Selling a house with a tenant; timing and plan-of-action?

[Villanelle]

We are in the early, fact-finding stages of maybe considering to sell our rental property.  Currently has a tenant with a lease through June. I spoke today with an RE agent who we like and have a relationship with (he was the seller's agent when we bought the property in 2004 and we've stayed in tough).  One possibility he mentioned, which I hadn't considered, we selling it before the lease is up, so that the buyer would take on the least and be required to honor it through the end of the lease.  He said it isn't something he typically recommends, but in the current market, he thinks it would work and wouldn't turn off buyers.  By the time we list, accept an offer, and close, there would likely only be ~2 months left on the list.

Any thoughts on this? How does that even work with closing?  Does the buy just take on responsibility for whatever damages the tenants might do in that time, and received the security deposit from me so they can return it, minus damages, when the lease is over? Is it better to just wait until the lease is up?  We aren't buying or using the money for anything specific, so we aren't in a terrible hurry. 

And assuming we don't try to sell with a lease in place, is it better to wait until the tenants are out to even list, or can we list ~6 weeks before the end of the lease, and work with the tenants on showings?  (I'm fine incentivizing them financially, whatever that means.  Paying for a weekly housekeeper and giving them $50 (?) off rent for each showing?  Is that necessary?) 

We could afford to wait until they are out, but I don't love the idea of continuing to send a mortgage check while I'm not getting the income.  That's doable, I don't love it. 

Any other thoughts? 

[clarkfan1979]

If you want to net the most money, I would wait for the tenant to move out and then spend two weeks making the house look nice (touch-up paint, clean and small repairs). If the house then closes 45 days after you list, this will cost you two mortgage payments. I would also spend $1500 on minimal staging. I don't know your mortgage payment, but let's call it $5,000 total.

In order for this to work, you need an extra $5,000 on the sale price. In my opinion, you will get it. I think there are too many things that can go wrong when trying to sell a house with a current tenant. Some buyers will be turned off. Your tenant might also sabotage the showings so the house doesn't sell and they get to stay. This is not realistic for them, but they might attempt it because they have nothing to lose by doing so.
 

We are in the early, fact-finding stages of maybe considering to sell our rental property.  Currently has a tenant with a lease through June. I spoke today with an RE agent who we like and have a relationship with (he was the seller's agent when we bought the property in 2004 and we've stayed in tough).  One possibility he mentioned, which I hadn't considered, we selling it before the lease is up, so that the buyer would take on the least and be required to honor it through the end of the lease.  He said it isn't something he typically recommends, but in the current market, he thinks it would work and wouldn't turn off buyers.  By the time we list, accept an offer, and close, there would likely only be ~2 months left on the list.

Any thoughts on this? How does that even work with closing?  Does the buy just take on responsibility for whatever damages the tenants might do in that time, and received the security deposit from me so they can return it, minus damages, when the lease is over? Is it better to just wait until the lease is up?  We aren't buying or using the money for anything specific, so we aren't in a terrible hurry. 

And assuming we don't try to sell with a lease in place, is it better to wait until the tenants are out to even list, or can we list ~6 weeks before the end of the lease, and work with the tenants on showings?  (I'm fine incentivizing them financially, whatever that means.  Paying for a weekly housekeeper and giving them $50 (?) off rent for each showing?  Is that necessary?) 

We could afford to wait until they are out, but I don't love the idea of continuing to send a mortgage check while I'm not getting the income.  That's doable, I don't love it. 

Any other thoughts?

[Villanelle]

If you want to net the most money, I would wait for the tenant to move out and then spend two weeks making the house look nice (touch-up paint, clean and small repairs). If the house then closes 45 days after you list, this will cost you two mortgage payments. I would also spend $1500 on minimal staging. I don't know your mortgage payment, but let's call it $5,000 total.

In order for this to work, you need an extra $5,000 on the sale price. In my opinion, you will get it. I think there are too many things that can go wrong when trying to sell a house with a current tenant. Some buyers will be turned off. Your tenant might also sabotage the showings so the house doesn't sell and they get to stay. This is not realistic for them, but they might attempt it because they have nothing to lose by doing so.
 

We are in the early, fact-finding stages of maybe considering to sell our rental property.  Currently has a tenant with a lease through June. I spoke today with an RE agent who we like and have a relationship with (he was the seller's agent when we bought the property in 2004 and we've stayed in tough).  One possibility he mentioned, which I hadn't considered, we selling it before the lease is up, so that the buyer would take on the least and be required to honor it through the end of the lease.  He said it isn't something he typically recommends, but in the current market, he thinks it would work and wouldn't turn off buyers.  By the time we list, accept an offer, and close, there would likely only be ~2 months left on the list.

Any thoughts on this? How does that even work with closing?  Does the buy just take on responsibility for whatever damages the tenants might do in that time, and received the security deposit from me so they can return it, minus damages, when the lease is over? Is it better to just wait until the lease is up?  We aren't buying or using the money for anything specific, so we aren't in a terrible hurry. 

And assuming we don't try to sell with a lease in place, is it better to wait until the tenants are out to even list, or can we list ~6 weeks before the end of the lease, and work with the tenants on showings?  (I'm fine incentivizing them financially, whatever that means.  Paying for a weekly housekeeper and giving them $50 (?) off rent for each showing?  Is that necessary?) 

We could afford to wait until they are out, but I don't love the idea of continuing to send a mortgage check while I'm not getting the income.  That's doable, I don't love it. 

Any other thoughts?

The agent I spoke with says he doesn't recommend staging it and that he's not seeing it as necessary in this market, so thankfully that likely won't be an expense.  It got new carpet and some new paint a year  and a half ago when we had a massive plumbing issue, so all that should still be on good shape, but certainly there will be areas that could use a touch up. 

