Owning a rental property can be a nice additional source of income every month. But after years of dealing with renters, maintenance, and vacancies, sometimes selling sounds like an attractive option.
Or maybe you’re interested in selling because the real estate market is hot right now in Memphis, and think now would be a good time to finally part ways with your rental property.
Unless you’re lucky and your current lease agreement is about to end, you will need to answer the question, “can I sell my rental property with tenants in it”?
Well, you came to the right place to help you answer all your questions on how to sell your property with tenants.
Can I Sell My Rental Property With Tenants In It?
Selling a Property with Tenants In It
Let’s answer that first burning question, “can I sell my rental property with tenants in it?” Yes, you can if you find a buyer willing to take on your old tenants. But you may not have to depending on what lease agreement you currently have. Typically there are two types of rental contracts.
- Month to Month
- Fixed Term Lease
Month to Month
If your tenants rent on a monthly basis, it won’t be a problem to sell the property while it’s being occupied, that is as long as you give the proper notice.
A proper notice involves delivering or mailing a letter to your renter 30 days before you want them to be out, usually in line with the rent due date. You do not need to give a reason to terminate the month-to-month lease agreement, which is why there is a ‘no cause’ termination. This is one of the main benefits of having a month-to-month lease agreement.
Each state has different notice requirements, but Tennessee’s landlord laws require 30 days notice for a month to month lease.
Fixed Term Lease
If you and your tenant have agreed to a fixed-term lease, your options will be a little bit more complicated. When selling an occupied property with a fixed-term lease, it will require more involvement and isn’t easily terminated because ownership changes hands.
In Tennessee, you are required to give notice if your tenant’s fixed-term lease is coming to an end. But if your renter is still locked in for another eight months, you will need to look over your options- which will be covered below- for handling tenants with a fixed-term lease.
Dealing with Tenants Before Selling the Property
Dealing with your tenants should be relatively easy; make sure you give them the proper notice and give them as much information as you can. Renters will be more apt to cooperate if you are more forthcoming. Dealing with your month-to-month tenants will be easier than your fixed term tenant, but there are ways to make the selling process easier for both parties. Below are the ways to handle selling a house with tenants.
Dealing with a Tenant in a Month-to-Month Lease
Dealing with your tenants if you’re in a month-to-month lease agreement will be pretty easy for you to sell the property. Make sure to give them 30 days’ notice of moving out, and within those thirty days of the termination of the lease agreement, you (the landlord) will only need to give 24 hours’ notice of showing the property. But this must be specified in your lease agreement, though, so make sure you confirm that is noted.
Besides that, you should let your tenants know that they will be getting 24 hours notice before showing the home and how that notice will be delivered (phone call, text, email). You should also let them know what hours you intend to show the property, for example, between 9:00 am and 6:00 pm. Lastly, you can make some notes about cleanliness, requesting that no dirty dishes are in the sink or that the home is tidy for visitors. Don’t forget to add that if there are any pets that they are crated.
Dealing with a Tenant in a Fixed-Term Lease
Dealing with your tenants while they are in a fixed-term lease will be a bit harder for you to sell your property, but it is still possible to do. The key is to figure out your options. Here are five ways you can deal with a fixed-term lease while selling a house with tenants.
- Just wait until the lease expires
Waiting would be the easiest option for a fixed-term lease; this respects the contract by waiting until the lease expires and your renter has to move out. But, if the tenant violated any lease terms, you will be able to terminate the lease sooner with proper notice.
Reasons for a lease termination would include:
- Failing to pay monthly rent
- Engaging in illegal activities on the property
- Subleasing, if not allowed
- Violating a no-pet policy
- Tenant destroyed rental property
- Being a nuisance to neighbors
- Falsifying details on the rental application
There are few key benefits to waiting until the renters have moved out to list a rental property. One reason is that you will have the opportunity to make any repairs, renovations, or improvements without disturbing the tenants. It will also be easier to stage, prep, and show the house.
- Sell the rental property to an investor with an active lease
Something to remember is that a fixed lease doesn’t automatically terminate when a home is sold or by mere transferring of ownership. In Tennessee, the law requires that the lease and security deposit be transferred with the property when the new owner becomes the new landlord. The landlord must also notify the tenants in writing that the new owner is now in possession of their deposit and lease agreement.
Selling a house with tenants is possible, but you will need to find a buyer who accepts and understands that a tenant lives in the property.
In this case, selling to an investor would be your best option, as it is important that the new landlord lets the renter live in the home until the fixed-term lease is up. One such investor who purchases rental properties in the Memphis area is Fair Cash Deal.
Investors like Fair Cash Deal look at this as a selling point. A good reliable tenant is a benefit to have, and they instantly see a positive rate of return.
- Offer your tenant cash for keys
Suppose you’re in a situation where you have a qualified buyer lined up, and you need the property to be empty. In that case, you could always try to negotiate a settlement with your tenant to get them to vacate the property before the lease expires. This is commonly known as “cash for keys,” this strategy can be useful but also costly.
If you decide to look at this option, here are some scenarios and tips to determine what to offer.
- Cover their moving costs: To make up for the trouble of an early relocation, you may want to consider offering some money to help cover their moving expenses.
- Make up the difference: If your tenant only has a few months left, offer to pay the difference of a comparable rental property in the area. If rent is more elsewhere than what you’ve been charging them, offer to pay the difference times the number of months left on the lease.
- Pay their security deposit: Offer to pay for half of what it would take for your tenant to move into a new place. Usually, that is the first-month rent and security deposit.
- Offer whatever you can afford: Ultimately, you should offer the amount you have available. You will need to weigh what you stand to gain by getting the tenants out early vs. your available financial resources.
