Selling an occupied rental

[Bob Foglia]

I have a rental "by default" (it was my primary residence but d/t the economy I held it when I moved)... Anyway, it is not a great rental but does have a fair bit of equity built up... The same renters have been in the house for a few years, but are currently month-to-month. Not the greatest renters, so I'm considering all my options... What are my options??? What are the ramifications to a purchaser of an occupied property? It is going to need some sprucing up... would I be better off encouraging the renters to find another place to live (they owe me some money I'd write off if they leave). Thoughts?

[Dan Travieso]

Usually easier to sell a vacant property than one with a tenant.

[Tracy Streich]

If you want to sell to an end user that will occupy the property get the tenant out ASAP.  You can spruce it up an little and makes showing much easier.   If selling to an investor it could go either way

[Andre Taylor]

I agree much easier to sell a property when it is vacant also your pool of buyers grows as you have people looking to do owner/occupied. I would say move them up...spruce up the place to get more.

[Paul De Luca]

Exactly what @Tracy Streich said if you want to sell.

After renovating the property you could also keep it as a rental by renting it to a different tenant, cash out refinance, and then invest that money into another property. But from what I understand the Denver market has been especially hot so you could probably sell it for a premium.

[Julie Hartman]

It's lucky they are month to month because in CO, the lease supersedes a sale. It would be better to have them out and then sell after it's cleaned up and in showing condition. 

[Maria Bakaj]

@Bob Foglia I agree with most everyone else, sell the property vacant.  Buyers are looking for properties that have had some reno done and they are paying a premium for it.  It's important to do the reno right and not cut corners.  Buyers do notice a shoddy job.  If you don't want to front the cash for reno, there are brokerages that will do that for you.  I work for Coldwell Banker and they have a program for this, it's pretty awesome.

The market is so hot, and buyers are so desperate that some are offering with no inspection.  If your property happens to be in a less than desirable location, i.e. close to a major road, now is a great time to sell as buyers are making compromises.  That being said, selling it occupied is unattractive to non-investor buyers and even investors aren't looking to inherit tenants right now.

[Lawrence Dy]

I think the answers to your questions would depend on your current financial needs. Assuming you don't have an urgency to sell immediately and your main goal is to maximize your sale price, I'd have to agree with previous replies that your best option is to sell the property vacant and do whatever repairs needed to maximize the sale of your property. 

Typically, selling your property with tenants in place that aren't great tenants will only hinder your ability to sell. Buyers will expect a discount on the price if they know they will be inheriting difficult tenants. Also, the tenants can make it difficult to sell if they make it challenging to show the property or limit buyers' access to the property. Sometimes, if difficult tenants can get upset at the fact that the home is being sold because they assume they will eventually have to vacate so they can the sales process challenging or even stop paying rent entirely.

In my opinion, if you already know your tenants will be challenging through the sale process, it's easier to eat the cost of incentivizing them to leave now, than to deal with the headaches later. Hope this helps

[Bob Foglia]

Thank you all for taking the time to respond. You've echoed many of my thoughts... I'm always glad when I'm in agreement with the pros! I think it's time to have a conversation with them about selling the house.

Wish me luck.

[Chris Freeburg]

@Bob Foglia I'm on board with all the comments left. Sell vacant (at the minimum), do the necessary maintenance to make it clean and tidy (paint, etc.) and minimal upgrades to get a better price. In this market, it will sell fast.

I'm curious to see how things go with your tenants. Good luck and keep us posted!