I agree that just telling them we aren't going to renew the lease, and then waiting for them to be gone, allowing a short time for any repairs, and then listing, is probably easiest.  Maybe I need to let go of the desire not to have a gap.  But that would mean not listing it until the latter end of summer, which isn't always as great a time to sell.   I think I'm also semi-worried about the current market crashing, but I'm trying not to factor that in since it is basically market-timing.

[clifp]

If you are selling the property to someone who is looking for a rental property then having a a tenant is a feature, not a bug. My partners who do flipping say that between 20-25% of their flips are sold to investors not home owners.  So I'd try to sell it now, you can always wait for the lease to expire and fix up later.  I've bought several rental properties with tenants, I was willing to pay a small premium, say roughly 3 months' rent.

[Telecaster]

In the Before Time (pre-COVID) we had a rental we wanted to sell.    Our realtor was pretty adamant that it would be much easier to sell if it was vacant.  Which makes sense to me.  If I bought a house I'd want to move in as soon as I got the keys.   That did mean there was a period between when we listed it and when it closed that we had no rental income.  But in the scheme of things, it wasn't that much money and I suspect--but of course can't know for sure--that we attracted more interest because it was move-in ready.   

[Villanelle]

If you are selling the property to someone who is looking for a rental property then having a a tenant is a feature, not a bug. My partners who do flipping say that between 20-25% of their flips are sold to investors not home owners.  So I'd try to sell it now, you can always wait for the lease to expire and fix up later.  I've bought several rental properties with tenants, I was willing to pay a small premium, say roughly 3 months' rent.

IMO, this is a terrible rental.  It has been a fantastic rental for us, in that it always rents immediately.  I think we've always had a signed lease before the current lease was even up.  Due to the floor plan, the fact that it is a very rare townhouse (so, cheaper) in a nice suburban hood known for good schools, and fairly close to the major work areas in a city with significant traffic but juuust far enough that prices aren't quite as insance, and a few other things, it is desirable.  But it will rent at less than .05% of the sale price.  (Current rent is 3200, though I'm sure that can be increased a bit given what the market has done in the last year, and projected sale is somewhere north of 800k.) So I can't imagine anyone would want to buy it as a rental, but I suppose stranger things have happened.  There's also not much room to improve it and get those numbers up.  The kitchen is old and dated, but spending $$ to replace it isn't going to net meaningfully higher rent, especially because it isn't a high end rental anyway.  Nor is it low end, but I don't see the value to a potential landlord (that's much of the reason we are selling, though the numbers are somewhat less bad for us as we benefit from CA's Prop 13 and a lower tax basis, at least.) or for a flipper who might want to wait out a couple months of a lease.  I mean, it could happen, but I am doubtful. 

I'll talk more with the agent about whether it would hurt us if we try to sell now-ish (with tenant in place) and it doesn't go, or we get lower offers, and then we reattack a couple months.  But right now, my inclination is to wait until closer to the end of lease and then either try to show while occupied (since the realtor said nearly everything reasonably priced is selling in less than 2 weeks, so not a ton of showing required and we could even try to consolidate them into maybe 2 windows of time), or even just wait to list until it is empty.  Unless the market shifts, it shouldn't take long to sell so eating the unrented time isn't a big deal.  One other option would be to see if the tenants want to extend month-to-month (perhaps at a reduced rent, which will be extra desirable since they are likely go to pay way more somewhere else) and agree to make it presentable and available for showings. 

All things to discuss with agent and PM once we are pretty sure we are going to sell. 

[Ants]

Have you talked to the tenant about buying it? You could cut out the realtors and potentially save yourself some headaches with listing?

[YttriumNitrate]

When I bought my last house, there was a tenant living in it. It was great in that A) none of the cheap cosmetic fixes had been done to drive up the asking price, B) the tenet's junk was all over the place during the showing to make the house look bad, and C) I got very honest feedback from the  tenant regarding the condition of the house when I was viewing it. While these things are good from a buyer's perspective, they aren't from the perspective of a seller wanting to get top dollar.

[clifp]

If you are selling the property to someone who is looking for a rental property then having a a tenant is a feature, not a bug. My partners who do flipping say that between 20-25% of their flips are sold to investors not home owners.  So I'd try to sell it now, you can always wait for the lease to expire and fix up later.  I've bought several rental properties with tenants, I was willing to pay a small premium, say roughly 3 months' rent.

IMO, this is a terrible rental.  It has been a fantastic rental for us, in that it always rents immediately.  I think we've always had a signed lease before the current lease was even up.  Due to the floor plan, the fact that it is a very rare townhouse (so, cheaper) in a nice suburban hood known for good schools, and fairly close to the major work areas in a city with significant traffic but juuust far enough that prices aren't quite as insance, and a few other things, it is desirable.  But it will rent at less than .05% of the sale price.  (Current rent is 3200, though I'm sure that can be increased a bit given what the market has done in the last year, and projected sale is somewhere north of 800k.)

So the cap rate is 5% which is average in CA (NoCal or SoCal?) Lot of folks have a made a ton of money with rentals in CA with similar cap rates over the last 20 years.  I agree a vacant place, that is fixed up is best for most buyers.  Just pointing out that not every buyer is looking for their dream house to move into.  If you aren't in hurry to sell certainly no harm in waiting.

A good RE will make sure that the tenant isn't present when you are showing the house. 

[Villanelle]

Have you talked to the tenant about buying it? You could cut out the realtors and potentially save yourself some headaches with listing?

It is three single roommates, so that seems unlikely.  When we make a final decision, I'll certainly run it by them as yes, it would be ideal.  But doesn't seem likely. 

[Villanelle]

If you are selling the property to someone who is looking for a rental property then having a a tenant is a feature, not a bug. My partners who do flipping say that between 20-25% of their flips are sold to investors not home owners.  So I'd try to sell it now, you can always wait for the lease to expire and fix up later.  I've bought several rental properties with tenants, I was willing to pay a small premium, say roughly 3 months' rent.

