Buying or Selling a Tenanted House
Investing in a rental property can be very appealing, however, many people think you cannot buy or sell a home that already has a tenant. It is absolutely possible to sell/buy a home with an existing tenant; however, there are considerations you must be aware of.
You MUST respect a tenant’s lease. You cannot kick out a tenant with a current lease before the lease expires, even if you need the home for your own personal use. You must give the appropriate notice (indicated either by the Residential Tenancies Act, or the lease agreement) before the end of the lease that you are not renewing the lease with that tenant.
If the tenant is on a month-to-month, YOU may move in. The required notice (60 days before the beginning of the month) must be given and YOU, or a family member, must move in. You cannot kick the tenant out to rent to another tenant.
Know the Residential Tenancies Act! The Residential Tenancies Act protects tenants from landlords arbitrarily, and wrongfully evicting tenants so they can sell, or for any reason. I strongly urge sellers to study The Act and follow the rules set out for this and any action they take regarding a rental property.
Tenanted homes may be harder to sell. So…you may be wise to NOT sign a new lease, or discontinue renting your space. You are required by law to give the tenant 24 hours notice for all showings. This makes it harder for agents and buyers to schedule last minute showings, giving your competition the upper hand.
By having your space vacant, (no tenants) you are opening your buyer pool to not only investors, but also buyers who want the home for their personal needs – which, naturally is a far larger group. Naturally, having a vacant space is appealing to many buyers. It also allows you to clean and stage the property properly, which leads to the next point…..
Tenanted homes may also be harder to market. The tenant has rights and may restrict photos, staging, cleaning of a home. Uncooperative tenants, clutter, smells, and bad staging can severely hurt your chances of selling. Many buyers cannot see past how a home looks. Some tenanted homes can stay on the market for months until the tenant vacated the home can be cleaned/staged properly.
That being said….
You have the right to show the home to potential buyers. Provided you give the appropriate notice, a tenant cannot restrict showings or keep you from selling the home, despite their objections to the inconvenience. Still, you should always be respectful to your tenants. A cooperative tenant can greatly increase your chances of making a good impression and sell quicker.
If you are thinking of selling in the future, increase your rents every year. Potential investors will be more attracted to homes that command a higher rent. If you keep the rent steady, when other rentals are increasing, it will appear that the home is not a good investment, which translates into a lower selling price.
If you're thinking of buying or selling an income property in the future, give me a call @ 416-450-4503 to make sure you are working with
an agent that understands all the facets of buying or selling a tenanted property. Or, fill out the form below with your questions