Selling a Rental Property with a "Bad" Tenant

by

Jason Reed

Sell

What Happens When I Have A Bad Tenant When Selling My Rental Property?

I have been helping buyers and sellers with investment properties for over 18 years, and I have run into several different situations with tenants. One thing that is crystal clear, with the experience that I have had, is that bad tenants can cost a landlord tens of thousands of dollars. Let me repeat; bad tenants can cost you- the seller, tens of thousands of dollars.

bad tenants can cost a landlord tens of thousands of dollars

I have heard sellers tell me the reason they are selling is because of the current tenants, and “let the new owner deal with them.” The problem with this is that even experienced investors get turn-off by bad tenants, and new owner occupants are even more susceptible to being affected by bad tenants behavior or units when they walk through the property. Here are a few examples of what I have run into in the 18 years of selling duplexes and investment properties.

Bad Tenants can Cause Landlords to Sell & Quit

Crazy Story about a Horrible Tenant:

I had worked with a buyer, who was excited about purchasing a duplex in Uptown, and we had made an offer without seeing the upper unit because the owner only wanted that unit shown at the time of an inspection. I went to the inspection with the inspector, and we inspected the lower unit without any problem. We then went to knock on the door of the upper unit. I heard people talking in the unit, and no one came to the door. I knocked a second time and the talking continued, and they could obviously hear us because they sounded like they were right by the door. I then knocked more aggressively, and the tenant opened the door and told me to meet him in the backyard and shut the door.

The inspector and I proceeded to go to the backyard where the tenant began screaming at me, and threatening me and the inspector.

We then proceeded to walk toward the front of the property, when a second tenant came out and intentionally blocked our way to the street. Eventually, the tenant tried to jump me and I proceeded to pin him to the ground, and the inspector held the other tenant, and kept him from attacking me. The police were called, and we explained what happened and the tenant was taken to jail. Luckily, the buyer didn’t experience this and decided to move forward only after the tenant was removed from the property. I realize this is a wild story, but it isn’t the only time it has happened. I have received calls from agents explaining to me that tenants are threatening them, and one that recently threatened to punch two women!

In another case, an out-of-town owner, had a rental property manager in charge that was allowing tenants to live in his unit that were dealing drugs. When I went to the property for the first-time, the tenant made a drug deal with someone that knocked on the back door just one room away from me. The property received an offer that was accepted, however when the prospective buyers did the inspection there were seven adults passed-out in the unit at 2 PM in the afternoon. They not only cancelled the Purchase Agreement, their agent told me they decided not to buy a duplex.

It's often better to take a temporary vacancy than to allow a terrible tenant.

I have had agents tell me the tenants wouldn’t let them in even when we had set scheduled times for showings a week in advance, and they had a couple days notice in addition to that. The one buyer that may pay $10,000 or $20,000 more than anyone else may back away from your property if you keep bad tenants there, or worse yet you may not receive an offer at all due to bad tenants.

You are better off ending their tenancy, and having one unit vacant for a month or two. You will make up for the lost rent often times by 10X in a higher offer.

If you need guidance on how to receive the best offer for your duplex or investment property please feel free to call me at 612 332 9000.

Thank you! Jason