IMO, this is a terrible rental.  It has been a fantastic rental for us, in that it always rents immediately.  I think we've always had a signed lease before the current lease was even up.  Due to the floor plan, the fact that it is a very rare townhouse (so, cheaper) in a nice suburban hood known for good schools, and fairly close to the major work areas in a city with significant traffic but juuust far enough that prices aren't quite as insane, and a few other things, it is desirable.  But it will rent at less than .05% of the sale price.  (Current rent is 3200, though I'm sure that can be increased a bit given what the market has done in the last year, and projected sale is somewhere north of 800k.)

So the cap rate is 5% which is average in CA (NoCal or SoCal?) Lot of folks have a made a ton of money with rentals in CA with similar cap rates over the last 20 years.  I agree a vacant place, that is fixed up is best for most buyers.  Just pointing out that not every buyer is looking for their dream house to move into.  If you aren't in hurry to sell certainly no harm in waiting.

A good RE will make sure that the tenant isn't present when you are showing the house.

SoCal.  I can't believe anyone would pay $850 k for a place that may rent for $3300!

I do think I'm also motivated by fears that the market will cool while I wait out my dang lease!  Of course, the market could also continue to rise (or stagnate).  I'm trying not to listen to that part of my brain though. 

[clarkfan1979]

When I bought my last house, there was a tenant living in it. It was great in that A) none of the cheap cosmetic fixes had been done to drive up the asking price, B) the tenet's junk was all over the place during the showing to make the house look bad, and C) I got very honest feedback from the  tenant regarding the condition of the house when I was viewing it. While these things are good from a buyer's perspective, they aren't from the perspective of a seller wanting to get top dollar.

Agree 100%. This is pretty much what I was saying.

[Villanelle]

When I bought my last house, there was a tenant living in it. It was great in that A) none of the cheap cosmetic fixes had been done to drive up the asking price, B) the tenet's junk was all over the place during the showing to make the house look bad, and C) I got very honest feedback from the  tenant regarding the condition of the house when I was viewing it. While these things are good from a buyer's perspective, they aren't from the perspective of a seller wanting to get top dollar.

Agree 100%. This is pretty much what I was saying.

Part of me offering them some sort of incentive per showing would be with the understanding that they are not present during showings, but I see what you are saying.  Point taken. 

[Sibley]

From painful experience - if your buyer doesn't want the tenant, then the tenant can potentially kill the deal. If they refuse to vacate, etc. But it will vary based on your situation.

[LightStache]

You could also buy your tenant out if you want to go to market sooner. That's what I did -- offered 50% off last month's rent to vacate by Feb 28.

I was also worried about the market cooling off, but that was in Spring 2021. Now a year later, yea...

The market for most homes is mainly owner-occupants. Having tenants will scare them off for multiple reasons. Unless I was selling a multi-plex or low end market, I'd never list with a tenant in place.

[Villanelle]

You could also buy your tenant out if you want to go to market sooner. That's what I did -- offered 50% off last month's rent to vacate by Feb 28.

I was also worried about the market cooling off, but that was in Spring 2021. Now a year later, yea...

The market for most homes is mainly owner-occupants. Having tenants will scare them off for multiple reasons. Unless I was selling a multi-plex or low end market, I'd never list with a tenant in place.

We have floated an incentive if they are out early.  I know the rental market is insane, but hopefully that will get them looking ASAP.  They've been given verbal notice and the written notice is forthcoming, so they will have had just over 3 months notice.  The incentive will be larger if they are out in a month (2 months early) than if they are out in 2.5 months (2 weeks early).  About half a month's rent for anything between now and 1 month early.  I know the rental market is tough, but hopefully that encourages them to be aggressive in the search.

I think the plan as of now is to list 30 days before the end of the lease, so that closing would happen after it is vacant.  That means showing with tenants in place, but unless the market cools considerably, we likely aren't looking at dozens of showings to find a buyer.  Rough plan is to have it available for 1 week ("all offers must be received by X day at noon", which will be about a week before it is officially listed, after being in "Coming soon" status for a few weeks).  So the tenants will only have to deal with 1 week of showings, but we can hopefully get multiple offers.

This is a tentative plan, and could change.  Agent is getting in to see the property next week and will have a sense of how it will show while occupied. 

[LightStache]

You could also buy your tenant out if you want to go to market sooner. That's what I did -- offered 50% off last month's rent to vacate by Feb 28.

I was also worried about the market cooling off, but that was in Spring 2021. Now a year later, yea...

The market for most homes is mainly owner-occupants. Having tenants will scare them off for multiple reasons. Unless I was selling a multi-plex or low end market, I'd never list with a tenant in place.

We have floated an incentive if they are out early.  I know the rental market is insane, but hopefully that will get them looking ASAP.  They've been given verbal notice and the written notice is forthcoming, so they will have had just over 3 months notice.  The incentive will be larger if they are out in a month (2 months early) than if they are out in 2.5 months (2 weeks early).  About half a month's rent for anything between now and 1 month early.  I know the rental market is tough, but hopefully that encourages them to be aggressive in the search.

I think the plan as of now is to list 30 days before the end of the lease, so that closing would happen after it is vacant.  That means showing with tenants in place, but unless the market cools considerably, we likely aren't looking at dozens of showings to find a buyer.  Rough plan is to have it available for 1 week ("all offers must be received by X day at noon", which will be about a week before it is officially listed, after being in "Coming soon" status for a few weeks).  So the tenants will only have to deal with 1 week of showings, but we can hopefully get multiple offers.

This is a tentative plan, and could change.  Agent is getting in to see the property next week and will have a sense of how it will show while occupied.

Sounds like a good plan!

