How to Sell a Texas Property With a Tenant Still Living in It

Owning a rental property can be extremely financially advantageous, providing you with a steady stream of income and an opportunity to benefit from long-term property appreciation. But owning this type of property, and managing tenants actively, does come with some additional complications and risks.

For example, let’s say you’re 6 months into a 1-year lease with a tenant and you decide to sell the property. Can you move forward with this type of plan? And if so, how do you do it without infringing on the rights of your tenant?

High Points: Selling a Texas Property With an Occupying Tenant

Let’s start by looking at some of the high points.

• A tenant could be a good thing or bad thing. First, understand that having a tenant in your property for sale can be a good thing or a bad thing. If you’re appealing to new property investors who want to make consistent income, having a reliable tenant already in place could be a massive benefit. Essentially, you’ll be saving them money on marketing and advertising costs while simultaneously proving the true income potential of this property. On the other hand, if you’re marketing the property to people who want to move in as soon as possible, the tenant could pose a significant challenge. Many home buyers will strictly avoid this type of situation.
• Tenants present additional complications. No matter what, tenants are going to present some additional complications. When showing the house, you’ll need to have a plan for how to manage the tenant. And depending on the terms of the lease agreement, you may be legally bound to allow them to continue occupying the property.
• You may be able to end the tenancy. Even if the terms of your lease agreement dictate that the tenant is allowed to stay for several more months, there’s a chance you can end the tendency prematurely. Ending the tenancy, as you might expect, can make the entire problem go away.

Can You Sell a Texas Property With a Tenant Still Living in It?

Here’s the short answer: you can definitely sell a Texas property even with a tenant still living in it. There are some extra hoops you’ll need to jump through, and some important strategic considerations you’ll need to make, but this process is possible.

Why Would You Want to Sell a Texas Property With a Tenant Still Living in It?

There are several things that might motivate you to sell your Texas property when a tenant is still living there.

• Raising liquid cash. Some property owners wish to sell as a way to raise liquid cash. If you’re interested in rebalancing your portfolio, if you need money for a major home repair, or if you need the proceeds for living expenses, selling your property may be the smartest financial move.
• Moving away. You may also be interested in selling the property because you’re moving to a new area. If you typically address maintenance and repairs yourself, this can put a damper on your property management strategy. Just keep in mind that you could also hire a property management company to continue managing your property remotely.
• Cutting losses. If you’ve lost considerable money on this property, or if you worry about the profitability of the property in the future, you might be interested in cutting your losses.

Legal Obligations for Property Owners

What legal obligations do you have to your tenants?

While there are some additional nuances to consider, your primary legal obligation is simply adhering to the terms dictated by your lease agreement. If the lease is month to month, you can easily push your tenant to move out with sufficient advanced notice.

Read your lease agreement carefully to better understand your legal position, and talk to a real estate lawyer if you have any questions.

Options for Selling a Texas Property With a Tenant

These are your main options for selling a Texas property with a tenant still living in it:

• Sell to the tenant. If the tenant is interested in staying at this property as long as possible, consider selling to them directly. They already know the property and wouldn’t have to move, so they could easily turn into one of your most eligible buyers.
• End the tenancy. Depending on the terms of the lease agreement, you may be in a position to end the tenancy. Removing them simplifies the equation.
• Negotiate with the tenant. If the lease prohibits you from forcing the tenant out, consider negotiating with the tenant. They may be willing to move out early in exchange for money or other benefits.
• Market the property as a rental. If the tenant remains, consider marketing the property as a rental to prospective investors. This way, the tenant will actually be a selling point.
• Sell to a new owner-occupant. You could also sell to a new owner-occupant, though this is arguably the least advantageous way forward.

Additional Tips

These tips can help you manage this process much easier, with fewer headaches and, possibly, financial advantages.

• Choose a high-level strategy (and stick to it). There are many potential paths forward, and each of them offer unique advantages and disadvantages. Choose the strategy that makes most sense to you and stick with it.
• Catch up on rent. If your tenant has fallen behind on rent, now is the time to collect it.
• Make showing times convenient. Schedule showing times in advance and try to make them convenient for the tenant.
• Ask the tenant to leave for showings. Their presence could make things more complicated and challenging.
• Consider finding alternative residence for the tenant. If your tenant is reluctant to move out, consider helping them find an alternative residence.

If you currently have a rental property that you want to sell, or if you’re interested in fleshing out your property portfolio, Green Residential has the experts who can help. Whether you’re interested in a real estate agent, a property manager, or even an investment advisor, contact us for more information today!