This is a pretty common scenario that I am seeing right now here in Ottawa. An owner wants to sell their condo, but has a tenant inside that has a number of months left on the lease. The owner is trying to figure out the best thing to do. Keep in mind I am going to answer this quite generally - every scenario and property is different (things like how the unit shows, the tenant, list price, area, etc will all come into play).
First thing I would ask is - Who is the potential buyer for the condo? Owner, Investor, etc? Most likely it is going to be an owner looking to occupy the unit. Depending on the price/unit, the majority of buyers we are seeing are not investors looking to rent out the unit, but owners looking to move into the unit. That being said, most people are not willing or able to buy a place, pay the mortgage (the costs will not cover the rent) and pay to live somewhere else, until the place is vacant. As a buyer, the risk you are taking with the tenant is quite high (yes, you can vet the tenant and verify everything, but the risk is still there).
Why not an investor? Well, there is nothing certain in real estate, so knowing my luck the next buyer will be an investor - BUT generally at these prices, resale units do not cash flow under standard financing terms. I have units that cash flow (after ALL expenses) $600 month, on a $250,000-$260,000 purchase price - so compare to the one beds that list around the same price, you would be loosing money every month.
Back to the original question... Put yourself in the shoes of the buyer and ask yourself - Would I rather be provided vacant occupancy on closing, or have to worry about kicking out (or waiting for the lease to end) some tenant? Especially when there are other options to buy that could be currently vacant.
Most downtown Ottawa condo buyers are looking for 30-60 day closing periods. So typically once the tenant gives the 60 days notice, then it starts to make sense to list the condo for sale. Since you will be able to give a reasonable time for the tenant to have vacated. More than two months notice and
Tenant just gave me her 60 day notice to leave! Now what?
This is when I get to work - how does it show? If it shows badly would it make sense to wait until they leave, paint, stage, and list it, or sell right now? Is the tenant cooperative? I value communication as one of the most important aspects of my job. Communication with the owner, communication with the other agent, and obviously communication with the tenant. If the tenant is unhappy, they won't give two shits about how the unit looks for a showing, and will ensure that 24 hours notice for every showing. When you are selling with a tenant, you want the tenant to be part of the team and on good terms. Right from the start, we make sure that the interactions with the tenant are positive, honest, and open. We need their help to sell!
There is more than two months left, what are my options?
If you still have more than two months remaining on the lease, obviously you can still list the unit for sale, but finding an interested buyer will become much harder. Keep in mind there is always negotiations with the tenant. While you can't kick a tenant out during a lease, they are not able to leave early - UNLESS you both agree. What is $1,000, the cost of movers, or sometimes even just a case of beer in the grand scheme of things? While you need to make sure that the timing is right - last thing you want is to let the tenant out of the lease, and then the deal falls apart and you have a vacant unit and no buyer. Sometimes buyers love a certain building and would consider moving to another unit within! This is all part of that communication with the tenant, and seeing what options you have as the landlord.
Thinking of selling your investment condo in Ottawa? I would love to chat more. You can reach me at matt@mattrichling.com or fill out the form below.
