Selling Your Investment Property While Tenanted

Selling Your Investment Property While Tenanted in Western Australia

Many Perth investors are considering selling their rental properties to cash in on a vibrant “seller’s market”. 

Willing buyers are plentiful, but when property is tenanted, the sale process can be tricky.

Are you currently deciding whether to sell while your property is tenanted? Or wondering how to go about it? 

This blog post will help you weigh up the pros and cons, and make selling less stressful if you do decide the time is right.

A couple considering selling their rental property with tenants on the lease
You may wish to sell a tenanted property for many reasons, but you need to weight up the pros and cons.

Should I Sell My Tenanted Rental Property?

Here are some key considerations:

Pros

  • Selling gives you capital.
  • Rental income continues until the sale settles.
  • Tenanted property attracts property investors.
  • Tenants may offer to buy the property.

Cons

  • Tenanted properties don’t appeal to the majority of buyers – i.e. owner-occupiers.
  • Access to show tenanted property to buyers is limited.
  • An unexpected sale can anger tenants given rental shortages. The earlier in the tenancy it is, the more likely they are to react badly.
  • Tenants due to vacate may not leave on time, leaving you liable for penalties if you offered “vacant possession”.

Tips for the Successful Sale of Tenanted Property

So after weighing up the pros and cons, you’ve decided the time is right to sell. 

Obviously you want the best price with minimal stress!

The single most important key to achieving this is winning the tenant’s goodwill. 

Even the best tenants can become stressed by the prospect of repeated inspections and house hunting again, especially in today’s tight rental market. 

Unhappy tenants negatively impact a sales campaign, so the first step is to find an agent who prides themselves on managing tenant relationships. 

A successful sales record is important, but also look for signs the agent will respect tenant rights, explain tenant responsibilities tactfully and avoid conflict. 

Incentives 

If your agent suggests you offer incentives to win a tenant’s cooperation, don’t dismiss the idea. 

Incentives motivate tenants to present the property well, and can be used to encourage flexibility around inspections. 

They can include:

  • coffee vouchers when tenants leave for inspections
  • weekly flowers / housecleaning 
  • a rent-free period / rent reduction during the sales campaign
  • removal costs, if tenants agree to end a fixed-term lease early.

Avoiding Legal Pitfalls

Tenants have rights under the Residential Tenancies Act 1987 (WA) (RTA) when their rental is for sale, so bear these key points in mind.

A fixed-term lease continues when rental property is sold, unless the tenancy is terminated. 

Termination is permitted if:

  • 30 days notice is given, ending the lease on or after the date when it was due to expire
  • a termination notice is issued where tenants breached the lease
  • a mutual written agreement is reached between landlord and tenant to end the tenancy.

A periodic lease (a lease with no expiry date) can be terminated by giving tenants: 

  • 30 days notice if the sale contract requires vacant possession
  • 60 days notice, without grounds.

Tenants:

  • only need to keep the property in “reasonable condition”
  • can remain at home during inspections
  • are entitled to 7 to 14 days written notice before buyers are shown through 
  • can negotiate alternative viewing times.

Landlords:

  • must comply with RTA requirements e.g. use prescribed forms required notice periods and serve notices correctly
  • can give notice of entry to show buyers through at ‘reasonable times’, on a ‘reasonable number of occasions’, after giving ‘reasonable written notice’ 

NOTE: What is ‘reasonable’ isn’t always defined, so negotiate with tenants. If tenants refuse entry, seek a court order before entering.

DISCLAIMER: This is general information only, not legal advice. For more information, consult government sources, and/or seek advice from a property law expert. Our blog post on what considerations you need to make also offers useful insights.

So Where To From Here?

As you can see, selling tenanted property isn’t a walk in the park. Unhappy tenants can derail the sale, and if you inadvertently breach the RTA, you could face fines. 

So to avoid the pitfalls, why not get some help from the experts at We Love Rentals?

They’re skilled at tenant negotiations and RTA compliance, and can introduce you to some of Perth’s most effective selling agents like the team at Naked Edge Real Estate.

Why not email us or call (08) 6254 6300 to talk?  

Our team will offer friendly, independent advice!

 

I am the licensee of We Love Rentals and provide support to the team whenever needed. I began my real estate career over two decades years ago. While I loved seeing people achieve their dream of a new home for their family, I kept thinking that there had to be a better way of doing real estate – one with respect for the long term benefit of the client and one that focuses on customer satisfaction.