Selling Your Investment Property with a Lease in Place

Selling an investment property with a tenant in situ can be a complex process, but with careful management, it can be a successful transaction that benefits both the seller and the tenant. As a landlord, there are several things to consider when deciding to sell a property with a current lease.

The first step is determining whether the numbers make sense to the seller. We conduct a desktop analysis to get a sense of the market value of the property and the potential return on investment. The next step is to assess the tenant's willingness to cooperate.

Having a good relationship with the tenant is crucial in these situations. The property manager may be responsible for day-to-day management, but the agent handling the sale should take the lead in building a relationship with the tenant. This involves discovering what is happening in their lives and how a potential sale could benefit them. For instance, if the tenant is looking to move to a different area, they may be interested to terminate the lease early without any penalties, subject to negotiation of course, which paves the way for easy access for sale ready preparations to the property.

Further, if the tenant is uncooperative going to market with them there may be challenging. A poorly presented property with limited access will likely negatively impact the seller's outcome. This is why the best course of action may be to wait until the lease expires or work with the tenant to find a mutually beneficial solution. However, if the tenant is willing to cooperate, the next step is determining the best way to go to the market with the property. Its worth noting that if the lease is almost over it may be prudent to not renew leases so that a wider buying audience can consider the property. These are some of the conversations and scenarios that should be understood to make this sale a success for you.

In some cases, tenants may approach the seller with interest in purchasing the property. While this can be an attractive proposition for some sellers, it is often not in their best interests. The tenant may make an offer lower-than-market value, justified by the fact that an agent's selling fee would not apply. They may also expect a loyalty discount, especially if they have been a long-standing tenant who has looked after the property.

To ensure the seller gets a fair market value for their property, we recommend obtaining an independent appraisal and then asking the agent to negotiate with the tenant on their behalf. This approach removes the perceived discount of the agent not being involved and opens up the property to the broader market.

With over 4,000 properties under management, the experienced sales representatives and property managers at Xceed are well-placed to negotiate these situations fairly for each party.

Contact Sales Director Jonathan Marlow on 0413 833 332, or at jm@xceedre.com.au for further information.