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Selling a rental with tenants is the worst! (here’s what you need to know)

Selling your own house is hard enough. But selling a rental with tenants is the worst!

This article answers the question IF YOU CAN sell a rental house with tenants. It also outlines the HOW TO and HOW CAN you sell a rental with tenants in it. We also give tips, recommendations, and what to look out for. After reading this you will know the rules, know how to successfully get rid of your rental, and know what to watch out for.

Thinking about selling a rental? Find out more about all of your options on our selling a rental property page.

Table of Contents

  1. Reasons Why You Might Want to Sell A Rental With Tenants
  2. Can You Sell A Rental With Tenants In It?
  3. How to: Selling a Rental With Tenants in a Month to Month Lease
  4. How to: Selling a House With Tenants in a Long-Term Lease 
  5. Wait for the lease to end
  6. Sell the house with the tenants in place to an investor or cash house buying company 
  7. Cash for keys
  8. Sell to the tenant
  9. Terminate the lease if the tenant has violated a condition of the lease
  10. Envoke your lease’s early termination clause if it has one
  11. How to Sell a Rental With Bad Tenants That Need to Be Evicted
  12. Conclusion

Reasons Why You Might Want to Sell A Rental With Tenants

The reasons why owners sell rental properties are endless. Sometimes you need to sell a property. Other times you just want to sell.

Below are some of the reasons that you may want/need to sell a rental property.

Maybe you:

  • Are sick of being a landlord and want out
  • Need the money to pay bills
  • Are at risk of losing the house to foreclosure or tax auction
  • Can’t afford or don’t want to pay the repairs on the rental
  • Need the money for other opportunities
  • Inherited the house and don’t want it
  • Just want to cash out and move on with your life

Regardless of the reason, you need to know if and how to sell your rental. So keep reading. We answer those questions in detail.

Can You Sell A Rental With Tenants In It?

Yes. The simple answer is YES.

You can sell your rental with tenants in it even if:

  • Your tenants are in a long-term lease
  • The tenants are awful and/or delinquent and/or need to be evicted

You are the owner of the property so you can legally sell it. But before you do you need to know how to do it AND make sure you follow the rules of the game.

Next, we tell you HOW. So keep reading.

How to: Selling a Rental With Tenants in a Month to Month Lease

If your tenants are month to month then selling your rental house with tenants in it is a bit easier.

Why? It’s easier because there is no contractual obligation to allow the tenant to stay if proper notice is given.

What does that mean? It means that as long as you give your tenants the notice required by your state they are obligated to leave.

Most states require 30 days’ notice. Check out your specific state’s required notice period here.

Alternative Solution (If Necessary): Cash For Keys

Scenario: you get a cash offer from a buyer. They want to close quicker than 30 days and they require that the property is delivered “vacant.”

If the buyer’s desired closing date is before the notice period you gave your tenants then you have an issue. If the buyer and the offer are solid you probably don’t want to pass it up.

So what can you do? Cash for keys is an agreement you make (which should be well documented) with your tenant that allows you to vacate your rental house before either 1. their lease end date or 2. the required notice period (for a month-to-month lease).

How does cash for keys work?

You ask your tenant if they would be willing to vacate the property by X date in exchange for Y. Y could be giving them cold hard cash as an incentive. It could be agreeing to give them back their security deposit even if they damaged the property beyond the security deposit amount. It could be helping them move, etc.

The amount or specific items that you agree on is dependent on what your tenant needs/wants.

We typically offer tenants a specific cash value. We also help them relocate to a new rental most times.

How to 6 Options For Selling a House With Tenants in a Long-Term Lease

Selling a rental with tenants in an active long-term lease is a bit more complicated. You also have less power, which complicates it even more.

You have six options when selling a property with tenants:

  1. Wait for the lease to end
  2. Sell the house with the tenants in place to an investor or cash house buying company 
  3. Cash for keys
  4. Sell to the tenant
  5. Terminate the lease if the tenant has violated a condition of the lease
  6. Envoke your lease’s early termination clause if it has one

Each option is discussed in more detail below.

Option 1: Wait for the lease to end

You can wait for the lease to expire. If you wait do make sure you give your tenants proper notice that you will NOT be renewing their lease before it ends. If you don’t give them proper notice, and they don’t give you the lease will most likely go into a month to month agreement automatically. This will delay things even more.

PROs: Waiting for the lease to end is the path of least resistance.

CONs: This method takes the longest time. If you need to or want to sell fast you might not be able to wait for the lease to end.

Option 2: Sell to an investor (cash buyer) with tenants in place

You don’t have to wait for the lease to end to sell your rental. This is not the only option. 

Selling your rental with the tenants still in it IS AN OPTION. You can even use the tenants as a marketing pitch if they pay their rent, keep the unit clean, etc. 

However, you should be aware that it’s not ideal. And most buyers (even most investors) will be turned off and want the unit vacant.

Selling with a tenant will limit your buyer pool, make it harder to show the unit(s), make it impossible for an investor to do renovations, etc.