Something to keep in mind when offering ‘cash for keys’, your tenant is under no obligation to agree to your terms or accept your offer. So, unfortunately, that may put you back at square one, which means you will need to wait until the end of the lease to sell the property.
- Sell the home to your tenant
Another option and easy way to sell a property with tenants is to offer to sell the property to them. They are already familiar with the home and all it offers, so they may be inserted in buying it. The only thing is your tenant would need to be financially ready to purchase the property. And if you wanted to sell quickly, they may not be able to line up a home loan for several weeks.
- Enforce an early termination clause in the lease agreement
When selling a home with tenants, always double-check your lease agreement; it may contain an early termination clause, which can be used to handle this particular situation.
Some clauses say that the lease will terminate in 30,60 or 90 days after closing on the property. The reasoning can be anything you want, as long as it is for a good reason, and both parties agreed to it in the initial lease agreement.
Rental Property Tenants Rights
A tenant has rights just as much as you do when it comes to leasing a property. Some of those rights have been touched on a few times in this article- like giving your tenant adequate notice of terminating the lease and letting them know when you intend to show the property.
Something else to remember when your tenant moves out is that you must return their security deposit or an itemized list of deductions within 30 days of the tenant vacating the property per Tennesee law.
It would be beneficial to work with an attorney familiar with local regulations if there is any confusion about a landlord selling a house and tenant rights.
The important thing to remember is to keep the lines of communication open, so your tenants know what to expect. Be upfront about selling your property. Meet with your tenants and be forthcoming about your efforts to sell the home and how it could impact them. Explaining the process of how you plan to show the property and acknowledging that it could be an inconvenience but that you’ll try to do everything possible to avoid that. Showing care and concern will go a long way and make the transaction a smoother process.
Remember, legally, you need to give your tenants 24hrs notice when scheduling a showing. Expressing that to your tenant will put them at ease that a realtor isn’t going to show up and enter the property unannounced. Though this is a rental property to you, to your tenants, this is their home.
Something else to avoid doing is putting a sign in the yard that would alert neighbors or the general public. This could be seen as an opportunity for nosy neighbors or people passing by to request a showing. Explain to your tenants that you will give them prior notice and that if anyone shows up, they should never let them in.
Tennessee law requires that the deposit and lease agreement be transferred with the property to the new owner. After closing, make sure to draft a letter informing the tenant of the sale and directing them to send their next rental payment to the new landlord. A more personal approach would be to take the buyer to the home and introduce them to the tenant. Either way, remember to share with the tenant who the new owner will be and where they need to send their rental payments.
Hopefully, this is a situation you’re currently not dealing with, unfortunately, though troublesome tenants are out there. The positive side to having troublesome tenants is that if the occupant is violating any terms of the lease, you will be able to evict them before their fixed-term lease is up. But if a tenant destroys rental property, you could be in some trouble, especially if you’re trying to sell quickly.
Tennessee eviction laws require notice to be given if the eviction is based on non-payment of rent or material non-compliance with the rental agreement. Landlords must provide tenants with a 14-day notice to pay or quit (move out). The tenant can pay during this time or attempt to pay whatever costs to cover necessary repairs that breached the lease agreement.
If the eviction is due to illegal activity or because of a material health/safety breach, the landlord must provide the tenant with a 3-day notice to quit-move out.
You may also need to evict your tenant if they stay past their rental termination date. Legally, you can begin the eviction process without having to provide additional notice.
Usually, troublesome tenants will also make it challenging to track them down, especially if they owe you money. This could put you in a tough position if the tenant destroyed the rental property. You will be able to account for the damage and deduct that from their security deposit, but in some cases, that isn’t enough to cover everything. This would be another instance when selling to an investor would be helpful. Investors like Fair Cash Deal actually buy properties in as-is condition. So you wouldn’t have to deal with the cost of fixing things left by your troublesome tenant.
The Selling Process
Selling a rental property can get complicated, which is why you should work with real estate professionals who have experience with these types of transactions. Selling your property to an investor like Fair Cash Deal would make for a smoother sale because you wouldn’t have to conduct multiple showings, and they would be willing to take on your current fixed-term tenant. Fair Cash Deal is also very familiar with these types of transactions- buying rental properties.
If you were to sell to Fair Cash Deal, the process would look something like this:
- Contact Fair Cash Deal to request and offer and share information about the property.
- Send photos of the home or set up a time to walk through the property with a member from Fair Cash Deal.
- Once they view the property or pictures, they will present you with a fair cash offer.
- Figure out the closing date, either after your tenant’s lease is up or while the tenant still occupies the property.
The process is relatively simple because you don’t have to wait for your tenants to move out. Also, you won’t need to make any repairs or renovations since Fair Cash Deal would buy the property as-is. This would save you thousands of dollars on repairs and renovations, as well as the time it would take to complete all those repairs before listing the rental property.
Furthermore, since you would be selling directly to them, you wouldn’t need to hire a real estate agent to sell a house with tenants. This would save you the cost of realtor commissions, which are 5-6% of the sale price. Not to mention Fair Cash Deal will also pay closing costs. It sounds like an ideal solution since you’re selling a property with tenants.
However, you end up selling your rental property, just make sure to follow the terms of the lease so that way you are doing everything within your legal rights. If there are any gray areas, always seek the advice of a real estate attorney; they can look over your lease agreement and help you understand your rights, the tenant’s rights, and if there are any legal consequences to selling a property with tenants.
Just remember selling a property in Memphis with or without tenants can be tricky and if you’re looking for a quick way to sell the home, sell to Fair Cash Deal. You can even get started today by getting a cash offer for your rental property by visiting their website.