Can I Legally Sell My Rental Property With Tenants in It?

Options for handling tenants with a month-to-month agreement

If your tenant rents on a month-to-month basis, you likely won’t have a problem selling an occupied property as long as you give the tenant proper notice.

In general, landlords and tenants can end month-to-month tenancies by giving written notice at least 30 days in advance. Neither party needs a reason to terminate a month-to-month agreement, which is one of the main benefits of this arrangement.

Before moving forward, check your state and local laws and review the rental agreement so you know you’re following the right steps. Notice requirements vary from one state to another, so be sure to check the rules that apply where you live.

Options for handling tenants with a fixed-term lease

A fixed-term lease, on the other hand, has a defined rental period and may extend from six to 12 months. During the lease term, tenants agree to stay and pay rent and can’t be forced to leave unless they violate lease terms. 

Fixed-term leases are great for stable, long-term housing and landlords who want to avoid frequent tenant turnovers. When the lease ends, tenants can move or renew, or it may become month-to-month.

If your tenants signed a fixed-term lease, your options for selling during that term are more complicated because the lease doesn’t easily terminate just because of a change in ownership of the property. You can:

1. Wait until the lease expires

If you want to sell your property, it might be better to take a patient approach and wait for the current lease to expire. This requires a little planning and foresight, but it relieves you of the headache of dealing with tenants. There are several crucial benefits to waiting until the tenants have moved out to list a rental property.

First, the current rental income will dictate what the house is worth, says top-selling Huntington Beach, California, real estate agent Cheryl Coleman, who specializes in investment properties. If the tenants move out, you may be able to increase the rent, which will, in turn, raise the property’s value.

Another reason to wait until the lease expires is that you’re free to make any renovations,  common repairs, or upgrades on a vacant property, increasing its value and not worrying about disturbing the tenants. An empty home is also easier to prep, stage, and show to buyers, Coleman notes.

The biggest drawback of waiting for your tenant’s lease to expire is the mortgage cost. If you are still paying a mortgage on your rental property, the time it takes to prep your home for sale may be an expense you don’t wish to accrue.