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​During the Great Recession, investors scooped up cheap single family homes by the dozens and converted them into rental properties. Home values have appreciated significantly over the past couple of years leading many investors to cash out of these properties. But how can a landlord sell a leased house? How can you get the best value out of a tenant-occupied single family home?

01

Who Buys a Leased House?

The first step to sell a leased house is to understand who would be your potential buyer and then market to those segments. Your buyers are going to fall into two main categories:

Other Investors

If the property is maintaining a strong cash flow, marketing the tenant-occupied property to other investors will be your easiest marketing plan. Investors are often looking for other properties to increase their portfolio. You will need, however, verifiable proof that this property can cash flow.

Sellers

A problem that affects existing homeowners is how to buy another home while trying to sell their first home. The difficulty is qualifying for and managing two mortgages or getting a seller to accept an offer contingent on the sale of their home. Selling a leased home can relieve the stress. A bridge loan will be much easier to get if one of the homes is producing rental income.

02

How to Sell a Leased House – the Right Way

Like many things in life, there is the right way and the wrong way to do something. Here are a few tips to help make the sale of your tenant-occupied property a little smoother.

Be Honest with the Tenant

Most standard lease agreements clearly state that the lease will transfer with the property and that the tenant can remain in the house until the expiration of the lease. That being said, however, most tenants become very anxious when they hear their landlord is selling “their” house. Be honest with your tenants. Let them know that the lease agreement is still binding and that any future buyer must honor the lease.

Schedule Showings a Few Days Out

A key to a successful sale of a leased house is to keep your tenants as happy as possible. Nothing can kill a sale quicker than a disgruntled tenant. Show your tenants as much consideration as possible and always provide at least 24-hour’s notice for showings.

Ask Your Agent to Come Early

Tenants who are not thrilled with the idea that you’re selling “their” house may be less inclined to keep the house neat, clean and tidy. Having your agent arrive at a showing 15 minutes or more early will give them time to spot check the property. Rather than surprising the tenant, just schedule the showing with the tenant earlier than the showing with the potential buyer.

03

What Can You Do to Encourage the Sale of a Leased House?

Now that you have your target buyers, there are some steps that you can take that will help to encourage more buyers to buy your leased house.

Choose Your Marketing Time

A good time to market your rental property is approximately 4 months prior to the end of the lease. This will encourage homeowners to consider your property as well. A buyer will be more likely to put an offer on a house if they know they can get possession of it within 30 days.

Month-to-Month Tenants

If your tenants are nearing the end of their lease agreement, rather than renewing, put them on a month-to-month basis. If your buyers want to occupy the house, you can give your tenants their 30 notice and then focus on the closing. It is much easier to terminate a tenancy on a month-to-month basis. If your tenants are in a 12 month or longer lease agreement, you and your buyer will be bound by the terms of the lease.

Fix It Up

Homeowners will generally shy away from buying a rental. If you want to sell a leased house to a homeowner, then make sure that the property is well maintained. When repairs are needed, install upgraded equipment that would appeal to a homeowner rather than the cheapest items to satisfy a tenant.

It is not difficult to sell a leased house – if you know your market, prepare your tenants and maintain the property. If you follow these easy steps, the sale of your tenant-occupied rental will go much easier.

Be sure to check out our other articles in this series!

​Landlords, in Light of a Major Run-Up in Home Prices, Do You Have an End Game Plan?

Is Your Investment Property Rent Ready Or Sales Ready, and What’s the Difference

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