[iluvzbeach]

For those wondering how a place with tenants goes in today’s market…take a look at this place (focus on the pics - someone living in the garage?) and then realize it was pending within 4 days of listing. By the way, list price is on the low end for the area but not terribly low or even out of line of some other nearby properties from the past six months. I share all this to say I don’t think buyers will be all that deterred by tenants in today’s market.

https://www.zillow.com/homedetails/653-Blue-Moon-Dr-Central-Pt-OR-97502/68675355_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare

[Villanelle]

For those wondering how a place with tenants goes in today’s market…take a look at this place (focus on the pics - someone living in the garage?) and then realize it was pending within 4 days of listing. By the way, list price is on the low end for the area but not terribly low or even out of line of some other nearby properties from the past six months. I share all this to say I don’t think buyers will be all that deterred by tenants in today’s market.

https://www.zillow.com/homedetails/653-Blue-Moon-Dr-Central-Pt-OR-97502/68675355_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare

It's hard to tell from the listing whether it is selling with an active lease that needs to be honored beyond closing (and if so, for how long), or if it just has renters now but they are month-to-month or the lease is ending soon.

I think selling when there are currently tenants for the showings, but they will be out by closing is very different than buying if there is an existing lease that needs to be honored.  Our agent suggested the latter would be possible for us but it would limit the number of buyers, and that the only reason he wouldn't very strongly recommend against it would be that the lease would only have 2 months or less by the time we would close, which isn't that different from a rent-back, which are common right now.  We still decided against it.  It seems like that would be ideal for someone who couldn't afford even a month or two of carrying costs without having rent coming in.  We are fine if it is vacant for a while, so attracting the most buyers seems more important than getting it listed ASAP.

[Villanelle]

LOLZ.  The tenant came back with a proposed incentive plan for early move out. 

$12,000 - May 1st
$10,000 - May 15th
$6,000 - June 1st
$3,000- June 15th

Insanity!

This is for a place with a $3200 per month rent.  We don't *need* them out early.  It's not as though we are closing on another place and need the funds, or anything like that.  It was just going to be nice to be able to get this taken care of and mentally over and done with.  So instead they can stay until the end of the lease--June 30--and move out with $0, and likely have to pay double rent for at least a few days unless they can move everything in one day. 

I suspect this also means they are going to be a-holes about scheduling some basic repairs and inspections, but in the end, the law says I can do that as long as they are given proper notice.  It may also mean they will be assholes about showings, in which case we can wait to start showing until they are out.  I was trying to be flexible by not only allowing them to move out early if they found a place, but also offering them some cash to do so, but we can proceed according to the letter of the law/lease now, which is rent through June, and some minor work on the place on our timeline.  I'm happy to be somewhat flexible on the work timeline, but if they are going to dig in their heels, we can default to everyone's legal rights, if we must.  (I'm not talking majorly intrusive things, but a termite inspection, replacing some rotting boards on the deck, and recaulking the tub.)

[Ladychips]

Do you think perhaps they got some bad advice from your property manager? At least this settles the uncertainty and now you know what you are dealing with.  And you don't have to pay anything.  Not a terrible outcome. In this market, I suspect you'll sell quickly so perhaps it will all work out for the best.  I hope you'll keep updating us!

[LightStache]

LOLZ.  The tenant came back with a proposed incentive plan for early move out. 

$12,000 - May 1st
$10,000 - May 15th
$6,000 - June 1st
$3,000- June 15th

Insanity!

This is for a place with a $3200 per month rent.  We don't *need* them out early.  It's not as though we are closing on another place and need the funds, or anything like that.  It was just going to be nice to be able to get this taken care of and mentally over and done with.  So instead they can stay until the end of the lease--June 30--and move out with $0, and likely have to pay double rent for at least a few days unless they can move everything in one day. 

I suspect this also means they are going to be a-holes about scheduling some basic repairs and inspections, but in the end, the law says I can do that as long as they are given proper notice.  It may also mean they will be assholes about showings, in which case we can wait to start showing until they are out.  I was trying to be flexible by not only allowing them to move out early if they found a place, but also offering them some cash to do so, but we can proceed according to the letter of the law/lease now, which is rent through June, and some minor work on the place on our timeline.  I'm happy to be somewhat flexible on the work timeline, but if they are going to dig in their heels, we can default to everyone's legal rights, if we must.  (I'm not talking majorly intrusive things, but a termite inspection, replacing some rotting boards on the deck, and recaulking the tub.)

If you decline (politely) they might come back with a lower ask, although they didn't exactly set a good anchor. When I went through this with my tenants, we didn't immediately agree on an early out deal. But then they started looking at new places, quickly found one that they wanted to lock in, and came back to ask me for a specific move out date. That's still a possibility for you.

[Villanelle]

Do you think perhaps they got some bad advice from your property manager? At least this settles the uncertainty and now you know what you are dealing with.  And you don't have to pay anything.  Not a terrible outcome. In this market, I suspect you'll sell quickly so perhaps it will all work out for the best.  I hope you'll keep updating us!

It is entirely possible and I've wondered that.  She was mediocre in the best of circumstances, and she's salty that we aren't using her as our agent.  And if the tenants leave 2 months early, that's 2 months less of the PM fee for her.  I don't want to think she'd be that shady, but.... 

If that is the case and they took her advice, they screwed themselves.  There was free money on the table, and they left it there because they were greedy.  A new place might have higher rent, but it isn't going to be $2000 higher for 2 months.  So now unless they change their minds, they move at the end of the lease and get nothing.  Based on those extortion-level numbers, I have to believe they thought for some reason we were desperate.  But the reality is we are totally fine waiting.  Heck, it the markets keep doing their thing, their refusal may see me come out thousands of dollars ahead.  I collect a couple more months of rent and might see another $5-10k, or more in the value.  (Zillow--which I know isn't super accurate--has it up $30k in the last month alone.)  of course, I know it could stagnate or drop, too. 

