Selling While Renting: Balancing the Scales

Many of my clients are investors.  Their business models includes renting properties for cashflow and flipping properties for profit.  Sometimes though, an investor will find it necessary to sell a property that was originally purchased for cashflow.  When the property is a single family dwelling, this situation produces a unique set of dynamics that I would like to address in this post.

First, let's talk about what sells a home.  Curb appeal and interior condition are by far the majority part of getting a home sold if its priced comparable to other homes like it.  Also, furnished homes tend to sell faster than their non-furnished counterparts. Hence the rise of a cottage industry of "staging" vacant property.

So how do these factors work when a home for sale is inhabited by a tenant? Depending on what the lease says about yard work, the owner may be at the mercy of the tenant when it comes to keeping the front yard looking good.  The same goes for interior housekeeping.  Tenants do furnish their own homes but the quality and style of the furnishings are typically less desirable than what a "staging" company would put in the home.  Also, the owner is at the mercy of the tenants housekeeping habits.  Do they leave their white laundry on the kitchen table?  Is there a bag of dog food sitting in the living room?  You never know what quirky habits your tenant might have until they move in.

Another interesting dynamic that goes on in rentals is the trauma created by selling.  When a tenant knows that their home is for sale they immediately go into survival mode.  This turns into a fight-or-flight scenario.  Many tenants will simply abandon the home at the end of their lease and leave it vacant.  However, other, typically less-qualified tenants who have nowhere else to go, will dig in their heels and become adversarial toward agents and perspective buyers.  I have seen this on many occasions where the tenants outright refused to let us in or simply allowed their big dogs to answer the door.  This scenario put the owner of the property in a stalemate position.  The real estate agent and the tenant, both of whom benefit the owner, become adversaries due to conflicting agendas.

For this reason, I encourage landlords with less-qualified tenants to vacate their property prior to putting it on the market.  This allows for the home to be prepared properly for the market and gives it the best chance of selling.  Of course, the seller must be in a stable financial position to be able to make house payments while the house sits on the market.  If they are not in such a position, keeping the home rented and off the market while they create such a position is likely the best thing to do.

There is no such thing as miracles in the real estate market.  Trying to sell a dumpy home with mean tenants is a quick road to nowhere.  The markets are ruthless.  They demand quality.  Strive to provide the best product possible and you will be rewarded.