Letter to tenants when building is being sold
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Calvin’s template sums it up nicely. I might just add a line like this about the existing lease transferring: “You can be assured that all of the terms of your existing lease, including rent amount for the duration of the lease, will remain in place even once the property is under new ownership, as the new owner will be obligated to honor all of the terms of your existing lease.” I find this helps calm some of the anxiety that tenants may have about the property being sold. I also try to minimize the impact on tenants by stacking showings all at once during a “showing window” on a Saturday or Sunday so they aren’t bothered by a bunch of individual showings. I also like to do a pre-inspection and fix most of the stuff on the inspection so I can give that to potential buyers and ask them to write their offer considering the current condition and with as much “as-is” language/ contingencies as they feel comfortable with. I also price the property such that I usually get multiple offers and at least one that is “as-is” so that the transaction is clean. Nothing is worse than having multiple cycles of flaky buyers with a bunch of contingencies in their contracts having multiple inspections at an occupied MF, buyers coming through talking to tenants and talking about stuff that is wrong with the property and mentioning mold tests, etc. There is a huge benefit to setting it up so you get a clean offer and limit the impact on the tenants as much as possible. A great listing agent who specializes in this property type will help you with all of this, and can possibly even get the property sold to a buyer they already know with little fuss so you don’t even have to tell the tenants until after the sale, which is ideal.
10 Replies
- Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes1y
I am unsure if I would send a letter when a building is being sold. Buyers back out, and now you must calm them as they know you are not sticking around with a property on the market. I would only send one once the property has been sold. Personally, I have only sent letters to tenants when buying or when changing management; never when I have sold.
- Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes1y
Quote from @Charles Carillo:
I am unsure if I would send a letter when a building is being sold. Buyers back out, and now you must calm them as they know you are not sticking around with a property on the market. I would only send one once the property has been sold. Personally, I have only sent letters to tenants when buying or when changing management; never when I have sold.
An interesting take. Have you sold occupied buildings before? Since there will be a real estate sign placed in the yard, and buyers agents will be bringing their clients through the occupied units to tour the property on a regular basis, I'd like to get out in front of this to set expectations and inform my tenants directly before they come to that conclusion on their own.
At the very least, I am required to give proper notice of entry for the appointments. I can only imagine how the showings would go if I blew off my tenants and did not inform them of my intent to sell and the processes associated to that end.
- Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes1y
Yes, we have done this with small, occupied multifamily properties, as investors are purchasing these properties. It would be very different if the person purchasing the property were buying it as a primary residence. Typically, with investment properties, buyers conduct a walk-through during the inspection period to view the property. We never have signs put in the yards. Yes, if/when you need access to the units, you need to coordinate that with the tenants beforehand.
- Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes1y
@Charles Carillo Interesting. I imagine this may be market specific. Here, prospective buyers typically walk through small multifamily properties while it's listed for sale. Then, there's an official "walkthrough" and inspection (if desired) that is also performed during due diligence when the property is pending.
The only exception I have seen as a buyer is one time, a listing for a 6-unit building required the property to be under contract before a walkthrough. This was at the height of the buying frenzy a few years ago when loan rates were virtually de minimus, so the sellers were doing all sorts of things that defied local custom. Anyways - we got the property under contract, then when we walked through, it was the proverbial dumpster fire. Each tenant was living in filthy conditions, there were structural issues, code violations, unsafe conditions, etc. This property was being marketed as turnkey. The pictures in the listing did not accurately reflect the reality. Needless to say we canceled the contract. I'd never do it that way again. I felt like I was buying a pig in poke, whereas a 15 minute viewing would have saved a lot of people lots of time.
In your market, investors are happy to put down an EMD without putting eyes on the inside of the asset? To me, on a retail property that's just bananas.Every occupied small multi I have purchased in my market has been marketed as described in my initial paragraph.
- Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes1yThe attorney usually does this for you.
Quote from @Wesley W.:
Does anyone have a template they can share that they send to tenants when they are selling an occupied building?
Any other feedback on the process is welcome.
Thanks in advance!
- Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes1y
I self manage. I am the single point of contact for tenants.
I guess I'm not asking the question I need the answer to.
- Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes1y
Quote from @Wesley W.:
I self manage. I am the single point of contact for tenants.
I guess I'm not asking the question I need the answer to.
Consider reviewing these templates.
- Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes1y
Quote from @Calvin Thomas:
Quote from @Wesley W.:
I self manage. I am the single point of contact for tenants.
I guess I'm not asking the question I need the answer to.
Consider reviewing these templates.
Thanks, Calvin!
Calvin’s template sums it up nicely. I might just add a line like this about the existing lease transferring: “You can be assured that all of the terms of your existing lease, including rent amount for the duration of the lease, will remain in place even once the property is under new ownership, as the new owner will be obligated to honor all of the terms of your existing lease.” I find this helps calm some of the anxiety that tenants may have about the property being sold. I also try to minimize the impact on tenants by stacking showings all at once during a “showing window” on a Saturday or Sunday so they aren’t bothered by a bunch of individual showings. I also like to do a pre-inspection and fix most of the stuff on the inspection so I can give that to potential buyers and ask them to write their offer considering the current condition and with as much “as-is” language/ contingencies as they feel comfortable with. I also price the property such that I usually get multiple offers and at least one that is “as-is” so that the transaction is clean. Nothing is worse than having multiple cycles of flaky buyers with a bunch of contingencies in their contracts having multiple inspections at an occupied MF, buyers coming through talking to tenants and talking about stuff that is wrong with the property and mentioning mold tests, etc. There is a huge benefit to setting it up so you get a clean offer and limit the impact on the tenants as much as possible. A great listing agent who specializes in this property type will help you with all of this, and can possibly even get the property sold to a buyer they already know with little fuss so you don’t even have to tell the tenants until after the sale, which is ideal.
- Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes1y
Quote from @Steve K.:
Calvin’s template sums it up nicely. I might just add a line like this about the existing lease transferring: “You can be assured that all of the terms of your existing lease, including rent amount for the duration of the lease, will remain in place even once the property is under new ownership, as the new owner will be obligated to honor all of the terms of your existing lease.” I find this helps calm some of the anxiety that tenants may have about the property being sold. I also try to minimize the impact on tenants by stacking showings all at once during a “showing window” on a Saturday or Sunday so they aren’t bothered by a bunch of individual showings. I also like to do a pre-inspection and fix most of the stuff on the inspection so I can give that to potential buyers and ask them to write their offer considering the current condition and with as much “as-is” language/ contingencies as they feel comfortable with. I also price the property such that I usually get multiple offers and at least one that is “as-is” so that the transaction is clean. Nothing is worse than having multiple cycles of flaky buyers with a bunch of contingencies in their contracts having multiple inspections at an occupied MF, buyers coming through talking to tenants and talking about stuff that is wrong with the property and mentioning mold tests, etc. There is a huge benefit to setting it up so you get a clean offer and limit the impact on the tenants as much as possible. A great listing agent who specializes in this property type will help you with all of this, and can possibly even get the property sold to a buyer they already know with little fuss so you don’t even have to tell the tenants until after the sale, which is ideal.
Valuable feedback. This is just what I was looking for. Thank you!
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