selling a rental property

weedyacresJanuary 25, 2010

We've got 3 rental properties (all single-family starter homes) that are in a state we moved from 3 years ago. We'd like to sell them. All are rented, with reasonably stable renters, none of whom are in a position to buy them. None of them is well staged to sell (they're rentals and show accordingly).

Should we go ahead and put them on the market while occupied? Or should we boot out the renters after sufficient notice, spruce up and stage the homes? It's a trade-off between looking nice (and hopefully selling faster/for more) and collecting rent, and I'm not sure which is the smarter decision.

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larke

I would think that if there are leases for the renters, they would have to be honored for the time allotted.

    Bookmark   January 25, 2010 at 4:00PM
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sweet_tea

I'd have an agent or friend tour all 3 homes. If any are decent enough to be shown while the renters are still there - then do that if possible (is it in the lease?). If the renters have crappy stuff or are unorganized, then wait until lease expires and have renters move out and then list the property as vacant. I don't think staging will be worth it for a starter home. Can you sell one at a time this way, so you are not stuck with 3 vacancies at once. This might force you to take a low ball offer.

    Bookmark   January 25, 2010 at 4:15PM
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creek_side

Your renters may not be too cooperative. There are lots of subtle ways they can sink your potential sales. For one thing, they will resent people touring their homes for your convenience. It doesn't matter that you are they owner, they are the ones living there.

    Bookmark   January 25, 2010 at 4:23PM
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weedyacres

We would, of course, abide by the terms of the leases, and not kick anyone out before we're allowed. We're looking at doing this over the next year or two, and can do one at a time. We're not desperate to sell, but I worry about having a vacant home sitting on the market for months (??).

    Bookmark   January 25, 2010 at 4:35PM
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adellabedella_usa

I think it's better to not have a renter in there unless you have someone you can trust to keep the house looking nice. Dh and I tried to look at a rental one time. It was originally a rent to own situation, but the renter couldn't afford the house. The renter then proceeded to make a jerk of herself so the place looked bad. The agent didn't bother to take us through, but I didn't highly of the renter and her kids standing outside staring at us.

    Bookmark   January 25, 2010 at 4:50PM
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melle_sacto

I remember looking at a home w/renters in it; this was over eight years ago. One of the bedrooms reeked of cigarettes and the house was disorderly. I had a sense they weren't excited about buyers coming through. We didn't offer on the house b/c we were first-timers and the cigarette smell was a huge concern.

Unless you're renters are cooperative and clean, you're probably better off selling once they have moved out.

    Bookmark   January 26, 2010 at 6:08AM
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Billl

Could you market them as rental properties with stable tenants? Sort of a turnkey way to get into the property business?

    Bookmark   January 26, 2010 at 8:31AM
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chrisk327

Unless you think someone would be interested in buying them to rent them I would think you should sell it when it is vacent.

You do have the luxuary that you have 3 and can sell them one at a time, so it isn't an all or nothing proposition on the rental income.

    Bookmark   January 26, 2010 at 1:04PM
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weedyacres

Sounds pretty unanimous...thanks everyone for your input.

Billl: We'd have to raise the rent a couple hundred bucks on each to make it attractive to another investor. I think the better bet would be to find a first time homeowner.

I suggested to my DH last night that he give notice to tenant #1 (who's rented for 10 years) that he needs to be out by June 30, and we can go up and spend a week fixing it up and put it on the market in early July. DH has been trying to get the guy to buy it from him for a couple years, because his payment would be less than his rent, but the tenant has dragged his feet and not even gone to talk to a loan officer about the numbers...he likes being able to call the landlord when something breaks. Perhaps official notice to vacate would spur him on to at least talk to a bank. If not, we'll sell. DH is still digesting the option....

    Bookmark   January 27, 2010 at 8:53PM
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sweet_tea

Don't be surprised if the renter moves out in April or May. When you give them that much notice, it spurs them to start looking at places pretty quickly. And he might find something sooner and grab it while it is still available for rent.

    Bookmark   January 28, 2010 at 10:06AM
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dreamgarden

"Your renters may not be too cooperative. There are lots of subtle ways they can sink your potential sales. For one thing, they will resent people touring their homes for your convenience. It doesn't matter that you are they owner, they are the ones living there."

You right about that. We looked at a house for sale that had the renters living in it. They weren't untidy, but they had a number of cats and the place smelled like it. My spouse likes to ride a mountain bike. They told him he would be fine riding the bike around so long as he wore orange (hunters). They also casually mentioned a buried oil tank and flood issues. The real estate agent didn't seem to pleased.

We could tell they didn't want to move. I asked why they didn't buy the place themselves and they said they couldn't afford it.

I personally wouldn't try to sell a house with renters. I'd give them the necessary notice and see what shape the house is in after they move out. Especially if they feel they are being given the heave ho. If they don't own the house in the first place they probably won't care what shape they leave it in. Many people who rent live paycheck to paycheck. If you have to sue for damages, you won't have much luck getting money out of a stone.

    Bookmark   January 28, 2010 at 7:21PM
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swampwiz

I just canceled a purchase on a home that used to be a rental (it was vacated while it was for sale.) Sure enough, I got my money's worth on the home inspection as the house was more of a dog house (termite and other insect damage, sloppy plumbing and electrical work, etc., etc.

I have a feeling that what happens is when a house is beat up, an investor will buy it and fix it up and try to sell it. Then after it doesn't sell, the investor decides to rent it out for a while. The reason it doesn't sell it that there are still problems that the seller knows about and is hoping that the greater fool will buy it.

    Bookmark   January 29, 2010 at 11:05PM
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terrene

I agree with the prevailing opinion on this thread, that the tenants should vacate before selling the house. I have a rental home and will sell it empty. This will give me the opportunity to clean, paint and carpet, make repairs, and install a new septic system (which will likely be necessary at the time of sale).

There have been several turnovers in this house, and the tenants have invariably left it filthy. One set of tenants did some minor damage, which the security deposit did not totally cover. The current tenants have painted some of the walls green! Not only do those look terrible to everyone else except the current tenants, but I agree with the posters above that tenants are unlikely to be cooperative with brokers showing the house.

    Bookmark   January 31, 2010 at 9:44AM
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weedyacres

Here's an update, for anyone who might be interested. We finally sold the first house last week...to the tenants. These are the 10-year retired couple where the husband was paranoid of buying, even with us telling them they had to move out in June. The wife finally stepped in (after the $8000 tax credit expired), lit a (relative) fire under him, and they started moving toward the purchase. After a jillion little things that delayed, we did finally close last week, for about 5% under what we expect we would have gotten in the market, (but we would have had to spend about that same amount doing fixes and clean-up).

House #2 just lost its tenant, but it's an impossible time for us to get up there and clean/fix up, plus we're heading into slow/cold season in Iowa, so we re-leased it to a new tenant that says he's interested in buying down the road. We'll see. If he doesn't, we may try house #3 next summer.

    Bookmark   November 23, 2010 at 11:11PM
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