NA Selling Rental Property

NealRomeoGolf

NealRomeoGolf

Final Approach
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Apr 12, 2016
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Illinois
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NRG
I own a single family rental property in a small town (35,000 people) in Illinois. It has been rented by the same family for nearly 7 years. They've always said they want to buy it, but have never gotten their finances in order to be able to do so. I may be undergoing a big life change this summer that would behoove me to sell my property. Here's what I think my options are, but would love to hear from the group if you have other experiences.

1) Put it on the market before lease expires in July and hope they keep the property up well enough to show.
2) Wait until lease expires in July, have them vacate, then market the property.
3) Attempt one more time to get them to buy it by giving them 3 months notice to get something together.
4) Find another investor to take it over as a rental.

I've tried #4 a couple of times by joining Bigger Pockets and posting the property on Craigslist. Nothing has come of that. I tried contacting my old real estate agent to see if she knew of anyone that would want to invest in it. She doesn't return my emails. I guess I could contact other agents to try that as well. I also contacted a few flippers near the area but they don't want buy and hold and the property doesn't need any work done to flip.

Any other ideas or advice? If this were a bigger market I wouldn't be worried about option #2, but it's a small town. I think I have to go with option #1 if option #3 doesn't pan out.
 
Would short term owner financing work? or putting them in a lease option with a hefty option payment?
 
I would talk to the tenants and explain your situation, offer them first shot, again. Let them know that at the end of the lease, they have to find a new place, maybe offer a discoutn if they leave early. Then list it with a good active local realtor, one that hustles, not just the pretty one.:rolleyes: Have in the contract that possession can't take place until the lease is complete. Sometimes listing the property will turn your renters into buyers. :D
 
What town is it in? I have a few commercial properties and would consider a residential buy and hold if the numbers worked out.
PM me with the numbers...
 
N747JB said:
I would talk to the tenants and explain your situation, offer them first shot, again. Let them know that at the end of the lease, they have to find a new place, maybe offer a discoutn if they leave early. Then list it with a good active local realtor, one that hustles, not just the pretty one.:rolleyes: Have in the contract that possession can't take place until the lease is complete. Sometimes listing the property will turn your renters into buyers. :D
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#1. Even a hustling agent may take a few months to get the property sold in a small market. Depending on how they're maintaining the property, you could agree to go month-to-month after July with the agreement that they will allow the property to be shown. That way you'll continue to get revenue while the house is on the market, but will not hamstring potential buyers with a tenant.
 
Also agree with number 1. Putting it on the market will motivate them to get their finances together if it will be at all possible for them to buy it. They'll know by July whether or not they can make an offer, and you will have given them plenty of notice that they'll need to be out if they can't bring you an offer backed by financial qualification. People tend to exist in inertia if you don't give them a deadline so tell them they'll need to buy or be out in July. When July comes and if no one has bought it and they still can't buy it, like Brad says, then you can consider whether to allow them to stay on a month by month basis. If they are the sort who can't clean it up enough to show, consult with your experienced local real estate agent whether it would be better to put it on the market anyhow, because you'll want to catch the spring bump, or wait until they're out. The agent should know whether the type buyer in that local area will see past the renter's "ambience". (I'm thinking if it's a $100,000 property, okay, if it's $500K then no, you'll want it pristine to show.)
 
Brad Z said:
#1. Even a hustling agent may take a few months to get the property sold in a small market. Depending on how they're maintaining the property, you could agree to go month-to-month after July with the agreement that they will allow the property to be shown. That way you'll continue to get revenue while the house is on the market, but will not hamstring potential buyers with a tenant.
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Before doing that, I would run this past a real estate and tenant law attorney familiar with local law and customs. A buyer who is not a rental investor will be very weary of any property that still has a tenant. Nothing like having a rate lock expire because your sellers tenant has discovered that his cat has bubonic plague and filed an injunction with housing court keeping the landlord from throwing him in the streets. The reason for the filings doesn't matter, at that point it just becomes a power play or scheme to extract money from the landlord. Also, unless your tenants are OCD neatniks, having tenants in there will make it difficult to sell.

I used to live in a Condo which the landlord eventually wanted to sell. Before listing it, he offered it to me at a discount below market price and made a rent concession if I agreed to vacate before my lease was up. He only listed it with an agent after I had moved out.
 
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Just give them notice of your intent to sell at the end of the lease and give them the options to buy or voluntarily early withdraw from the lease if they wish and want to relocate...that way they either make an offer or would hopefully start finding a new place sooner then later if they know they are getting the boot allowing you to list it sooner.

