Is it better to sell your property with tenants or vacant?

You may have to sell a property in your portfolio that isn’t performing all that well or maybe it’s because you need to free up some capital to invest elsewhere. Whatever the reason its likely there will be a tenant in the property.
So do you sell with them in there or market the property while it’s vacant? A good question that we get an answer to today from Shannon Davis.

Transcript:

 

Shannon Davis

Kevin:  You have an investment property, you have a tenant inside that who’s very happy, but you’ve made the decision, for whatever reason, that it’s time to sell that investment property. Do you keep the tenant in there, or do you need to wait until it’s vacant? What’s going to be best?
I’m going to talk now to Shannon Davis from Metropole Property Strategists who gives this kind of advice all the time because you also have got a very big rent roll at Image Property Management.
Shannon, what would be your answer to that? Is it better being vacant, or is it good to have a good tenant inside?
Shannon:  It’s going to be harder for the owner to have the vacancy cost, but you will double your market. We need to remember most people out there are owner-occupiers. About 70% are owner-occupiers and only 30% are investors. If you have a tenant in, or a lease and it’s a lease with a long amount of time, be prepared that you’ve just shrunk your market by half if not more than half to only investor-friendly.
There’s going to be lots more restrictions for their comings and goings, because tenants need to be provided entry notices, and they may not care as much about the sale and the presentation of the property.
I have a pretty firm opinion on this: it’s always better to be empty.
Kevin:  Okay, so you have to effectively wait then until you can either give notice for them to vacate, or you wait for that lease to run out?
Shannon:  Yes. The lease needs to be definitely towards the end of its natural conclusion. But empty is always better, because we can present it better. It can have more comings and goings, more showings, and we’re not going to be interrupted.
When there’s a person inside the house, the feedback is restricted. People don’t want to offer their thoughts in front of other people. Therefore, the sale eventually is restricted, as well.
Kevin:  Yes, and love them dearly, too, tenants don’t always present the property the way a property owner would.
Let me ask you another question, though. A vacant property can look very sparse. Are you better off spending a little bit of money and just making sure there’s a dining room in there and something in one of the bedrooms at least?
Shannon:  Yes. Empty properties tend to look smaller. Staging will definitely help with showing the rooms the right size and definitely the interest that comes from the property. But it would also be a question of investor’s budgets.
When I deal with investors who are trying to sell, sometimes they can’t afford the vacancy. Sometimes they’re going to sell right towards the end of a lease and sometimes there’s no money for the staging, as well. It’s just about getting the best opportunity, and that’s where the choice of agent comes in.
Some agents will work really well with a tenant, help tidy, provide a movie ticket or a bottle of wine, but some agents are only good at selling display homes where there’s nothing, everything’s pristine, and everything’s easily done. That’s where your choice of agent becomes important.
Kevin:  You make a very good point about the choice of agent. In fact, one of the questions you could ask if you have an investment property and looking at putting on an agent is “How are you going to keep my tenant happy in this situation?”
Shannon:  Oh, definitely. We’ve had agents who have cruelled a sale when a tenant is paying $50 above market rents, and that’s a real concern. The best thing about the property was the $50. The guy is hooked onto a tenancy that had to be honored, and yet, the agent is having arguments with the tenant every Saturday morning.
Kevin:  Yeah. Good stuff.
Shannon Davis, who’s a buyers agent with Metropole Property Strategists and also controls a very big rental agency called Image Property Management in Brisbane.
Shannon, thank you so much for your time.
Shannon:  No worries, Kevin. Any time.

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