There is a number of reasons for why a landlord would want to sell a rental. If the property is yours, you can sell it anytime, but, when you have tenants, there’s a certain process you must follow.
Reasons A Landlord Would Want to Sell
Landlords may want to sell their property because:
- They want to cash in on the property’s value.
- They are tired of renting and/or the rental isn’t performing well.
- They are moving and won’t be able to manage the property anymore.
- They inherited the property and don’t want to be landlords.
- They want to trade it in for something else in the form of a 1031 exchange.
Regardless of the reason for wanting to sell a property, landlords must be aware of the specific processes involved in ending an existing tenancy.
Dealing With a Month-to-Month Tenancy
In terms of a month-to-month tenancy, where the tenant is paying rent month-to-month, and may not necessarily have a lease, a landlord only needs to give proper notice. Typically, this means sending your tenant a letter or email that gives them 30 days to vacate the premises. The amount of notice you are legally required to give depends on your state laws, so make sure to read through them carefully.
With month-to-month tenancy agreements, landlords do not need a reason to evict the tenant. This is referred to as “no cause termination.” After sending tenants the proper notice, landlords should also send them a move out checklist. This will ensure that tenants remove all possessions, return keys, and leave the property in good condition.
Dealing With a Fixed-Term Lease
When dealing a fixed-term lease, landlords need to be a bit more careful; you can’t just end the tenancy because you are selling the property. Because of this, there are a few different courses of action you can take to get the tenants out:
- Wait until the lease has ended. If you have a good tenant who pays rent on time and doesn’t cause problems, the easiest method is to just wait until the lease is up. However, if your tenant has violated the lease terms, you may have a reason to evict the tenant and get them out faster.
- Sell the property with an active lease. You may be able to find a buyer who is okay with taking over and becoming the landlord. Keep in mind that you’ll have a lot less potential investors, though. Also, almost every state requires for the security deposit to be transferred with the property.
- Pay the tenant to vacate. If you’re in a hurry to get the tenants out, you can consider paying them to vacate the property. There are different ways you can come up with an amount, like offering to pay the security deposit, making up the difference (rent amount x number of months left in lease), or helping with moving costs. This is usually called the “cash for keys” method.
- Sell the property to the tenant. Considering that they’re already living there, a tenant may be interested in purchasing the rental property. You can offer a seller-financing agreement and kill two birds with one stone.
- Use the early termination clause. If you included an early termination clause in your lease, then you’ll be able to get rid of any tenant before the lease is up. The clause usually states that the lease will be up in 30, 60, or 90 days as a result of a valid reason (like the sale of the property).
The Bottom Line
As a landlord and homeowner, you have the right to sell your property. Although, you do have to keep your lease agreement in mind and make sure to follow the proper steps. Also, no matter the case, always meet with your tenants to discuss the plan of action.