Unless you find an investor, a buyer is not gonna wanna deal with a lease or hoping you can boot a month to month tenant.
 
weilke said:
Before doing that, I would run this past a real estate and tenant law attorney. A buyer who is not a rental investor will be very weary of any property that still has a tenant. Nothing like having a rate lock expire because your sellers tenant has discovered that his cat has bubonic plague and filed an injunction with housing court keeping the landlord from throwing him in the streets. The reason for the filings doesn't matter, at that point it just becomes a power play or scheme to extract money from the landlord. Also, unless your tenants are OCD neatniks, having tenants in there will make it difficult to sell.

I used to live in a Condo which the landlord eventually wanted to sell. Before listing it, he offered it to me at a discount below market price and made a rent concession if I agreed to vacate before my lease was up. He only listed it with an agent after I had moved out.
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How's your cat doing today? :rolleyes:
 
Shawn said:
Just give them notice of your intent to sell at the end of the lease and give them the options to buy or voluntarily early withdraw from the lease if they wish and want to relocate...that way they either make an offer or would hopefully start finding a new place sooner then later if they know they are getting the boot allowing you to list it sooner.

Unless you find an investor, a buyer is not gonna wanna deal with a lease or hoping you can boot a month to month tenant.
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You can always write into the contract that the deal is contingent upon the tenants vacating before closing. Alternatively, it may be attractive to an investor to buy a property that already has a decent long-term tenant. In a certain price-point, it's not unusual to have a house up for sale with current tenants. The biggest concern I would have is whether the property will acceptably show with them still in the house. That's a call that the OP, along with his agent can make. Having a house sit idle can be expensive too.
 
Brad Z said:
You can always write into the contract that the deal is contingent upon the tenants vacating before closing. Alternatively, it may be attractive to an investor to buy a property that already has a decent long-term tenant. In a certain price-point, it's not unusual to have a house up for sale with current tenants. The biggest concern I would have is whether the property will acceptably show with them still in the house. That's a call that the OP, along with his agent can make. Having a house sit idle can be expensive too.
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I bought my house from a couple who rented it and still had tenants. The house buying side went smooth as can be, it was the switching of utilities that sucked. The tenants were so behind on bills they were in the process of being sued by 2 different companies and refused to turn on services for be because they thought I was doing it for the old people.
 
I had residential rental property for maybe 25 years. IMO trying to show the property while it is occupied by tenants who really don't want to move is pretty risky. I would not do it. I'd work out the most amicable parting possible (assuming they still aren't buyers), then send a handyman into the home, followed by a cleaning service. Your local real estate salesperson can help you with this. Maybe a certified home inspector, too. If a home inspection is required you might as well get ahead of the game by getting the house looked at and understanding any issues, dealing with as many as possible.

I agree about hiring a local agent, but I strongly suggest that you visit the town for a couple of days. Drive around, see which realtors seem to have the most listings of your type of house, ideally in your neighborhood. Interview the sales managers for several, then interview agents. If you're doing a deal in your own town, you don't have to have a lot of trust in your agent. At a distance, though, your agent really is acting as agent and you have to be absolutely confident in him/her. You'll pay the agent thousands if you do a deal; a few hundred bucks and a couple of days invested to find the right agent is wise IMO>
 
1. Is out of order. 2 & 3 are normal. 4. Is a crap shoot. They'll just wait until you get the tenants out and fix it up and then buy it anyway.
 
You can also write a contract to sell to the current renters and include a portion of the rent towards their downpayment, with a deadline: if they don't close by (your date) then the downpayment assistance evaporates. I sold a rental home that way once, from 500 miles away. If I'd had my license and plane, I could have visited it more often and written off more travel money and some flight training . . .
 
We originally had a deal that if they bought within 3 years I would put in $1000 per year towards whatever (down payment, knock price off - however you slice it). That time has long since gone.
 
NealRomeoGolf said:
We originally had a deal that if they bought within 3 years I would put in $1000 per year towards whatever (down payment, knock price off - however you slice it). That time has long since gone.
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Your horizon was too far away. Ours rented for $600; I offered $200 per month credit towards downpayment if they closed within 12 months. The 2nd family that signed that lease closed in less than six months.
 
#2

I just sold 2 rentals in the last 6 months. The market is so hot, I had firm purchase agreements in less than a week both times. Escrow closings were 45 days, and I only had a 1 month dead horse on each. You don't think you could do similar?
 
If you want to show the house while tenants still live there, you should give the tenants an incentive to cooperate. Offer them a small refund of their rent each time a buyer visits, and double the refund if the house is clean and orderly. If that seems costly, consider that the alternative is waiting until they vacate and then you'll be getting no rent from them at all.
 
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