Who is buying these days in the West Valley?

Question

We have a SFR in the west valley (South Summerlin off Desert Inn) that we are thinking of putting up for sale this spring.  We currently have a long term tenant who has done us a good turn over the past few years and has maintained the property impeccably.   The property is a standard 3 bedroom of about 1,700 square feet with a nice backyard pool.   The tenant is month to month but we are thinking of entering into a lease (6 to 12 months) to give him some breathing room before having to move.  Given the make-up of buyers out there these days (i.e., investors who may be interested in tenanted property versus retail purchasers who presumably want to move in asap), what impact is selling a tenanted property  likely to have on the price?     Any thoughts, suggestions, comments, flames from the local guys much appreciated.

Bill B. · Answer

If you give them a 6 month lease the new buyers have to honor that. So you’ve just eliminated 80-90% of the buyers, owner occupants that need to move in within 60 days. So I would guess you’re going to lose $10-$20k on an average Las Vegas home, maybe double that? Maybe just keep them MTM and write them a check for $10k if you’re willing to pay that much to thank them. You’ll probably end up with more money in your pocket than selling with a lease.

Stephen DeThample · Answer

I agree, the biggest reason house sit on the market and get less offers and $$$ is tenant showing issues. When it’s vacant buyers are more comfortable and can see it at their convenience. Huge difference and will definitely effect price.

Phillip Dwyer · Answer

Bill's correct.  The buyer would have to honor the terms of the lease, so an extension has the potential to kick some buyers out of the game.  It's not just the lease that's the issue here though.  Tenants have zero incentive to keep the house nice for showings, be available for all showings, answer the phone, flush the toilets, ect.  Sure this is a hot market, but these things still impact the sale.

Phillip Dwyer · Answer

@Darius Ogloza. I usually advise against selling with a tenant in place if you have a choice.  In the current market, it may not impact you as much.  However, you will be wiping out a huge percentage of the buying pool.  This will especially be the case if you lock in the tenant in a longer term lease versus staying on month-to-month.  Most of the time the leases will be under market, which could impact your ability to get a higher price.  Some investors prefer to place their own tenants.  Some owner-occupier buyers could still purchase the unit if the tenant were on monthly terms versus a longer lease.  Instead of offering the tenant the longer lease, why not try to give them the opportunity to buy it first?  Otherwise, I'd either give them notice to vacate or keep them on month-to-month.

Brian Walters · Answer

Having them on anything other than a month to month lease limits your buyers (as others have noted) but also could even turn away some investors.  Any investor that purchases has to either abide by the lease or buy them out rather than set their own terms.  If they are great tenants you could highly recommend them should the buyer be an investor and let them work out a new lease with them, under the investors terms.

Joey Smadar · Answer

@Darius Ogloza, This is a great question, after dealing with a big amount of transactions with tenant's in place, i would recommend to sign a lease of 6 months with a higher rent and keep in mind that sometimes the Buyer can ask to give the tenant a 30 day notice after buying property so in reality, the tenants are going to be in a situation that they might need to leave earlier then expected. I live in that same area of the Lakes (Desert Inn and Fort Apache) and that is one of the best areas of Vegas so i don't see a reason why this should make a big issue for your sell.

I would inform the tenants that an early termination can happen by the new landlord.

Who is buying these days in the West Valley?

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