Selling with tenants vs selling without tenants

[Ricky Powell]

I perform real estate sales and property management services in and around Tulsa Oklahoma. Today one of my property management clients asked about selling their SFR subject to an existing lease and while responding I thought some may benefit by reviewing the response:

There are pro’s and con’s to listing and selling with a tenant in the property. There is an effective lease until 5-31-2020 which doesn’t go away even if the property is sold meaning the new buyer will inherit the tenants and the lease. Because the new buyer can not owner occupy the home that limits the buyer pool to investors only due to lending regulations. There are also pro’s and con’s with selling to investors vs owner occupants.

Selling with a lease to investors:

Pro’s:

1. Selling with a tenant can provide a sense of comfort to a new landlord especially when the property is tenanted with a good tenant such as is the case with your property. 

2. Gives the new buyer an idea of rent expectation. 

3. As-is contracts

4. Attracts cash buyers

Cons:

1. Tenant typically has conflicting interest (Shouldn’t be a problem with our current tenants)

2. Landlord tenant laws require that all appointments be scheduled with a 24 notice to the tenant

3. The new buyer would have to honor the existing lease until lease expiration which is 5-31-2020. 

4. Buyer’s will not pay as much as an owner occupant.

Selling after lease expiration and removing tenants: 

Pro’s 

1. Potential to sell at a higher price to an owner occupant. 

2. Easier to schedule showings and other appointments

Con’s

1. Buyers will have a higher expectation in regards to condition and will typically require a normal working order sell

2. Financing regulations may prolong and complicate the sell 

3. No cash flow during listing and waiting to close timeframes