I think there is still a chance that now that this conversation has ended (for the time being) they will start looking, find a place that is available before June 30th, and come back to us.  If they are out by early May at the latest, I *might* be willing to go up to $2500, but maybe not.  And at that point, I will be holding even more of the cards, because they will have presumably found a place they like, in a very, very tight rental market, so they will be the ones desperate to get out, or else they have to pay double rent or let that place go and hope they aren't homeless in July. 

They may also think it through and realizing that moving everything in 1 day is tough.  They'd have to get the place empty and presumably into a truck or storage unit on June 30, and then move in to the new place on July 1.  And even that is rough because they have to clean the carpets, per their lease, so if it isn't empty until June 30, I'm not sure when that happens.  Or they will have to pay double rent for at least a few days, which is spending money when they could have been getting money from me.

This is why I genuinely thought we were being generous offering them an early out for the lease, and even some cash.  I thought it was a huge win for them, and a small win for us to do that.  Clearly, they thought otherwise. 

[Villanelle]

Our agent followed up, asking the tenant if they want to take the $3000 or stay through the end of the lease.  They responded with this:

Agent'sName , if you made it 6,000 we would sign today, to be out by end of May, but for 3,000 it’s tough.
What are the chances you would meet us at 5k?
At this point we are open to negotiating. We have found a nice place to transition into. We are willing to work with you but for a fair price.
Thanks.

The language about "fair price" raises my hackle a bit, but there's no point in engaging on that.  If they have found a place like they say they have, then I suspect they need to leave early or they will lose that place, and in the insane market for rentals, the chances of finding something else on their very specific timeline, with no overlap or gap, isn't great.  So I think they need to do this and are just playing hard ball.  In order to maybe allow them to save face and feel like they negotiated us up, I've told the agent I can go up to $3500, and I suggested it might help for him to make it clear we in no way need them out, and the incentive was something I thought would be mutually beneficial to both parties because we could be done with the sale sooner, and they could have more flexibility in their timing. 

I don't know if a $500 increase will be insulting to them (BTW, that makes it more than 1 months' rent), but I don't especially care.  If it helps them feel like they won and they can now give us the yes they want to, in order to move in to the place they found, fine.  If not, they leave a month later with nothing by my best wishes.

In the mean time the Zillow on my house has gone up another $4000, making it more than $40k in the last few months!  I know Zillow isn't perfect and I suspect it is high for our place given how dated the finishes are, but the fact that it continues to creep up is amazing.  Wonderful, and amazing. 

[LightStache]

Our agent followed up, asking the tenant if they want to take the $3000 or stay through the end of the lease.  They responded with this:

Agent'sName , if you made it 6,000 we would sign today, to be out by end of May, but for 3,000 it’s tough.
What are the chances you would meet us at 5k?
At this point we are open to negotiating. We have found a nice place to transition into. We are willing to work with you but for a fair price.
Thanks.

The language about "fair price" raises my hackle a bit, but there's no point in engaging on that.  If they have found a place like they say they have, then I suspect they need to leave early or they will lose that place, and in the insane market for rentals, the chances of finding something else on their very specific timeline, with no overlap or gap, isn't great.  So I think they need to do this and are just playing hard ball.  In order to maybe allow them to save face and feel like they negotiated us up, I've told the agent I can go up to $3500, and I suggested it might help for him to make it clear we in no way need them out, and the incentive was something I thought would be mutually beneficial to both parties because we could be done with the sale sooner, and they could have more flexibility in their timing. 

I don't know if a $500 increase will be insulting to them (BTW, that makes it more than 1 months' rent), but I don't especially care.  If it helps them feel like they won and they can now give us the yes they want to, in order to move in to the place they found, fine.  If not, they leave a month later with nothing by my best wishes.

In the mean time the Zillow on my house has gone up another $4000, making it more than $40k in the last few months!  I know Zillow isn't perfect and I suspect it is high for our place given how dated the finishes are, but the fact that it continues to creep up is amazing.  Wonderful, and amazing.

Hehe I kind of like your tenants. If you counter with $3.5K, you should expect another counter from them. If you really don't care whether they move early and you don't like negotiating, just restate the $3K. They might just take it.

[Villanelle]

Our agent followed up, asking the tenant if they want to take the $3000 or stay through the end of the lease.  They responded with this:

Agent'sName , if you made it 6,000 we would sign today, to be out by end of May, but for 3,000 it’s tough.
What are the chances you would meet us at 5k?
At this point we are open to negotiating. We have found a nice place to transition into. We are willing to work with you but for a fair price.
Thanks.

The language about "fair price" raises my hackle a bit, but there's no point in engaging on that.  If they have found a place like they say they have, then I suspect they need to leave early or they will lose that place, and in the insane market for rentals, the chances of finding something else on their very specific timeline, with no overlap or gap, isn't great.  So I think they need to do this and are just playing hard ball.  In order to maybe allow them to save face and feel like they negotiated us up, I've told the agent I can go up to $3500, and I suggested it might help for him to make it clear we in no way need them out, and the incentive was something I thought would be mutually beneficial to both parties because we could be done with the sale sooner, and they could have more flexibility in their timing. 

I don't know if a $500 increase will be insulting to them (BTW, that makes it more than 1 months' rent), but I don't especially care.  If it helps them feel like they won and they can now give us the yes they want to, in order to move in to the place they found, fine.  If not, they leave a month later with nothing by my best wishes.

In the mean time the Zillow on my house has gone up another $4000, making it more than $40k in the last few months!  I know Zillow isn't perfect and I suspect it is high for our place given how dated the finishes are, but the fact that it continues to creep up is amazing.  Wonderful, and amazing.

Hehe I kind of like your tenants. If you counter with $3.5K, you should expect another counter from them. If you really don't care whether they move early and you don't like negotiating, just restate the $3K. They might just take it.

