Investment Property Conundrum: Selling with or Without Tenants
November 2019
Deciding to sell an investment property can be a long, drawn-out process. There are so many variables to consider both financially and emotionally, that it may seem that there is never a good time to sell.
One of the key hurdles to selling an investment property is if the residence is tenanted. Legally, a homeowner is entitled to sell a property whenever they see fit. However, there are provisions that govern how a vendor can sell a tenanted property to minimise the impact on the renter. Specifics including showing the property to prospective buyers, conducting open for inspections, eligible access hours, and marketing such as photos and signage, are all subject to a strict set of rules. At times, disputes between landlords and tenants are escalated to the Tribunal, which is not a desirable outcome and can increase the stress of an investment property sale considerably.
Alternatively, to sell a property vacant, a lease with a tenant can only be terminated under certain conditions based on the type of agreement in place. Under a fixed term agreement, a landlord cannot terminate your agreement in order to sell the property. Under a periodic agreement, the landlord can issue a 30-day termination notice only if a contract of sale with a buyer has been exchanged, and the contract stipulates ‘vacant possession’.
Whichever option an investment property owner chooses can be fraught with potential issues. While a negative experience is not always the case, it pays to do your due diligence before embarking on the sale of a tenanted home. The pitfalls of not following the strict guidelines that protect tenants can be risky in the long run. Alternatively, if it is financially viable, not renewing a lease (again, following strict guidelines) and having the home vacant before selling may balance out somewhat with lost rental income. With a vacant property, there are more options to repair or renovate, as well as the choice to make an investment in staging the home. Professionally staged homes statistically produce stronger returns than not staged homes so this may be of benefit to homeowners. So an opportunity to prepare your home for sale properly, without the pressure of tenants, may be worth the wait.
