When selling a tenanted property, you don’t want to overstep your rights as a landlord unwittingly. If you’re uncertain where to begin, fear not, Toronto landlords. Here we have all the answers on how to sell your tenanted property as easily and lucratively as possible.
Long-Term Lease vs. Monthly Lease
According to the Ontario Landlord & Tenant Act, long-term leases must be honoured by the new owners until the lease ends. This can be an incentive for investors, as it saves them the time of finding tenants on their own. However, it’s less inviting to buyers who intend to live in the home themselves. If the tenant has a monthly lease, you can choose to sell the property with the tenant still living there or give them 60 days’ notice to move out to sell an empty unit. Selling an untenanted property is easier for a single rental unit as it will appeal to both home buyers and investors. However, if you have a property with more than one unit, your ideal buyers are likely investors. If your tenants are paying fair market rent, investors like the idea of purchasing a fully rented property that’s already generating income.
Keep Your Tenant in the Loop
Although you don’t have a legal obligation to tell your tenants your plans, it’s the nicer way of doing things, and we’re all about being nice. It’s not a bad idea to send your tenants a notice of intent to sell the property. By including your tenant in your plans, you can avoid common issues such as pushback when you try to show the home to buyers. There are several benefits to keeping the tenant in the loop:
- Easier to assess the property: Once you inform the tenant about putting the property up for sale, it becomes easier for your real estate agent to come in and assess the property.
- Better marketing: You can work with your tenant to get professional marketing photos of the property, with an agreed-upon schedule that keeps things amenable.
- It’s nicer: Your tenant won’t feel as helpless during the process and will have time to plan their next steps.
In our experience, the better the communication, the better it is for all involved.
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Share Information with Your Tenant
It’s often helpful to be an advocate for your tenant, making sure they know their rights. Explain the buyers have to assume their lease based on the current terms and rent. Discuss their plans to see if you can help. For example, maybe they were already intending to move out, and would welcome the chance to break the lease early without penalty.
You can also provide a link to a Tenants’ rights website, so they can read up on how much notice is required to terminate their lease, the rules on raising their rent, notice for viewings, etc. Respect for their position helps set a more positive tone for the property sale.
Looking for more information about becoming a Toronto real estate investor? Check out more of our real estate investing blogs right here:
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Understanding Tenant Rights During Viewings
Don’t be surprised if your tenant is less than friendly. Consider their position: You’re selling their home out from under them in a terrible rental market. Expect some pushback and be prepared to manage things as diplomatically as possible while understanding your rights as a landlord.
You have a right to show the property between 8 AM and 8 PM as long as you give the tenant 24 hours’ notice. The tenant can’t deny access, nor do they have to be present for viewings. You can enter the home without permission when you give proper notice. Be respectful. For example, if the tenant works nights and sleeps during the day, it’s not unreasonable for them to request later afternoon or evening viewings. Also, it’s more comfortable for prospective buyers to view the home without the tenant home especially if the tenant is breathing down their necks or shooting daggers at them as they try to look around.
On the messier side of things, if the tenant refuses to show the home or causes issues that interfere with your right to sell the home, the rules allow you to evict them or claim damages.
Staging a Tenanted Property
You can’t ask your tenant to help stage your property for marketing purposes. Although you do have the right to arrange viewings with 24 hours’ notice, you can’t show up with a staging team to replace their furniture or start moving their things around. However, there are a few things you can do:
- Make repairs to things like windows, cabinets, plumbing, etc.
- Paint the walls
- Schedule professional carpet cleaning and overall home cleaning
- Update light fixtures, kitchen cabinet knobs, etc.
- Take photographs of the property
As mentioned, the more you keep the tenant in the loop, the more likely they are to cooperate. Allow them to remove anything they don’t want to be photographed, such as expensive items or personal photos. Also, point out that keeping the unit presentable will help sell more quickly, with fewer buyers traipsing through their home. They might be more on board with keeping things presentable, knowing it will help limit disruptions.
Learn more about staging your home with our Staging 101 guide right here.
Maximizing Your ROI
Despite the challenges of selling a tenanted property, there are ways to help maximize your ROI:
- Enlist a real estate agent: As soon as you consider selling your tenanted property, reach out to a real estate team (like us). We’ll help you develop a plan to get your property listed, improve communication with your tenant, and devise the best approach to market your property to reach the right buyers.
- Prepare to sell: Take full advantage of the things you can do to prepare your property to get top dollar. Your agent can advise you on what you can do, what changes require you to give 60 days’ notice to your tenant, or when you would be expected to provide tenant compensation for serious renovations while the lease is still in effect. Beware of money-wasting upgrades to the property. Read our guide on that right here.
- Discuss the market: Your real estate agent can advise you on whether now is the right time to sell. Although you might have good reason to do so, i.e., divorce or risk of defaulting on your mortgage, selling at the wrong time is a terrible, costly mistake.
- Focus on online marketing: Working with a real estate team that understands how to market tenanted properties will ensure you attract the right buyers for a quicker, more profitable sale. For example, a good virtual tour allows more buyers to view the home without needing an open house.
When it comes right down to it, the best time to sell is either when your tenants decide to move out or their lease is coming to an end. It’s way easier to sell a vacant rental property, so you’ll see higher profits and put up with far fewer hassles than you would selling a tenanted property. However, when your timing calls for a tenanted sale, we can help you devise a plan to see the best possible return on your investment.
If you’re looking for the best Toronto real estate team to guide you on your tenanted property real estate decisions, call The Christine Cowern team at 416.291.7372 or email us at email@example.com. We’d love to work with you!