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Selling aninvestment property while your tenants are still living in there often makesfinancial sense for investors.  Timing your market move to ensure you areselling at the right time is important, but also having the consistency of therental income right up until you sell the property, can make a big differenceto your financial stability, especially if you need to make home loanrepayments.

Additionally, other investors often prefer topurchase a property that has reliable tenants in situ and in some cases canhelp push the sale over the line.  

However, having tenants in your property adds alevel of complication.  In many cases tenants facing the sale of their‘home’ are likely to not be very happy.  They have to find and move into anew place which is both time consuming and costly. They need to search for anew property – and this can take ages, pay for removalists, cleaners, utilityconnections and find the bond for their new place.  Tenants can expect topay $2000 - $3000 which is a lot of money! And a lot of reason not to be veryhappy.

How can you keep your tenants happy and sellyour property at the same time?

1.   Open Communication with your tenants

Open and earlycommunication is key.  It’s important that you let you tenants know youare going to sell the property BEFORE you put the property on the market. Manytenants love their 'home' and in many cases if they are in a financial positionto do so, may like to buy your property. So ring the tenants first and offerthem the opportunity to purchase it. Keep in mind if the first time they hearabout the sale is when the signboard is going up, you’ll find they may not bethat willing to work with you to help you sell your property – and you need themon side.

Additionally, in many states and territories youneed to abide by legislative requirements and notice periods and be reasonableabout the number of inspections that are held each week.  In some statessuch as NSW, if you don’t let your tenants know that you are planning onselling your property when they sign the lease, if you go to sell they haveright to give notice to vacate the property whether they are on a lease or not.Make sure you talk to your property manager about your specific state andterritory legislation.

2.   Open homes and inspections

If the propertyhas tenants, you have less control over how well the property will be presentedto potential buyers.  Most tenants will do the right thing and ensure theproperty is tidy and in a reasonable state for inspections, however overflowinggarbage, a smelly bedroom or an unmade bed can have a negative impression onbuyers.  If the property is presented very poorly this can directly affectthe sales price.

Again open communication is key here.  Inmost states and territories, written notice must be provided to the tenants atleast 24 hours before the property will be shown to a potential buyer.  Tohelp ease tension over last minute requests, it is a good idea to organise 2 settimes per week for open home viewings as this gives your tenants enough time totidy up the property and make plans if possible to be out of thepremises.  There is no official requirement for tenants to be out of theproperty but by giving them notice they are often happy to go out for theduration of the inspections.

3.   Offer incentives to your tenants

Having incomecoming in from your tenants during the sale period is important to manyinvestors and they find offering an incentive to their tenants can make all thedifference to how willing they are keep the property clean and tidy and vacantfor inspections.  Here are some incentives you could offer your tenantsduring the sales period:

·        Taking $50-$100 off the weeklyrent in return for the tenants presenting the property as nicely as possiblefor viewings and staying away during open homes

·        Consider offering a week’s freewhen the property sells to help them pay for the relocation costs

·        A small fee for open forinspections if they tidy and prepare the property for sale

·        A reference for their futurerental property applications

4.   Offer the chance to break the lease

If your tenantsare really unhappy it may be better to offer them an early release from thetenancy. While you will miss out on the rental income during the sales process,having them out of the property offers benefits too.  You can get into theproperty easily and fix anything that needs to be repaired, things that youcouldn’t do while the tenants were living there.  Do the walls need a repaint,how is the carpet looking, does the bathroom or kitchen need a refresh? Thesechanges can often bring in more money when you sell than if you had the tenantin place collecting rent.  Plus, you don’t have to worry about access andconsidering them at open inspections.

A few points to consider though – if they are ona fixed term lease you cannot ask them to leave unless they choose to break thelease themselves.  If you can’t wait until the end of the lease to sell,then your property manager can try to negotiate with them and perhaps offer anincentive for them to break the lease.

If your tenant is still living in your propertypast the end date of your fixed term lease they are protected under what iscalled a Continuing Agreement Tenancy.  You can terminate this lease ifyou give them 90 day’s notice, or advise them that you plan on selling theproperty and give them 30 day’s notice when the sales contract is signed. Ofcourse you need to make sure the tenants are out of the property beforesettlement date.

5.   Pay for a clean up

A well-presentedproperty has a direct impact on how many people are interested in yourproperty, how quickly it sells and how much it sells for.  Relying on yourtenants to prepare your property for sale is a bad idea.  Hire a cleaner(and gardener if you have and outside space) to do a thorough clean and gardentidy up before you take any photos or open the property for inspections. First impressions matter so spending some money on making your property lookits best can really pay off, plus the cost of this is tax deductable and yourtenants will be happier living in a fresh, clean and tidy home.

*article credit:Sarah Lefebvre, 2018