I have a house I intended to rehab and flip but ended up renting it. Problem is I have too much money tied up in it to keep it as a rental. But I am wondering what I should do to sell it as the market is strong near a growing area but the house has a bad floor plan with no basement–families seem to want a basement and buyers tend to have poor credit and hard to qualify. But it shows very well vacant and I rented it easy to a couple without kids; there was lots of rental demand. Turns out the tenant I have, while takes care of it and pays on time, PACKED the house with stuff do I don’t think it would show well. What do you think my idea to sell it: Raise the rent 15%, or as high market will bear, in order to try to get a new tenant on a month to month lease so I can have realtors show it plus put out my fsbo sign? That way if I can’t sell it at least will have more positive cash flow. Of if my current tenant wants to stay, at least will have better rent while keep it listed.
If the only prospects that come to look at the place have poor credit and are unqualified for the loan, you might be overpriced. Negative attributes like no basement and a bad floorplan will make the place worth less to prospective buyers.
Check your local laws. In some places you cannot raise the rent 15%. If your current tenant is month to month, then you can file a 30 or 60 day notice of change in terms of tenancy. Once again, check your local laws to see how much notice you are required to give the tenant. A change in terms of tenancy form can be obtained from your local apparment association or online.
If you want to sell this place no matter what, then you probably do not want to sign a term (eg. 6 month) lease agreement, because many buyers will qualify to buy this place with owner occupant financing. The only way they will get the money to buy the place is if they agree to move in as occupants, in which case, THEY will have to serve your tenant a notice of change in terms of tenancy which asks the existing tenant to vacate, so that the owner may move in.
Lots of property managers, especially in low income properties, only use month to month agreements, which gives the landlord more flexibility. So if you have a tenant who does not follow the rules, instead of going through the headache and drama of dealing with these tenants, you can use some excuse like a remodel to kick them out on short notice (I'm not suggesting that you lie, a light remodel would then be in order to keep yourself out of court). I think that you can see that the tenant may be much more agreeable to "you need to move because I am remodeling" than to "you need to move because you are screaming the F word at the top of your lungs at 3:00 AM because of a lover's triangle."
If you keep this house as a rental for at lease one year, you will open up the possibility of a 1031 exchange. This is a way better tax break than being taxed for income or capital gains.
A move out can cost a LOT of money. It may justify the expense of offering to pay the first 3 months of a storage unit or an interior decorator or a house stager (who will encourage the tenant to make the house more presentable on the inside).
It sounds like you have a good tenant but not enough in cashflow. Try offering the current tenant a lease to own deal. The rent goes up enough to cover mortgage and put money towards the agreed upon purchase price with each monthly payment. Ideally you should also get a “Non-refundable” lease option fee. You can find lease option agreements on most real estate sites or in an office supply store. Where are you located? You can also list on Rehablist.com
Good luck
Already have lease to own but don’t think tenant will actually buy. What do you mean include a fee? The house is beautiful so have a number of people could have rented to own quick. But that is the problem with selling: its much nicer than trashy houses in the area, while only 160k most can not qualify to loan.