Any advice on selling the home with tenants already there?

Question

We may (not fully sure) sell our duplex in the next couple of months. However, we have a tenant in there and are looking for another one in the meantime for the other unit. For those of you who have sold a property with tenants already in place, have you run into any issues during the sale? One of my biggest concerns is making sure the tenants we have now aren’t forced to move out when the property changes hands.

Drew Sygit · Answer

Do NOT allow showings until an accepted offer!

You want to keep showings to a minimum to avoid upsetting the tenants.

Experienced investors know that they only need to see the interior when they do their inspection.

We once had an owner hire a owner-occupied experience-only agent who wanted to FORCE the tenants (duplex) to allow an open house!

Your ads should be targeting other investors as no buyer will be able to owner-occupy it.So, make sure the ads talk about ROI, Cash-on-Cash, etc.

Bill B. · Answer

You will get at least 10% less if it’s fully occupied. You can only sell to an investor who wants a deal. Keep one empty for an owner occupant.  They’ll need to move within 60 days  and they are your preferred buyer.  Ps. This ignores the buyer/landlords that don’t want your tenant they didn’t screen.

Jennie Ballard · Answer

You need to check your state laws. In Texas, the lease continues as written. A tenant in good standing can only be forced out if new owner occupies their unit as primary residence. You will need to have rent and deposit history availble for review.

Michael Eskenasy · Answer

If you may sell in the next couple of months, I’d think carefully before filling that vacant unit.

An occupied duplex and a duplex with one unit available attract two different buyer pools. A fully occupied property can be attractive to an investor, but keeping one unit vacant can make it much more attractive to an owner-occupant or house hacker. Depending on your market, that flexibility may be worth more than a few months of rent.

For the existing tenant, start with the lease and your state/local law. In many situations, selling the property does not simply erase a fixed-term lease—the buyer takes the property subject to existing tenancy obligations—but the exact rules vary by jurisdiction and lease terms.

If you sell occupied, get your paperwork extremely clean before listing: signed lease and amendments, rent ledger, security-deposit records, payment history, notices, maintenance history, and tenant contact information. Buyers will underwrite the tenancy just like they underwrite the building.

I’d also communicate with the tenant early rather than surprising them with showings and a FOR SALE sign. A cooperative tenant can make an occupied sale dramatically easier.

The bigger decision here may actually be the empty unit. If you’re genuinely leaning toward selling soon, I wouldn’t automatically trade away your flexibility just to collect another couple months of rent.

Crystal Smith · Answer

The issues we have run into with tenant's in place is buyer access to the unit(s) and/or the tenant unit does not show well. So if you can afford it- have a least one unit vacant for showings and only show the tenant unit once the property is under contract.

Regarding your concern about a tenant being forced to move- When you sell the property the new owner is taking the property subject to any leases that are in place even if it's month to month lease. It's up to the new owner what he will do regarding renewing those leases.

Rick Albert · Answer

If it is fully rented, then it comes down to numbers, not comps. No one will care if the duplex next door sold for $500,000 if the numbers only work at $400,000.

I've had much better luck selling duplexes when they were fully empty. I sold my last house hack with a tenant in the back unit and I got push back from buyers who wanted it for extended family.

Versus I bought a duplex out of state with a tenant and then sold the property 100% vacant a few months later (had problems getting it rented) and actually sold at a premium.

Diana Khan · Answer

@Mose Gebremeskel, since you’re still deciding whether to sell, I’d think carefully about how you lease the second unit right now. If you sign a new longer-term tenant, that could change the type of buyer the property appeals to and how much flexibility you have when you’re ready to list.

I’d also keep the lease, rent history, deposit records, and any tenant communication organized so a future buyer can clearly see how the property is being managed.

Since you’re using a mid-term rental strategy, that may give you a little more flexibility depending on your timing. I’d just make sure the leasing plan and the sale plan are working together.

Any advice on selling the home with tenants already there?

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