When talking with property investors who have held their properties for a long time, I noticed that they are out of touch with the market and are eager to know more about the sale process. Specifically, what is involved in selling a tenanted property.

Working with a lot of investors, I wanted to cover this topic to make vendor’s understanding and expectations clear when listing and selling their investment property.

One of the main decisions to make is whether to market the property with the tenant in it, or give a notice, wait for tenant to vacate and market the property when it’s empty.

Before making that decision, have a look through the list to find out which options would suit you best. Here are 7 things you might want to consider:

1.     Cashflow

Rental income might be paying for your mortgage, insurance, and other related costs. Do some calculations as to how long you will be able to survive if the property is vacant. Based on January REINZ report it takes a 37 median day to sell the property, so make sure you have at least 2-3 months of bills covered.

2.      How soon do you need to sell?

If you need a quick sale then it’s unlikely you will be able to remove tenants prior to marketing the property.

There are two types of notices that a landlord can issue to tenants. One is a 90 day notice to end tenancy- it requires tenants to move out within that timeframe. No advertising can be done during the 90 day notice. Another notice is the one notifying tenants that the property is being put on the market for sale and the property can be advertised straight away leaving the tenants in place.

The landlord cannot give both notices to the tenant- it is either one or the other. Breaching this will be an unlawful act with a fine of $1,800.

When trying to sell with tenants, you can encounter another delay with the settlement- when receiving a great offer with the highest purchase price but purchasers need to move into the property. Although you didn’t give 90 day notice to tenants before marketing the property, once the offer is unconditional, you would have to give 90 day notice so the property settles with vacant possession.

3.      Tidiness of the property

A consideration should be given to the tidiness of the property. A property’s overall appeal can be ruined when the house is cluttered, dirty or poorly ventilated. But having tenants who are maintaining the property well and who look after the house will make it look homely and liveable.

Not all purchasers think the same and can look past the mess and clutter in the house. When purchasers are buying a place to call their home, they want to have some sort of connection to the property, an emotional attachment, they would be trying to imagine themselves living there. The more appealing, less cluttered the house is, the better the results will be when you are selling. And this is probably the most cost-effective way of improving the look of your house- a deep clean can make an original classic home look 100% better.

4.      Furnished/unfurnished

Is your property better presented when tenants are living there, empty when tenants vacate, or staged. I’ll leave this one for you to decide. But remember the more presentable the house is, the more interest can be generated which can lead to a higher sale price.

With staging, you also have some options- physical staging when the property is vacant, partial staging or adding an extra touch to highlight the features of the house or virtual staging. Staging is a whole topic in itself, and something I might cover later on– so watch out for that!

5.      Repair/renovation or sell as is

This one is relevant when the property is an existing, older home. How much work needs to be done to achieve the best sale price?

This is where an appraisal from a salesperson comes handy and gives you an idea of what it is worth in the current market. You might spend money and time modernising the house but it would not double your profits- this is often the case in the current market.

Some repairs like leaky taps, broken handles, patching a hole, some repairs to the cladding could be done when tenants are still living in the property. But if it’s worth renovating the house, installing a new kitchen, for example, re-carpeting, painting all the walls, you might need to come with some sort of arrangement with the tenant or give a 90 day notice for them to vacate first.

6.      Access to view

Now, when the property is on the market for sale, access to the house is crucial for open homes and private viewings.

Hamilton is located in a “Golden Triangle” where many potential purchasers are considering moving to, from Auckland and other cities. It happens that a purchaser is travelling to Hamilton for one day, views properties, but finds the one they haven’t arranged a viewing for. A call to an agent asking to view the property today means an opportunity to introduce another potential buyer. If tenant can only allow a viewing with 24 hour notice given prior, only on particular days, it becomes difficult.   

Being available to show the property on the weekends and multiple times during the week is a big advantage when selling. If tenants are willing to collaborate, it is great news. This is something I usually discuss with tenants when the property is listed to meet with them and establish suitable viewing times. Having tenants on board certainly helps the process run smoothly.

7.      Who is the buyer?

And finally, who is the target market? A first home buyer will be moving to the property and are not interested in taking possession with the tenants which requires the 90 day notice to be issued once the property is unconditional, meaning a longer settlement timeframe.If the property is on a large section and a developer is purchasing it, they might not worry whether it’s tenanted or not while they are waiting on the building consent from the Council. The property might be a modern home with good tenants in it, and the purchaser is an investor who is happy to keep the tenants long term and take possession with immediate rental income. I would recommend talking to the salesperson to find out what would likely be the target audience when selling your property.

Summary

To summarise it all, the benefits of selling your investment property while it’s tenanted are, ongoing rental income that can pay for your bills, selling at any time without having to wait for 90 days before tenants to move out, and, if you have very good tenants, you don’t have to worry about cleaning and staging.

On the other hand, when tenants have vacated, you have an opportunity to do an extensive renovation or repairs,  the access for viewings is easier and if the buyer wants to move into the property, it is possible for them to do so straight away rather than wait until tenants move out after the sale and purchase contract goes unconditional.

If you want to discuss your situation and find the best way to sell your property, get in touch with Ksenia today.