This is definitely as high as I'll go. The fact that they stated they have found a place (if true) sort of means they need to be out early anyway. It would be ore expensive to carry another place for more than a couple weeks than to just take my offer.  With the rental market as tight as it is, no place is going to hold something empty, not collecting rent, for more than a few days, if that.  And since the alternative is walking away 30 days later with nothing, they are crazy if they don't take this.  The only reason I could think of for them not doing so is that they haven't found a a new place, and it seems like they have.

And frankly his "fair price" comment rankled.  This is business so I don't want to make decisions based on emotion, but that definitely didn't grease the skids on further negotiations.  The fact that he thinks $3000 for doing basically nothing isn't "fair" is insanity.  If that was a tactic, it failed miserably.  Saying it's not enough incentive is one thing, but saying it isn't "fair" is just insulting. And also doesn't suggest that we are anywhere near the same page, so future negotiations would be pointless, even if I was willing to go higher. 

[Mustache ride]

It seems like they are a rookie negotiator.  Says 6K to sign today but then undercuts themselves to 5.5K, while also blowing all leverage by saying they found a place. My guess is they are negotiating to try to get a little more money from you, and if you held firm they would have taken it. Either way, the increase should be more than enough to get them out. Good luck!

[Villanelle]

Well, they agreed to the $3500 about a week and a half ago.  To be out May 31.  Except then they reached out again and the place they had lined up fell through (so I guess that means they hadn't actually signed a lease before agreeing?).  They are going to attempt to find a place this weekend, but the chances of them finding something for occupancy in a week and a half seems slim to none.  I tod our agent (who is the one dealing with them), that we would be willing to discuss a smaller incentive if they are out sometime between May 31 and June 30 (the end of the lease, when they move and get nothing).

But frankly, I don't think I'm willing to offer the $3500 pro-rated without a discount to myself, as 2 weeks is worth much less to me than a month was.  And at that point, I feel like I have all the bargaining power.  If they find a place and sign on it they need to be out, so I'm not inclined to pay them $1750 for half a month.

Because I can wait 2 weeks, which isn't much time, and pay them nothing.  They wanted to play hard ball, so I can, too.  I don't want to screw them and I also don't want to piss them off enough that they do something stupid like stay longer, damage things, etc.  But really, it isn't worth $1750 to me to get the house on the market 2 weeks sooner.  (and probably less than that, since I'd agreed to hold off on work until they were moved out, even though I didn't have to, but I'm not canceling the workers we have scheduled to replace some bad decking on June 1. 

[Ladychips]

@Villanelle do you have an update you'd be willing to share?

[Villanelle]

@Villanelle do you have an update you'd be willing to share?

Sure.  Sadly, it's not the update I want to be sharing.  It seems the market cooled *quickly* in the area of my rental.  This isn't just realtor excuses and BS.  It's quite clear just based on looking at listing.  We are still listed.  We had one lowball offer that came up slightly but then wouldn't budge.  Right now, we are doing some basic improvements and it would be great if those got it sold, but mostly I'm doing them with renting in mind as I'm pretty sure that's where we will be.  Repairs/improvements should be done at the end of this week, and I'll likely let it stay on the market a couple more weeks after that, then list it for rent.  (I'll likely keep it listed for sale until we have a signed lease, but it looks like it would rent very quickly.)  We are doing LVP, which will look much better than the mix of dated flooring materials we currently have, and also be much better as a rental, especially with CA's laws.  (I think they consider the useful like fo carpet to be something like 4 or 5 years, so even if a tenant damages the carpet, you get almost no money for it.)

I've already interviews a couple new property managers, since I was pretty unhappy with our old one.  One of them came highly recommended from one of my husband's coworkers who happens to own property in the same city.  I really liked him and he made great suggestions. 

This situation is largely what prompted my "what's your biggest financial mistake" thread.  We haven't been collecting rent for 2.5 months.  this makes no difference in our day-to-day finances.  We are investing slightly less.  So it's only a "financial mistake" in what feels like an abstract way.  We tried a thing and it appears it didn't work, and that's okay.  Would our bottom line have been better had we not done this?  Absolutely.  But I still think trying was the right choice.

Unless the next few weeks bring a surprise, it looks like I won't be done being a long distance landlord. 

[Ladychips]

I'm sorry it didn't work out like you wanted, but I think a couple of months rent to get a new property manager may turn out to be a good deal.

I appreciate the update and would love to have another one in a few weeks if you are so inclined.

[clarkfan1979]

If you want to net the most money, I would wait for the tenant to move out and then spend two weeks making the house look nice (touch-up paint, clean and small repairs). If the house then closes 45 days after you list, this will cost you two mortgage payments. I would also spend $1500 on minimal staging. I don't know your mortgage payment, but let's call it $5,000 total.

In order for this to work, you need an extra $5,000 on the sale price. In my opinion, you will get it. I think there are too many things that can go wrong when trying to sell a house with a current tenant. Some buyers will be turned off. Your tenant might also sabotage the showings so the house doesn't sell and they get to stay. This is not realistic for them, but they might attempt it because they have nothing to lose by doing so.
 

We are in the early, fact-finding stages of maybe considering to sell our rental property.  Currently has a tenant with a lease through June. I spoke today with an RE agent who we like and have a relationship with (he was the seller's agent when we bought the property in 2004 and we've stayed in tough).  One possibility he mentioned, which I hadn't considered, we selling it before the lease is up, so that the buyer would take on the least and be required to honor it through the end of the lease.  He said it isn't something he typically recommends, but in the current market, he thinks it would work and wouldn't turn off buyers.  By the time we list, accept an offer, and close, there would likely only be ~2 months left on the list.

Any thoughts on this? How does that even work with closing?  Does the buy just take on responsibility for whatever damages the tenants might do in that time, and received the security deposit from me so they can return it, minus damages, when the lease is over? Is it better to just wait until the lease is up?  We aren't buying or using the money for anything specific, so we aren't in a terrible hurry. 

