Can you list a property for rent before you have closed on it.

Question

We are scheduled to close on a property in 30 days that we have an accepted offer on. Are we able to list it for rent now or do we have to wait for closing? Not sure if it matters from state to state but we are located in Iowa.

Jeff Rabinowitz · Answer

This is a bit of a grey area. By listing what do you mean exactly? If it is putting it on the MLS, that is probably against the rules, though I have seen it done. If it is putting it on Craigslist, why not? I have listed properties before I owned them. I know people who do this routinely. I remember taking one potential tenant on my walk through the day before I purchased a property. I expected it to be in great condition and it was. They gave me a deposit that day (that may not have been strictly legal). We signed the lease and I gave them the keys the next day after I closed on the property.

I finished the sale of a property today. Technically, I didn't sell the property--I sold the LLC that owned the property to another local investor. I took possession back in September. The property has been rehabbed to the new owners specifications while I owned it. I would not usually do this but I trust this investor (partner) and I had a $35K deposit. He signed a lease and put his tenant into the unit on January 1. Was that proper? Maybe not. However, I knew about it and everything worked out well. (We both had reasons why the delayed closing made sense. For me it was nice to push the transaction into 2017 for tax reasons.) I would not recommend this, nor do it, under most circumstances.

So if your question is truly are you able to do this, the answer is absolutely. If your question is if it is legal to do it, or if it conforms to all the regulations, the answer is maybe not. As landlords/real estate investors we are businessmen and are able to make business decisions as they arise. There are times it makes sense to push the envelope a bit and other times when that is foolhardy. You get to decide.

Tyson Allen · Answer

@Mike Cumbie Thank you for the great insight. So many valid points in your response.

Mike Cumbie · Answer

I generally recommend sellers do not allow access to the property before closing except the agreed upon inspections/final. Reason being is the longer buyers are there, the more they notice. So after all is said and done and we are just waiting to close, the buyer goes in and sees a broken molding, a leaky faucet, a sticky light switch, a faded window panel or a water spot on the ceiling. Pretty soon the requests start flowing in and the price reductions. The requests to "let me go ahead and fix now, so I can rent on day 1".... which if course turns into a mess if the sale fails for some title reason. Now they want to be reimbursed because they repaired a property that someone else owns.

Being the buyer I recommend not doing anything that is costing you money or time that you are not prepared to donate to the current owner. If you find a tenant and get them all ready to lease and something happens with closing/title, you own that issue. Nothing you can do to fix it except pay some cash over to the prospective renter. If you expect to close on the first and set a renter up and there is an attorney delay for 2 weeks, you will have one hot under the collar tenant.

Just my 2 cents and good luck in whatever you decide.

Tyson Allen · Answer

@Jeff Rabinowitz Thank you for the detailed reply and insight. Greatly appreciated.

Tyson Allen · Answer

I was more thinking of generating a list of potential qualified tenants and show the house after closing. Thinking for the future I could list a property at a higher rent rate than I believe to be at parity with the market and see if there is interest at that price as I'm not missing out on revenue from a property sitting vacant.

Mark Holencik · Answer

I try to get possession of the property when we sign the agreement of sale.

I start getting it ready to rent and with a little luck have it rented before settlement.

I have signed agreements of sale with closing dates anywhere from 30 days to 17 years.

I am signing one tomorrow and on Saturday and I will get immediate possession with both of them. 45 day closing on both of them.

Tyson Allen · Answer

@Chase Gochnauer You are not kidding when you state that Altoona is a little picky when it comes to their rental inspections but I suppose it is in good measure. This will be our 2nd property we've bought in Altoona and know what to expect this time around. I would love to compare our properties some time to see what you are getting for rent rates in Altoona. We also have some properties in Des Moines as well.

@Andrew Johnson @Chase Keller Thank you for the response and it sounds like what I am doing seems to be a norm among some. I'm glad to hear that I'm not crazy and am going to steal some plays from your playbooks based on your responses. I'm not sure how this will all pan out but I guess we'll never know if we don't try.

Chase Keller · Answer

@Tyson Allen.  I would consider asking the seller if they would allow you limited access to show the unit.  I've done it several times on property that I'm currently buying.  I have also been on the other side, where I was selling a property that had a tenant move out.  I offered the buyer to put a lockbox on the door so he could show it anytime.  I trusted the buyer, so there wasn't any issue there, but you don't have to go as far as I did.  Maybe they don't trust you to have a key, but you could arrange with them to have an 'open house', where you can have several applicants all come to view the unit at the same time.  Then you could have the owner come one time and not waste everyone's time making lots of trips out there.

Just an option...

Can you list a property for rent before you have closed on it.

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