Any Pointers on Selling an Investment Property w/ Tenant

[Bryan Brooks]

I own an investment property in Virginia. I purchased it in 2005. It's been a great investment. It's about 3,300 square feet. Current market value is between $330,000 and $350,000 or so. It rents for $1,900 per month. I pay an 8% management fee ($152/month) to Dodson Property Management, based out of Richmond, VA. Dodson has been a fantastic MGMT company to work with.

The lease ends in April 2021. Tenants seem to like living there and also keep the house in good condition. Never had a late payment from them. 

My question here is if anyone has tried to sell an investment property in the middle of a lease? I have another investment property that I'm interested in and I'd like to use the equity from this property, after sale, to purchase another property.  I'm thinking of offering the property to the tenants but I just want to be aware of any issues as I've never tried to sell any of my investment properties while they're leased. 

Just looking for any guidance or tips. Appreciate your time. 

Bryan

[Greg Scott]

I've sold a rent property mid-lease a few times. 

If you are selling to another investor, they just step into your shoes.  The hardest part is the inconvenience to your current residents.

I prefer to sell my rent properties to my residents.  That is a beautiful arrangement.  First, if the closing drags on because of bank paperwork, you don't care because you are collecting rent.  Also, residents usually don't make you come in and fix cosmetic items before closing.  Unless your property management company agreement requires you to sell through them, you do not have an agent involved, so there are no commission fees to be paid.  You are also not buying a bunch of new carpet and painting every room to make it "sale ready".  As a result, when I sell to a resident, I usually offer them a good discount off of retail price.  That is a huge enticement for them to buy.  On a $350K house you could say "I'll sell it to you for $10K (or $15K) below appraised value" and both of you would be better off in this arrangement.