How to sell investment condo with tenant
Hello, I need some advice from avid condo investors. My wife and I have an investment condo that we are thinking about selling and I currently have a tenant with a lease up to June 2012. I know that in order to break my lease I may be liable for up to 2 months of rent to my tenant (we live in BC). However, the part that I am having a tough time wrap my head around is to how to keep my tenant in the condo while I'm selling it (planning on listing it with a realtor).
I'm obviously going to have to let my tenant know that I'm listing the property as the Realtor will be bringing by potential buyers. But, do I give my tenant notice now that he will have to leave in 3 months - to perhaps avoid the penalty of having to pay him 2 months rent?
Is it a good idea to keep the tenant in there while it is listed?
Ideal situation for me would be to have the tenant stay at the condo until it is sold, however I'm thinking once I tell him I'm listing it he may leave and than I'll be on the hook for the whole mortgage payment and who knows how long the condo will sell in.
Any thoughts or advice would be greatly appreciated.
First of all, welcome to CMF.
Secondly, I understand perfectly where you are at because I was in a very similar situation a few years ago. The difference is that mine was not an investment condo, but my former dwelling. Besides that, I had all the same issues you mention.
The reality is that tenants do not want you to sell the condo for a number of reasons. For one thing it often means they will have to leave and pay moving costs and find a new place. They'll try and delay the process while they do this, often in spite. Secondly, many of them (and I understand their POV) find the parade of RE agents and potential buyers in "their" residence to be somewhat invasive as they show up at all times. Mine had actually prevented access by agents and told the listing agent that they needed 24 hrs permission prior to entering and it could only be in certain hours. She was not happy that the place had to be sold and eventually gave her notice and moved out. While a blessing in that it made it easier to access and show, it now meant the place was not bringing in a penny of revenue and was actually costing me every day it went unsold. It took me several months to sell and I lowered the price numerous times but in the meantime, those thousands and thousands of dollars in condo fees, property taxes and liability to continue making mortgage payments was very difficult to handle since I was paying for housing elsewhere. It was a huge liability. From the few pennies that were left, of course the RE agents took their 4% as well as all the other costs.
This is the other side of RE investing you hear very little about but this is what I went through. There is little you can do other than to be aware of these challenges.
Moral of the story: only buy if you intend to hold for a long period of time, and there is a low probability of circumstances that would lead to you selling the property.
So you want to have your cake and eat it?
You signed a legal contract with a tenant promising that they could stay until June 2012.
Now you want to break said contract because you don't want to honor it whenever you please even though if the tenant left you'd scream to high heavens that they broke the lease.
Then you want the tenant to love having a stream of strange real estate agents and weird buyers come into their home at a moment's notice.
You want us to help you find a way to keep said tenant from moving out until the moment the property closes because you can't afford to carry the place or don't want to...
Here's a tip, give standing instructions that every time the property is shown the tenant gets a $50 gift card for their inconvenience as the RE agent will not want them there and they have to go out.
Tell them if they stay until the property is sold they will get $1000 moving bonus. In the meantime, they have to keep paying the rent.
This is why it can really suck being a tenant for those of you who might be unconvinced. Yes rent VS buy is stacked in financial favor of rent these days, but how many of you would enjoy this situation?
Your tenant has the right to ask for 24 hours notice,I would suggest trying to sell it to another investor.If you have a good tenant who pays the rent and keeps the place clean that goes a long way.This only works if tenant is willing to stay ,We have a few rentals and sometimes I scan the lists for tenanted properties.
I think the tenant should be told ASAP to be fair. I don't know how easy it is to find a new place to live for the tenant. This can be a huge hassle for the tenant.
However, if you want the tenant to stay as long as possible, give them financial incentive and tell them that most of the buyers are investors anyway so they probably want her to stay. Nothing really changes for the tenant if that's the case although I'm sure you'll take the best offer regardless of whether it's an investor or not.
Well, Berube actually makes a good point. Renting a place from a specuvestor is bad news for all the reasons being discussed here. It's a royal PITA when the seller wants to walk away and your life is filled with uncertainty in this instance. I am one of those pro-rent people, but not in these circumstances. I want it to be in a regular, quality tower that is managed properly by fulltime rental companies such as Morguard, Orange etc. I will not rent from a specuvestor.
I do like the idea of a moving or gift card hassle bonus for the tenant. Of course, this does tip the scale against specuvesting once again.
We got into the real estate to build a portfolio for our retirement ,we have only purchased newer single family homes with exception of one huge bungalow which we got very cheaply and made into two units.When we started this we never counted on any appreciation but to build equity an eventually to have our tenants pay them off for us.I currently have Six units which we put down 20-40% and we have a reserve fund which we keep in cash just for these properties.If you cannot keep on hand a minimum of $10,000 cash for your rental home IMO you are putting yourself and your tenant at risk.I think you should work on improving your savings and do right by the tenant ,let them decide if they want to try to get a new landlord buyer and stay or try to find a new place now.You should also be willing to be flexible with their moving date ,if they find a perfect place tomorrow let them leave without consequence.