2 to 5 years, some landlords are thinking it's time to exit.

**Here's a real stat — in the past 6 weeks I've listed 8 houses for landlords looking to sell their rentals**

Thinking about it? One of the biggest problems exiting a rental investment is selling the property while it's tenanted. Here's my advice to make selling your rental as pain-free as possible.

Make sure the tenants know what to expect

As soon as you know you're going to sell, advise your tenants – verbally at first and then in writing. Let them know what your expectations are in terms of timing, viewings and presentation. Have an open conversation taking into account the tenants needs where possible.

Have some empathy and respect

Don't forget it's a stressful time for the tenant particularly when the rental market is tight. They will be anxious about leaving their home and finding another one to rent. Add to this the pressure of keeping the place tidy and they'll no doubt feel quite stressed. So think about how you make the whole process as pain free as possible for them.

Keep disruptions minimal

Ask your real estate agent to use open homes as the main viewing mechanism where possible to minimise disruptions for your tenants. Consider having two open homes per week.

Offer a financial incentive

It's a drag if you're the tenant and the house is being sold from under you. A financial incentive is very important if you expect any cooperation from your tenant. Consider a two part strategy. Reduce the rent while the house is on the market. But then also offer a bonus for keeping the place clean and tidy and cooperating with your real estate agent. Rebate part of their rent once the property has sold providing the tenants have kept their end of the deal. The trick here is to make the rebate a decent amount – say a third or half the weekly rent – or else the tenants won't see the benefit.

Keep a record of what's been agreed

Capture your agreement in writing and have the tenants sign. This is particularly important if you're offering a large incentive. Be clear about what you mean by clean and tidy, and eg: Beds made, benches clear, floors clear, curtains open etc.

Stay in touch

Make sure your tenants are kept in the loop throughout the campaign. For example, let them know when an offer has been received so they can plan accordingly. Or if the purchaser is buying the property as a rental you may be able to introduce them in the hope they can stay on.

Weigh up the odds

While selling an untenanted home may be easier in many ways (you don't have to worry about all of the above), don't forget that your tenants provide a crucial source of income for you. Especially if your property takes a while to sell.

But you need to weigh up the odds.

If you have seriously messy tenants that you know won't present your house well, then you're probably best to give them notice before you sell. You should also factor in the market conditions - how long houses like yours are taking to sell.

If you're thinking about selling a rental property (or buying one) we should talk.


Rodney Fong is a Licensed Salesperson and Auctioneer working with clients throughout Tauranga, Mt Maunganui and Papamoa.

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