The D's and Don'ts of Preparing to Sell An Investment Property - Part 1

Are you thinking about selling your investment property? You might think it follows the  same rules as selling your own primary residence, but actually there are very different  tenant rights and obligations.



To protect yourself from legal headaches, here is what you should know and follow in  preparation for selling your investment property. 


 

Selling Your Investment Property: Tenant Rights &  Obligations

•  If your tenant is in a lease, the tenant has a right to stay under the Ontario  Landlord & Tenant Act. It doesn’t matter if a new owner wants to move in, the  lease obligations transfer to the new owner until the end of the lease term.



• If the tenant is month-to-month, the new owner may move into their space.  Minimum 60 days written notice (from the first of the month) must be provided  and the new owner must occupy the space themselves (or rent it to a family  member) – they can’t simply kick the tenant out and rent it to someone else.



• Tenant Cooperation – Provided 24-hour notice has been provided to the Tenant,  they must cooperate with the Landlord for showings (whether they are in a lease  or not). They cannot insist that they must be home for showings. If they do not,  the Seller can claim damages and/or proceed with an eviction.



 

When Should You Sell an Investment Property? Timing  Considerations

When should list your tenanted property for sale? Should you list it while your tenant  has a lease in place, at the end of their lease or wait until they give notice that they are  leaving? Timing the sale of your investment property depends on a few factors:


• Your Target Buyer: If your target Buyer is an investor, the fact that there’s a tenant  already in place, and a known rate of return may be a benefit to the Buyer. Of  course, if you aren’t charging your tenant market rent, that will be a deterrent to  investors. If your target Buyer is an end-user (in other words, someone who will  move into the unit themselves), then you’ll want to time the listing of the property  towards the end of their lease. Remember that once an agreement of purchase is in  place, you can provide 60 days notice to the tenant (from the 1st of the month) on  behalf of the new Buyer, if they (or their immediate family member) will be moving  into it. For example, if the lease ends on July 1st, you could give notice on behalf of  a new Buyer as late as May 1st. If condos in your building take an average of 30  days to sell, then you’d probably want to target a listing date of April 1st. That way, if  your tenant is in a month-to-month lease, you’ll be able to target effectively both  investors and end-users.


• Your Goals: Your personal financial goals need to be considered when timing  the sale of an investment property. Do you need the equity for other purposes?  Is your mortgage up for renewal? How would your taxes be affected by a sale?


• The Market: What’s happening in the real estate market? Are values in your  building or neighbourhood increasing or decreasing? Should you lock in your  returns and move on? What’s happening to interest rates?


Keep in mind that under the Ontario Landlord & Tenant Act, you cannot ask your tenant  to leave because you want to sell, if they are in a lease OR if they are month-to-month  tenants.


If you wait until your tenant gives notice before selling your property, you could be  waiting for years.


Stay tuned for next week where we dig into the details of preparing your investment  property for sale, and what you can and can’t do when it comes to marketing and  staging!


If you are an owner/investor and have any questions about this important topic that you  would like to ask me, or you would like to find out what your property is worth in this  constantly changing market, please call me at 905-683-7800.




 

Thanks for reading today’s BLOG!!!

Brian Kondo
Sales Representative / Team Leader
The Brian Kondo Real Estate Team
Re/Max Hallmark First Group Realty Ltd.
905-683-7800 office
905-426-7484 direct
brian@briankondo.com
www.BrianKondo.com
www.BrianKondoTeam.com

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