selling directly to investors with occupied rental

4 Replies

We own a rental (single family home) in Clovis CA and have never had a problem having it occupied. The current tenant pays above market (approx 15% more) and has communicated they want to live in the house for several years. We need to sale in order to have the cash to put down on a new primary in southern california for our expanding family.

Is it harder to sell a rental with tenant? Would it be smarter to market the property directly to investors vs the general public via a local real estate broker? 

What are your thoughts/experiences?

Thanks.

An owner occupant is going to be more likely to pay a premium for an SFR than a would be investor. So depending on the current lease agreement it likely makes more sense to give the tenant proper notice to vacate, potentially stage it, and sell.

If you're cash flow positive on this property then perhaps you should look for other avenues of achieving the purchase of your new primary? This property is an appreciating asset and your primary is arguably a liability. If you were to calculate the return on this investment over 10 years and compare that to the potential return achieved by selling it to finance your primary, then I would imagine the opportunity cost would cause to you drink hard liquor straight up.

If you have equity built up then perhaps cash out refinance to get the down for the primary? Being sure to keep positive cash flow in the investment property.

Ryanb, my lease runs to FEB 2016 at which time I will not renew it and put the rental on the market. I was wondering If selling it sooner would be possible if I specifically targeted investors. The only reason for sooner than later is to free up cash to move school districts before registration next February. 

 I'm achieving a 5% return annually after expenses and not including whatever appreciation has or will occur. I have owned the property since 2008. I lived in it for 4 years then moved 4 hours away. I have hoa and property management expenses. It's a newer home so I haven't had many repair expenses. 

A cash out refi is definitely an option, although I would need a sizeable chunk of the equity for a down payment on a new primary. My rental is worth half the price of the types of homes we would be looking to purchase. Again the main motivation for moving is relocating into a better school district.

My current primary could be converted into a rental, but I would not be cash flow positive on it and the bank's required reserves for a new loan would be quite high for my current situation.

Your response makes a lot of sense, so I'll have to recheck my numbers and see if I have assessed it correctly. There are other options that don't require me to sell the rental immediately and I also plan to look at these.

Thanks again.

I imagine you have offerred the house for sale to the curret tenant?  If not you should give that a try.  You not not have to pay commission on it if they bought it.  

Thanks Barbara, yes I have. Before the lease renewal at the beginning of 2015. The tenant is not interested in purchasing, but wanted to stay at the house and offered a slight increase in rent. I couldn't say no to that, especially with appreciating home values in the area. 

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