Selling a rental with tenants in it is going to reduce your buyer pool for sure. 

Why? Because the only buyers interested in buying a house with tenants in it are investors. Homebuyers want the house vacant. Even most investors want the property vacant. This will mean fewer offers and less power while negotiating the sale. Most investors will offer less when a tenant comes with the house.

If the tenants are difficult to deal with then it will also be a nightmare when scheduling showings, inspections, etc. You will have to coordinate everything with the tenants. This makes it much harder to sell your rental.

TIP: Although it is possible to sell a rental with tenants you should be aware that it is a hard thing to do. Selling your rental to a cash buyer, like us, is probably your best bet if you cannot get the tenants out. You will get less money for your rental, but they will take the property with tenants as is.

Find out why it might make sense to sell your rental with tenants as is to a cash buyer.

Option 3: Cash for keys

As mentioned earlier, this is where you ask your tenant if they will vacate the property by X date in exchange for Y (some incentive).

We discussed this in much more detail in the month-to-month section above. 

One thing is important to note with this. If your tenant knows that you want them out because you need to sell by X date then you look vulnerable. In other words, they have all the power and you are in a position of weakness. This is because they are protected by the lease agreement (assuming there is no early termination clause and they have not broken any terms of the lease).

What’s the issue? If the tenant knows your sale is dependent on them moving out they will ask for the stars and moon.

TIP: You are not obligated to tell the tenant why you are offering them “cash for keys.” If they find out somehow then it is out of your control. Don’t lie to them. BUT if they don’t already know we recommend not telling them. This will allow you to agree without them taking advantage of the situation.

PROs: If successful you can get the tenant out quickly and sell faster. 

CONs: It might cost you. Be prepared to spend some money to make it work. Consider it an investment that will be returned when you sell the house (if you make a profit).

Option 4: Sell your rental to the tenant

Selling to your tenant sounds like a great idea, but it doesn’t work very often. Why? The tenant has to both 1. want to buy the property and 2. be financially able to buy the property. They will need to get approved for a mortgage if they don’t have enough cash to buy outright.

They are probably renting for a reason. That might be because they do not want to or do not have the ability to buy a house.

You might want to ask some basic questions before offering this to the tenant. These might be questions like “have you ever thought about buying a house” or “why haven’t you looked into buying a house.” These might give you a sense of if they 1. want to buy a house, and 2. can buy the house. If it sounds like they might be a good fit you can ask them if they would be interested.

TIP: Be careful not to get stuck in a long drawn out process with the tenant.

You need to know up front whether they want the house and if they are financially able to buy the house from you. If the answers to these questions are no (or they can’t give you the answers) then move on.

You don’t want to get stuck in a wishy-washy agreement with them. You will feel semi-obligated and end up waiting endlessly for them to get approval and move forward with the sale. If it turns out they can’t buy it then you will have wasted your time.

Option 5: Terminate the lease if the tenant has violated a lease condition

If your tenants have violated a lease condition then you have grounds to terminate the lease. You do have to make sure that you have legal grounds to give them notice. You also have to make sure that you give them proper notice.

TIP: If you want to pursue this route we recommend you seek legal advice first to make sure that you are playing by the rules.

Option 6: Envoke your lease’s early termination clause if it has one

Some leases have an early termination clause. If yours does, then you might be in luck.

According to Cozy an early termination clause in a lease is the language that states the lease will terminate within a specific time upon the sale of the house. This could be 30/60/90 days.

Look in your lease agreement (especially if you inherited the house with a lease you did not enter into) and see if it has an early termination clause.

TIP: Again, if you want to pursue this route we recommend you seek legal advice first to make sure that you are playing by the rules.

How to Sell a Rental With Bad Tenants That Need to Be Evicted

When selling a rental with tenants this situation is the toughest. Selling with good tenants is hard enough, but this is another level of difficulty.  

What are the issues? First, buyers don’t want to take on tenants, nevermind tenants who do not pay their rent and/or need to be evicted.

Your buyer pool for this situation is very, very slim.

Advertising the property on the MLS will not yield results for the reasons stated above.

TIP: If you have to sell your property with bad tenants (going through eviction or just a nightmare) and can’t wait then we recommend selling to a cash house buyer

These buyers are probably the only buyers who will buy the house as-is with the tenants. This is because they are experienced in handling these situations. They will buy for cash as well.

Conclusion

So there you have it! We just answered the question dif you can sell a rental with tenants in it. We also laid out your options for if your tenants are 1. in a month-to-month lease, 2. are in a long-term lease, or 3. are nightmare tenants and need to be evicted.

Are you looking to sell a rental with tenants in Ohio?

Our company, Sesa Properties is a cash house buying company operating in Ohio. Selling to a cash buyer like Sesa Properties makes the selling process as fast and painless as possible. We buy houses as-is. We aim to make the process as fast and easy as possible. Want to see how much we can buy your house for? Click here to get your confidential, obligation-free offer started.

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