And assuming we don't try to sell with a lease in place, is it better to wait until the tenants are out to even list, or can we list ~6 weeks before the end of the lease, and work with the tenants on showings?  (I'm fine incentivizing them financially, whatever that means.  Paying for a weekly housekeeper and giving them $50 (?) off rent for each showing?  Is that necessary?) 

We could afford to wait until they are out, but I don't love the idea of continuing to send a mortgage check while I'm not getting the income.  That's doable, I don't love it. 

Any other thoughts?

I looked at two rental properties today as a vacation home/investment property. I was really interested in one property and the other was a comp. When I looked at the comp, it was tenant occupied and the tenant turned the entire house into a marijuana grow house. House was listed for 309K and it won't sell at that price. If the house was not full of marijuana plants and somewhat clean, I think it would sell for 400K. As a result, if I was the seller, I would terminate the lease, spend 10K fixing it up and list it for 399K.

[Villanelle]

If you want to net the most money, I would wait for the tenant to move out and then spend two weeks making the house look nice (touch-up paint, clean and small repairs). If the house then closes 45 days after you list, this will cost you two mortgage payments. I would also spend $1500 on minimal staging. I don't know your mortgage payment, but let's call it $5,000 total.

In order for this to work, you need an extra $5,000 on the sale price. In my opinion, you will get it. I think there are too many things that can go wrong when trying to sell a house with a current tenant. Some buyers will be turned off. Your tenant might also sabotage the showings so the house doesn't sell and they get to stay. This is not realistic for them, but they might attempt it because they have nothing to lose by doing so.
 

We are in the early, fact-finding stages of maybe considering to sell our rental property.  Currently has a tenant with a lease through June. I spoke today with an RE agent who we like and have a relationship with (he was the seller's agent when we bought the property in 2004 and we've stayed in tough).  One possibility he mentioned, which I hadn't considered, we selling it before the lease is up, so that the buyer would take on the least and be required to honor it through the end of the lease.  He said it isn't something he typically recommends, but in the current market, he thinks it would work and wouldn't turn off buyers.  By the time we list, accept an offer, and close, there would likely only be ~2 months left on the list.

Any thoughts on this? How does that even work with closing?  Does the buy just take on responsibility for whatever damages the tenants might do in that time, and received the security deposit from me so they can return it, minus damages, when the lease is over? Is it better to just wait until the lease is up?  We aren't buying or using the money for anything specific, so we aren't in a terrible hurry. 

And assuming we don't try to sell with a lease in place, is it better to wait until the tenants are out to even list, or can we list ~6 weeks before the end of the lease, and work with the tenants on showings?  (I'm fine incentivizing them financially, whatever that means.  Paying for a weekly housekeeper and giving them $50 (?) off rent for each showing?  Is that necessary?) 

We could afford to wait until they are out, but I don't love the idea of continuing to send a mortgage check while I'm not getting the income.  That's doable, I don't love it. 

Any other thoughts?

I looked at two rental properties today as a vacation home/investment property. I was really interested in one property and the other was a comp. When I looked at the comp, it was tenant occupied and the tenant turned the entire house into a marijuana grow house. House was listed for 309K and it won't sell at that price. If the house was not full of marijuana plants and somewhat clean, I think it would sell for 400K. As a result, if I was the seller, I would terminate the lease, spend 10K fixing it up and list it for 399K.

If just de-potting and cleaning would make it worth ~$100k more, is there a reason you wouldn't consider buying it and doing that?  Seems like a great opportunity, especially for a rental. 

Part of the reason we waited until it was vacated to list was this, though to a much lesser degree.  The tenants were fine--no weed farm or anything like that.  But it was 3 single-guy roommates and looked like a mix of college frat furnishings (though they were slightly older professionals, maybe in their early 30s-ish) and an electronics store back room.  It definitely wouldn't have shown well, even beyond its admittedly somewhat dated features. 

We are replacing all flooring, most with LVP.  (Carpet in 2 of the bedrooms, the stairs, and a loft space.)  Since there were many types of flooring that made it look old and cheap, this will be huge whether we end up selling or re-renting.  Also repairing and painting a few cracks in the ceiling (which is more expensive than you might imagine due to the soaring, 2-story ceilings) but still not all that much, doing a good cleaning on the cabinets which the painter swears will make them look so much better and be better than painting (and I somewhat trust that assessment because it would have been more lucrative for him to paint), and fixing some peeling window tint since the condition of the windows got comments from several of the showings.  All in it is >$15k. 

I'm guessing the changes can get us maybe $250 more per month if/when we rent it.  So a 5 year break-even, give or take.  But more importantly, those LVP floors will last much longer (and I can actually hold a tenant accountable if they trash them, rather than getting a few hundred bucks if they literally light fire to the carpet and draw dicks on it with a Sharpie; thanks, CA rental laws!).  So that will save money on both carpet and vacancies while I replace carpet between tenants.  If we don't sell this year, we pay cap gains on the increase when we do sell, so we are unlikely to sell any time soon.  It was sort of "this year or probably not for a long time", and it seems this year isn't panning out. 

[PMJL34]

Hindsight really is 20/20. We all know that you would have got above asking price if you would have listed it as-is when you first created this thread.

However, you did the "right thing" by getting tenants out and listing it in a summer month. I would have likely done the same. It was difficult to predict the turn of events happening so quickly.

Glad you are able to make lemonade from the situation and you seem to be taking it all in stride as you should. At the end of the day, you still own a very attractive property in a great location. It all works out!

[Villanelle]

Hindsight really is 20/20. We all know that you would have got above asking price if you would have listed it as-is when you first created this thread.

However, you did the "right thing" by getting tenants out and listing it in a summer month. I would have likely done the same. It was difficult to predict the turn of events happening so quickly.

