So you own a rental or investment property in Queens and you’ve determined that now is the right time to cash out or move on to your next investment. Being the savvy investor that you are, you have leased your property to tenants who have been helping you pay down the mortgage. Now is when the question arises, should you list the property with your current tenants occupying the unit, or wait until they move out? Here in Queens we see this all the time, and we personally have sold a lot of tenant occupied properties, enough to see the good, bad, and ugly side of doing so. As a result, there are different schools of thoughts on the issue, and the right answer will depend on your property and your priorities. Below we’ll highlight some of the advantages and disadvantages to each approach so you can have a full picture of the issue and potential benefits/consequences.
Listing with Tenants
The biggest advantage to listing with tenants is continual receipt of your rental income. This ensures that there is minimal impact to your finances in the short term, and it alleviates the pressure of needing the property to sell right away. If your target buyer is an investor, then they may look at the occupancy favorably, especially if the rental income is high and you can show proof of consistent collection. In our experience, selling with tenants is a good idea if your tenants are very cooperative, and if you are receiving a market rate of rental income. If either of these is not the case, then you can run into several issues that can potentially get very ugly, and take a long long time to resolve. Unfortunately we have experienced this first hand and the person who ends up losing the most is usually the Seller.
The biggest disadvantage to listing with tenants, is usually a lower listing price. If the property can be delivered vacant and tenants are cooperative, you may be able to still market the property at a competitive list price, however, it is always harder to show the full potential of a house when it’s occupied by tenants, because you can’t do the renovations, touch-ups or staging needed to showcase the home. All of these factors limit the price you can ask on the property, or if you list competitively to other properties, this factor will most likely be reflected in the offers you receive. In addition, it’s always unclear if the tenants will be cooperative with open houses and viewing appointments until you actually start the selling process so when selling with tenants, there is a certain unpredictable variable that comes along with it. Lastly, many new homeowners don’t want to deal with tenant evictions, especially here in Queens, so if you decide to sell your property with the current tenants, you may limit the buyer pool to mostly investors.
Listing without Tenants
When listing your investment or rental property without tenants, it becomes like most of other properties on the market, and many times more attractive because in Queens, most homeowners opt to sell with tenants. More importantly, you can attract a bigger pool of buyers— investors and non-investors alike. Selling without tenants allows you to first update the property as needed which ultimately lets you garner the highest listing price possible. Staging a vacant property is pretty straightforward, but just being able to do so makes a huge difference that is usually reflected in the speed and strength of the offers received. It is also easy to show, because it will be vacant (not owner or tenant-occupied), so the property can receive as much traffic as possible. In our experience, whenever we’ve sold investment properties without any tenants, the properties have sold much quicker, and for way over asking price. Reason why, because most rental properties sold in Queens are not sold vacant, so for most buyers, there is usually a tenant factor involved. As a result, when you are selling a vacant investment property in Queens, you get a lot more activity, and much higher offers because there is a lot of value in that kind of piece of mind.The main challenge with listing without tenants is the planning that goes into the process. You first have to deliver the news to the tenant—hopefully the lease is at a month-to-month stage. Remember to check your rental agreement on the notice requirement. There will be a lag time between when you provide notice and when the property is ready to be listed—renovations, touch-ups, repairs and staging all take time. Because you won’t be receiving income from the property while the it’s vacant or listed, it’s important to plan for the financial shortfall during those weeks or months.
You have many factors to consider when deciding to sell your investment rental property. Be sure you’re working with a qualified real estate agent who can guide and assist you through this process. Rest assured that we here at the Queens Home Team have sold several investment properties, both with or without tenants, and we have developed a system to ensure success either way. In our professional opinion, selling without tenants is always the best bet because you can guarantee the highest sale price possible with little to no headaches. This is not always possible for homeowners, so if you do decide to sell with tenants, you just need to make sure you take all the necessary steps to ensure a smooth transaction.
Blog & site courtesy of George & Abigail Herrera with the Queens Home Team at Keller Williams Realty Landmark II