Selling A Rental With Existing Tenants

9 Replies

A few weeks ago, I was eager to begin the process of renting to an acquaintance who requested to rent my parent's property as it would have been additional income for my parent as well as cover expenses (no mortgage).  The tenant admitted that his credit wasn't good, but I was going to give him a chance anyway. The house is nice, but in a low value area. I changed my mind about renting after receiving a caveat from a property inspector who inspected previous homes rented by this potential tenant, and described him as being "dirty". My problem is that this acquaintance continues to beg to rent the property even AFTER a recent shooting sent a car into the property damaging a railing and step. I still want to sell as I am fearful of having to constantly visit the area. Also, I'm told that we will have to pay a tax if we rent and then decide to sell without living in the home for two years.  The home may take a while to sell, so renting it would pay taxes and keep the home from looking vacant.  This renter is persistent. He's self employed with a business in the area. He's not afraid to live there, he knows the neighbors.  Can you rent out your home and place it up for sale at the same time? Do investors want houses that are already rented out to tenants? 

@Lynn B.   Yes you can sell a property with existing tenants. As an investor looking at properties it varies whether or not I want a tenant already in place. If the unit needs a lot of work I tend to prefer to have it vacant so that I can get in and make repairs right away. However, if the property is in good shape I would like to see an existing tenant in place, preferably a long term tenant.

You have several issues to manage. First, the prospective tenant. He is persistent and potentially a pest. He is also independently described as living  in dirty conditions in a series of properties and is known for this. All of these characteristics rule him out of the tenant pool in my view. There are better tenants and if you decide to go this route you should find one by going out and marketing the property properly and seeking tenant applications. But before doing so you have to face the next issue which is that you may want to sell the property but may have to do work to bring it up to standard. The last poster puts this clearly, you may need to have the property vacant to do this work depending on the extent. Do too much work while it is occupied and you could be held to have interfered with the reasonable enjoyment of the tenant.

Finally, sale. Is it possible to sell now as is? How much would repairs cost? Would they bring a corresponding appreciation in price? Just how long do you want to hold onto this property? You seem undecided but you also seem like an accidental landlord. Unless you have confidence in your ability to oversee repairs I would seriously investigate sale now. Have you consulted with realtors as to current value and repaired value? Time to have a substantive discussion with your parents about what they most want to happen and what is practical in the circumstances.

Ditto to what @Stephen E. says: Don't rent to a pest, get a CMA from a realtor, talk with parents about what they want. I wouldn't own a rental in an area I was opposed to/scared to even go to! Sell, sell, sell!

Thanks everyone! I just put the house up for sale last week. No inquiries yet. I'm a little impatient. lol

@Lynn B.  

In my experience most SFHs are sold to owner occupants not LLs. Therefore they sell better, are cleaner, and smell better without tenants. So for SFH leave vacant, possibly staging.

For multi-units the story is the opposite.  Most of the buyers will be investors and not somebody looking to live there.  The investors buyers want to see the places rented, generating income.  I see totally vacant multis for sale and one of the first things I think is these places are hard to rent, why else would the owner purposely leave them vacant despite their phony rationales to the contrary.

Originally posted by @Lynn B. :

Thanks everyone! I just put the house up for sale last week. No inquiries yet. I'm a little impatient. lol

 how the curb appeal? Did you get the accident damage taken care of by a contractor? If it looks scary on the outside, you might not get alot of people wanting to even go inside. A few low cost investments is maybe paying a landscaper to clean up the outside a bit or getting those obvious repairs from car damage repaired to make it look like its possible the inside has been cared for. Dont bother making any other big repairs. this is just to improve curb appeal and advertising when people want to visit

Curb appeal is the first thing to take care of....a couple of flowers, pressure washing any stained or dirty concrete, cleaning windows, taking care of damages, etc.  

Also, would recommend getting a termite inspection report to see what needs to be would have to do this anyway if you plan on selling.  It is worth the cost.

If you rent to someone who has history of being dirty, just go by where he lives and you will see what your rental will look like!  I, personally, would NOT rent to this guy...

If you're afraid to even go in the area, then definitely sell and maybe do a 1031 exchange into a rental in a nicer area.  :0)  It's a good time with interest so low.  That is what I did years ago and I'm glad I did.

"a property inspector who inspected previous homes rented by this potential tenant, and described him as being "dirty"."  How does this even happen?  Is this a Pennsylvania thing?

Yes, you can sell a rented house. Is it the best idea, only you can judge.  However getting the right renter is key. First,   I would judge dirty for myself. Then I would find out why he is so anxious. Keep in mind it is best to have a clean and neat tenant in a for sale house and someone who has a short term need is I think better then a long term tenant that you may need to get out on short notice. 

If the area  has a potential safety issue have you addressed the break in potential if it is not occupied?   Some tips if you decide to leave unoccupied make sure it is  secure and perhaps alarm the house and ask a trusted neighbor to use the driveway.  Unoccupied homes in such areas can be  targets for break ins.

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