Glad you are able to make lemonade from the situation and you seem to be taking it all in stride as you should. At the end of the day, you still own a very attractive property in a great location. It all works out!

This is when it is so, so nice to have savings and a clear picture of a stable future.  I can look at this in a detached way and sort of shrug my shoulders at a failed experiment, and move on.  If we'd have been counting on a quick sale and couldn't pay our mortgage--much less the cost of improvements--without that rent check coming in, this could have been devastating.  Instead, it's more an annoying pebble in my financial shoe that I'll dump out and forget about. 

And both of the PMs I spoke with quoted much higher rent numbers than we were getting.  Even accounting for the fact that they will be inclined to quote optimistic numbers in order to get my business, things look good on that front.  It's a very difficult property to comp because it is in a neighborhood if SFHs, with a few apartment-style condos, but it is a townhouse.  I always checked comps, but relied on my PM for advice and I think maybe she was just giving slightly lower numbers to make her job easier.  Yes, the market has gone up a lot in the year since we signed the last lease, but if we get anywhere near what the PMs suggested, the numbers on the property as a rental look even better. 

[clarkfan1979]

If you want to net the most money, I would wait for the tenant to move out and then spend two weeks making the house look nice (touch-up paint, clean and small repairs). If the house then closes 45 days after you list, this will cost you two mortgage payments. I would also spend $1500 on minimal staging. I don't know your mortgage payment, but let's call it $5,000 total.

In order for this to work, you need an extra $5,000 on the sale price. In my opinion, you will get it. I think there are too many things that can go wrong when trying to sell a house with a current tenant. Some buyers will be turned off. Your tenant might also sabotage the showings so the house doesn't sell and they get to stay. This is not realistic for them, but they might attempt it because they have nothing to lose by doing so.
 

We are in the early, fact-finding stages of maybe considering to sell our rental property.  Currently has a tenant with a lease through June. I spoke today with an RE agent who we like and have a relationship with (he was the seller's agent when we bought the property in 2004 and we've stayed in tough).  One possibility he mentioned, which I hadn't considered, we selling it before the lease is up, so that the buyer would take on the least and be required to honor it through the end of the lease.  He said it isn't something he typically recommends, but in the current market, he thinks it would work and wouldn't turn off buyers.  By the time we list, accept an offer, and close, there would likely only be ~2 months left on the list.

Any thoughts on this? How does that even work with closing?  Does the buy just take on responsibility for whatever damages the tenants might do in that time, and received the security deposit from me so they can return it, minus damages, when the lease is over? Is it better to just wait until the lease is up?  We aren't buying or using the money for anything specific, so we aren't in a terrible hurry. 

And assuming we don't try to sell with a lease in place, is it better to wait until the tenants are out to even list, or can we list ~6 weeks before the end of the lease, and work with the tenants on showings?  (I'm fine incentivizing them financially, whatever that means.  Paying for a weekly housekeeper and giving them $50 (?) off rent for each showing?  Is that necessary?) 

We could afford to wait until they are out, but I don't love the idea of continuing to send a mortgage check while I'm not getting the income.  That's doable, I don't love it. 

Any other thoughts?

I looked at two rental properties today as a vacation home/investment property. I was really interested in one property and the other was a comp. When I looked at the comp, it was tenant occupied and the tenant turned the entire house into a marijuana grow house. House was listed for 309K and it won't sell at that price. If the house was not full of marijuana plants and somewhat clean, I think it would sell for 400K. As a result, if I was the seller, I would terminate the lease, spend 10K fixing it up and list it for 399K.

If just de-potting and cleaning would make it worth ~$100k more, is there a reason you wouldn't consider buying it and doing that?  Seems like a great opportunity, especially for a rental. 

Part of the reason we waited until it was vacated to list was this, though to a much lesser degree.  The tenants were fine--no weed farm or anything like that.  But it was 3 single-guy roommates and looked like a mix of college frat furnishings (though they were slightly older professionals, maybe in their early 30s-ish) and an electronics store back room.  It definitely wouldn't have shown well, even beyond its admittedly somewhat dated features. 

We are replacing all flooring, most with LVP.  (Carpet in 2 of the bedrooms, the stairs, and a loft space.)  Since there were many types of flooring that made it look old and cheap, this will be huge whether we end up selling or re-renting.  Also repairing and painting a few cracks in the ceiling (which is more expensive than you might imagine due to the soaring, 2-story ceilings) but still not all that much, doing a good cleaning on the cabinets which the painter swears will make them look so much better and be better than painting (and I somewhat trust that assessment because it would have been more lucrative for him to paint), and fixing some peeling window tint since the condition of the windows got comments from several of the showings.  All in it is >$15k. 

I'm guessing the changes can get us maybe $250 more per month if/when we rent it.  So a 5 year break-even, give or take.  But more importantly, those LVP floors will last much longer (and I can actually hold a tenant accountable if they trash them, rather than getting a few hundred bucks if they literally light fire to the carpet and draw dicks on it with a Sharpie; thanks, CA rental laws!).  So that will save money on both carpet and vacancies while I replace carpet between tenants.  If we don't sell this year, we pay cap gains on the increase when we do sell, so we are unlikely to sell any time soon.  It was sort of "this year or probably not for a long time", and it seems this year isn't panning out.

That's a good point. I am looking for something for personal use in the mountains. The location and lot size of the comp doesn't really meet my personal preference. It would be nice to be able to use something for personal use while I am fixing it up.

The other house was closer to my personal preference and might have 75K to 100K of sweat equity after a 6 month rehab. The seller said that I need my offer in the next day because of competing offers. However, that wasn't really enough time for me to estimate repairs. I'm also waiting on some answers about financing from my lender. The house I was interested in doesn't seem to be under contract. Maybe the seller was bluffing, the deal fell through or they are doing their due diligence on accepting an offer?