Selling an Apartment with Existing Tenants in NYC

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Selling an apartment with existing tenants in New York City. We will demystify this topic in the following video. I'm Nick at Hauseit. Visit our website https://www.hauseit.com to learn about ways to save money when buying or selling real estate here in New York City. So, let's get started.

Selling an apartment in New York City with existing tenants in place can be much more challenging than selling a vacant apartment. Now this is especially so if you're selling a co-op as the buyer will likely be an owner-occupant who won't want a tenant to be in place post-closing. In addition to disqualifying purchasers who are owner occupants, having tenants in place can make a property much more difficult to show to prospective buyers. This is because extra work is required to coordinate both showings and open houses with tenants. Moreover, some tenants may be uncooperative or non-responsive to showing requests altogether.

Another disadvantage is the possibility that the tenant keeps the unit in an unsightly condition. Perhaps even so bad to the extent that it's not possible to take professional photos. The bottom line is that properties with tenants usually do not show as well and it's harder to get access. If you're selling a condo or a multi-family property having an existing tenant might be beneficial. This is because the majority of investor buyers would ideally like to have a tenant in place as quickly as possible after closing in order to minimize the risk and cost of a prolonged vacancy period regardless of what property type you are selling. The best-case scenario is to have an existing tenant on a month-to-month lease. That way you can effectively market your home to both investors who'd like certainty of cash flow and owner-occupants who'd like to move in right after closing.

Investors will like the idea of carrying over the tenant post-closing and owner-occupants will appreciate the flexibility of being able to terminate the lease so that they can take occupancy of the property right away. It's also equally valuable to have a tenant in place provided that the lease has an early termination clause in the event of a sale. Once again, the option value here is highly favorable to the sellers marketing efforts since having a tenant in place with an early termination clause would still encourage owner-occupant buyers to purchase the property.

Should a seller wait until the tenant has vacated before listing? Well it depends. If your tenant is highly uncooperative or keeps the apartment in an unsightly condition, it may be advisable to wait for them to vacate before listing. This is because the condition of the apartment would make it impossible to take professional photos and buyers who do view the property might lose interest in the unit simply because it's messy or dirty. If your tenant is uncooperative, they could refuse to provide access altogether.

We've actually heard of a situation where a tenant simply stopped responding to all showing requests and this made it impossible to show the unit at all. If your unit doesn't show well due to the messy condition of the tenants, it could stunt the momentum of your sell, prolong the days on market and force you to reduce your asking price in a way which might not have been necessary if the apartment wasn't show ready condition. Listing your home with a tenant in place isn't always a bad thing especially if the tenant is generally cooperative and keeps the apartment relatively organized. Most investors will actually prefer that a tenant is already in place as it means there's no risk of vacancy shortly after closing.

The other key drawback to waiting until a tenant has vacated before selling is the fact that you'll have no rental income to offset your carrying costs during the sale process. It usually takes around 2 to 3 months to close on a sale once you're in contract, and this excludes the multi-month marketing period of finding a buyer and signing the purchase contract. Even if you don't have an existing mortgage, you'll still need to cover the monthly maintenance or common charges for possibly six months or more as the sale process unfolds.

We hope you found this video helpful. I'm Nick at Hauseit. Visit our website https://www.hauseit.com to learn about ways to save money when buying or selling real estate here in New York City and if you like this video do us a favor hit like, subscribe or leave us a comment and we hope to see you on the next one!

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