Selling a property with tenants already in place has many benefits. The most significant one being the added financial security for prospective buyers, knowing that rent is already coming in. Selling rental property with periodic tenancy provides more flexibly to the buyers then long term Fix tenancy in place.
To increase your profit, start by planning for the sale as early as possible. If you have your property on a fixed term, ask your property manager to conduct a rent appraisal. Although adding a rent increase will result in more capital gains for you, you want to do it right and ensure your tenants are okay with the increase. Concessions have to also be granted to existing tenants depending on how long they have stayed at the property. This you minimize downtime and unnecessary advertising costs.
However, if you plan on selling rental property, it is worth making sure that the concessions you give equate to the selling price of the property.
A property with a cap rate of 7.2% means that an additional 20 dollars per week would net the seller an additional 14,444 dollars on the selling price. This cannot be overlooked.
Under the current Residential Tenancy Act rent requires 60 days’ notice and can neither be increased within 180 days of the start of tenancy nor within 180 days of the previous increase.
The recently elected government led by Labors Jacinda Arden currently reviewing these time frames and considering the option of an increase to 90 days and 12 months respectively.
Planning in advance when considering Selling Rental Property also ensures that you put your property on the market at the best time, both in relation to the selling season and the tenancy end dates. In contrast, if the property will appeal to an owner occupier and the tenants have bad furniture or are messy, you may want to sell the property without tenants in order to present it at its best. The only way you can maximize all angles is to plan in advance as much as possible.
If the property may take a while to be sold, be mindful to the fact that should you need to find tenants during the sale process, most tenants will shy away from renting a house on the market. You should therefore consider the sale period in relation to the tenancy end date.
Also, most existing tenants do not like their home being on the market. So an existing tenant may not renew his tenancy if it expires while the property is on the market.
Before you list a property, speak to your property manager about what can be done to raise the value of the house. They should have good knowledge of the property and little fixes that can be done to boost the property value.
Some fixes may not be important on a day-to-day basis for an owner to prioritize their limited maintenance fund, but for good return on investment for a sale they would be worth doing.
Also, those fixes if not attended to before sale could be deal breakers. Especially if tenants are around during an open home or viewing. What are the questions a buyer would likely ask an existing tenant before deciding to purchase a property?
Your property manager could also be able to connect you to existing landlords that are looking to purchase more property. Property managers are often being told by other landlords that they are looking to purchase more property.
Some tenants may also be interested in buying properties that they are currently renting. So your property manager could check with your tenants to see if they are interested in buying the property and connect the to you.
In both instances, the seller and the buyer undergo less hassles and fees. This can result in a mutual win for both parties. The property manager does not get involved with the negotiations.
If you plan on listing your property in the market, make sure your property manager is informed at each step. Particularly regarding who will do the market appraisal and who you have selected to market the property.
Once you accept an offer, let the property manager know right away what the unconditional date is as well as the settlement date. It is quite frustrating and time consuming to have tenants tell you of a sale or to only hear of it when the solicitor calls to sort out rent apportionments.
It is also wise to give your property manager the details of your solicitor so that they can plan ahead towards preparing the information the solicitor would need when selling rental property.
Finally, if your property manager has been doing a great job for you, then do not forget to recommend them to the buyer. There is a direct relationship between the capital gains of a property and the quality of the property management over the past years.
A good property manager ensures that the property remains well maintained and improved over the time of management. They must have also vetted the tenants which in turn would result in less wear and tear. A good property manager also conducts and follows up on routine property inspections and maintenance, thus making sure the property remains in the best possible condition.
A low quality manager on the other hand, would have allowed the property to deteriorate, resulting in less capital gains. They would have spent less time vetting the tenants, leaving whether or not tenants respect and care for the property to chance. They would have also spent less time dealing with issues of maintenance and repair.
The “Tired landlords” phrase is also one of the effects of having low quality managers. These “tired landlords” are landlords that sell off their property because they are fed up with being landlords.
For new owners, continuing with the same property manager can also have benefits. The tenants won’t have to change the bank account and the end of the tenancy would also be smoother. As the property manager knows when each tenant checked into the property and has the necessary records.
Many new owners miss out at the end of a tenancy if property managers change due to tenants getting away with a lot more. This in turn may reduce the value of the property or cost the new owner to rectify.