Just like everyone else, landlords aren’t created equally. Some will hold onto their rental properties ostensibly forever, and pass them on to their children when the right time comes. 

However, for others, it all boils down to opportunity, no matter the format it presents itself in! For these landlords, increasing rental income may be a primary focus before deciding to sell. 

But selling the property while occupied by a tenant could prove tricky. And this now brings us to the question of the day – can you sell a property occupied by a tenant?

It is possible! 

In this blog, we’ll walk you through everything you need to know in this regard. Including your options and what you should do to ensure the selling process is successful. 

Can Selling a Property Occupied Be Difficult for a Landlord?

While selling a property that is occupied by a tenant isn’t exactly impossible, it can be marred by certain challenges. The following are some of the challenges you can expect to encounter. 

• Legal Issues – First off, a rental agreement is a legally binding document. It binds both parties to the lease to certain terms for a certain duration of time.

Rental agreements can be short-term, like month-to-month, or long-term, which can run between 6 months and a year. 

To attract long-term tenants, it’s important to offer appealing terms and maintain the property well. Regardless, you must wait until the contractual rental period is over for the tenant to leave, legally speaking.

• Uncertain Outcome – Because of the legal issues, it may be impossible to correctly predict the outcome. That’s why it’s important for landlords to build a solid relationship with their tenants. With a cooperating tenant, things can get much easier on your part. However, with a difficult one, they could complicate things for you. 
• Other Variables in Play – No two selling situations will ever be the same. There is a smorgasbord of variables that will be in play. Whether that will be the type of the lease, local landlord-tenant laws, or level of cooperation you have with the tenant. 

Does the Lease Type Affect Selling a Property Occupied by a Tenant? 

The type of lease you have with the tenant matters a lot when it comes to selling an occupied property. 

Now, rental agreements can either be short-term or long-term. An example of a short-term rental agreement is a month-to-month lease. 

With this type of rental agreement, you’ll have relatively more flexibility when it comes to selling the property. Tenant screening also plays a crucial role in ensuring you have reliable tenants, which can help in managing the sale process smoothly.

This is because all you’ll need to do is serve the tenant with the appropriate lease termination notice. For instance, in the state of Oklahoma, you’d only need to serve the tenant on a month-to-month lease with a 30 days’ advance notice. 

When it comes to a tenant on a fixed-term lease, you’d have relatively more challenges to contend with. This would be especially true if the tenant continues to abide by the terms of the lease agreement. Such as, paying rent on time, taking care of the unit, and reporting issues on time. 

In such a case, the only option you’d have is to negotiate with the tenant. 

How Would You Deal With a Tenant Who Refuses to Leave?

This can be quite challenging! 

If the tenant refuses to leave, the following are some of the best options you could consider. 

Consider Selling the Property to the Tenant

It is possible that the tenant could have fallen in love with the property. They may have lived on the property for a considerable amount of time and completely loved the place and moving out wasn’t an option. After all, moving is one of life’s top stressors. 

In such a case, reaching a mutually beneficial arrangement would be ideal. The tenant may get to continue living on the property, while you get the proceeds from the sale. 

The only hurdle that could complicate things with this option is financing. But if the tenant doesn’t qualify, you could consider seller financing. 

Buy Out the Lease

This is especially true if the rental agreement is a fixed-term lease with many months remaining. This is a legal option that will give the tenant a cash incentive for early termination by a certain date. 

The amount to pay the tenant for the lease buyout will depend on various factors. Including, the remaining lease term or the specific terms of the lease (if any).

Try Selling the Property to Prospective Homebuyers

In a seller’s real estate market, you may be able to get away with selling an occupied property. However, the caveat would be that they would need to wait out the remaining period of the lease.

In most cases, however, homebuyers won’t go for this option. After all, what would happen if the tenant doesn’t move out at the end of the lease? Having to obtain a court order would be another unnecessary wait time for the homebuyer, which would take another few extra months. 

Sell It to Rental Investors

This can be a great option to consider. Rental investors understand how rental investments work and will likely be interested in the property if the potential exists. 

In fact, selling the property while occupied would be the cherry on the cake! 

Bottom Line 

As you can see, selling a property occupied by a tenant is doable. You just have to understand the options before you. But in the rental world of things, working with a reliable and professional property management company can help make things a lot easier.  

Specialized PM Oklahoma City can be an invaluable partner to have during such a scenario! We have been helping property owners like yourself for over 30 years now. Get in touch to learn more!learn more!