This is a common question we get from property owners at Penrose Real Estate. Selling a tenanted property isn't always straightforward - in the right market, it can be a great opportunity, or a bit of a headache, depending on how you handle the sale and communication with your tenants. In this article, we will break down what we've learned from years of managing tenanted property sales.
Why Sell With a Tenant?
Let's talk about why selling with tenants in place might actually work in your favour:
Continuous Rental income
The big one? Your property keeps earning while it's on the market. Those mortgage payments and bills don't stop during a sale, so having that rental income can be a massive relief.
Tax Benefits
If you need to spruce up the place for sale (think fresh paint or minor repairs), these costs are often tax-deductible on an investment property.
Investor Appeal
Great long-term tenants, who keep the place spotless and always pay on time are a great incentive for potential investors. A property with proven rental performance can be incredibly attractive to the right buyer.
Challenges of Selling a Tenanted Property
Of course, not every property is suitable to sell with a tenant, and some maybe better to sell vacant. Here's what you need to watch out for:
Buyer Pool Might Shrink
If you're selling a more affordable property, having tenants might significantly reduce your potential buyers. Owner-occupiers may not consider the property if they cannot move in at settlement, and the additional stamp duty required for an investment property can deter some buyers. First-home buyers typically only consider properties where the tenancy has less than 6 months remaining, as banks view tenanted properties differently for lending purposes. We've seen this impact sales prices in some cases.
Presentation Challenges
The presentation of a tenanted property can vary dramatically. While some tenanted properties are maintained in excellent condition, others might be cluttered or poorly presented, which can significantly impact your sale price. A poorly presented property can substantially reduce your final sale price and limit your pool of potential buyers. Whilst tools such as virtual furniture can help to visualise a property's potential, having a well-presented property is always the preferable option to help your property appeal to the right buyer. Unlike vacant properties where you have full control over the presentation, you're largely dependent on your tenants' housekeeping standards and lifestyle.
Access Challenges
Unlike an empty property where we can pop in anytime, we need to work around tenant schedules and give proper notice. It's more than just paperwork - it's about respecting that this is someone's home while trying to sell your investment. Additionally, tenants have the legal right to refuse photography, open homes, and onsite auctions, which can make it much more challenging to market the property effectively and achieve the best possible price.
The Two-Month Window
Here's something crucial: if your tenants just moved in and didn't know you were planning to sell, they can walk away with just two weeks' notice if you list within their first two months.
The Penrose Approach
Over the years selling a range of properties across Brisbane, we've developed some pretty effective ways to handle these sales. Here's a quick overview of some our approach to get you the best result for your sale of a tenanted property:
Start With a Coffee and a Chat
Before we do anything else, we sit down with the tenants. No formal meetings, just a genuine conversation about what's going to happen and how we can make it work for everyone. We'll often discover they prefer Saturday viewings because they're at sports anyway, or that Wednesday evenings work because they have regular dinner plans out.
Smart Incentives
We work with your tenants and focus on things that make a real difference to building a productive relationship with them, which may include initiatives such as:
- A professional cleaner before open homes (tenants love this!)
- Fresh flowers that brighten up the space for photos and make tenants feel appreciated
- Sometimes even a rent reduction during the sales period
- A nice bottle of wine or chocolates to show appreciation for their cooperation and the inconvenience
Marketing Solutions
If the property looks a bit 'lived-in', or the tenant's furniture does not reflect the style of the property, we might suggest virtual furniture for the online listings to show the potential of the property. This way tenants maintain their privacy, and we can show the property's full potential.
The Legal Obligations You Need to Know
Quick but important points:
- Fixed-term leases stick around even after the sale
- For periodic agreements, there's a two-month notice period after contracts are signed
- You can't hike the rent just because you've got a new owner
- The new owner steps into your shoes with the existing tenancy agreement
At Penrose Real Estate, we've found that selling a tenanted property comes down to one thing: treating everyone involved like real people, not just names on a contract.
Sometimes that means being flexible with viewing times, other times it's about finding creative solutions to presentation challenges. If you want to chat about selling your tenanted property we'd love to share more specific strategies based on your situation. Reach out for a chat and your complimentary property appraisal today.