Selling a rental with tenants in it: what transfers and what does not
Most buyers want a rental empty before they will touch it. We do not, and that difference is usually the whole reason a landlord rings us rather than an agent.
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The four things that turn a rental into a decision
Almost nobody decides to stop being a landlord in the abstract. Something specific happens first, and it is normally one of these.
A turnover that ate the year
Paint, carpet, a month empty and a letting fee. One bad changeover can cost more than the year's profit.
The usual trigger: Working out that the property made nothing after the void.
Somebody stopped paying
The rent stops, the mortgage does not, and the process to do anything about it is slow and public.
The usual trigger: The second or third month, and the realisation of how long the rest will take.
A repair bigger than the return
A roof, a boiler, a sewer line, or a code notice. The number is large and it does not increase the rent.
The usual trigger: The quote arriving.
It stopped being worth the evenings
Nothing dramatic. The calls, the coordination, the paperwork, and a return that no longer justifies any of it.
The usual trigger: Usually a date rather than an event. It has simply been enough years.
A lease survives the sale, and that is not a problem
This is the single thing most landlords get wrong about selling, and it is worth being precise about.
Selling the house does not end the tenancy. A lease normally runs with the property: the buyer steps into your side of it, on the same terms, until it expires or is properly ended. You do not need to remove anybody, and in most places you could not simply because you are selling.
That is exactly why an agent will usually ask you to get the house empty first. A retail buyer wants to move in, so an occupied rental takes a discount or a delay, and the landlord ends up funding a vacancy in order to sell.
We buy it occupied. A paying tenant is not a defect to us, and a non-paying one is a situation we have dealt with before. Either way you do not have to resolve it before you can sell.
What actually changes hands when a tenanted property sells
Five things move, and knowing them in advance is most of what makes this straightforward.
- The lease itself. Assigned to the buyer, who takes on your obligations under it from the closing date onward.
- The security deposit. Transferred or credited to the buyer at closing, because it is the tenant's money and their claim on it does not change hands with the building.
- The rent, prorated. Split at the closing date. You keep the part of the month you owned it, the buyer takes the rest.
- An estoppel certificate. The tenant confirms in writing what the rent is, what deposit was paid, and that no side agreements exist. It protects you as much as the buyer, because it fixes the facts in writing.
- The notice obligations. Whatever your state and the lease require about informing the tenant of a new owner and where to pay. This one is genuinely jurisdictional and worth asking about.
How a walkthrough works with somebody living there
One visit, arranged at a time that suits the tenant, with whatever notice their lease and your state require. We are not inspecting their housekeeping and we are not there to discuss their tenancy.
We buy as-is, which for a rental usually means the deferred items: the windows, the kitchen from two tenants ago, the driveway. None of it needs doing.
If there is an eviction already running, tell us on the first call. It changes what we are buying and it is better said early than discovered at the title search.
General orientation, not legal or tax advice. Landlord and tenant law, notice periods and anything to do with an eviction varies by state and by case, so ask somebody licensed where the property is before you act on any of it.
Selling a rental: common questions
Do I have to get the tenants out first?
No, and you should be careful of anyone who says you do. We buy with tenants in place and the lease transfers with the house.
Emptying a property in order to sell it means you fund the vacancy, and that cost lands on you rather than on the buyer who asked for it.
What if the tenant has stopped paying?
Tell us on the first call. A non-paying tenant is a situation rather than a dealbreaker, and it is one we have bought before.
What it changes is the arithmetic, and we would rather build that in now than revise a number three weeks later.
There is an eviction in progress.
Say so early. It can usually still close. Where the process has got to and what has been filed both surface at the title search anyway, so they are better said than found.
Do the tenants find out before it is agreed?
Only if you want them to. They have to be given proper notice for the visit and they have to sign an estoppel certificate before closing, and beyond that the timing of the conversation is yours.
I have several properties.
Say so on the first call and we will look at them together. A portfolio is often simpler for both sides than the same houses sold one at a time, and it can be a single closing date.
What about the security deposit I am holding?
It transfers or is credited at closing. It is the tenant's money and their claim on it follows the property rather than staying with you, which is one less thing to reconcile afterwards.
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