How to Sell Rental Property with Tenants California

Have a rental property you want to sell in California? But still have tenants in it? We buy rental properties AS IS and we cover closing costs. Get started by requesting a free CASH offer below!

  • This field is for validation purposes and should be left unchanged.

How to Sell Rental Property with Tenants in California

how to sell rental property with tenants California

If you’re a landlord in California planning to exit the rental business, you may have already considered putting your property up for sale. While you have every right to do this, the process can be wrinkled with challenges if there’s still a tenant in residence. You may see yourself going through legal issues that can delay or even prevent you from selling the property in California.

To sell a rental property with tenants in it in California, you have a few options: wait for the tenant’s lease to expire, negotiate with the tenant regarding early move-out, terminate the lease, sell to the tenant, work with a real estate agent, or sell to a real estate investor. Among these options, selling to an investor is the most hassle-free because you won’t have to ask the tenants to move out.

To explore all your options when selling an occupied property, check out the rest of this blog! Aside from what was mentioned, we also included some tips to ensure you’ll sell your property in California smoothly.

Can You Sell a Rental Property with Tenants in California?

can you sell a rental property with tenants California

Yes. You can legally sell a rental property in California even if it is occupied by tenants. In fact, many real estate transactions these days involve rental properties that are being sold even with tenants in residence.

The timeframe with which you can sell your rental property to a new buyer depends on the lease agreement with the tenant

If the lease agreement is month-to-month and you have a good tenant, there would be little to no issues in selling the rental property. Meanwhile, if the tenant’s lease is on a fixed term, the sale would be more complicated and take longer.

We’ll discuss these two major types of leases in a later section of this blog.

Challenges of Selling a House with Tenants in California

challenges of selling a house with tenants California

As established, selling an investment property with tenants in it can throw you a few curveballs. You would benefit from knowing these challenges so you can plan your sale accordingly.

Here are four common challenges of selling a house with tenants in it in California.

Smaller Rental Buyers Pool

smaller rental buyers pool California

Perhaps the biggest problem when selling a house with tenants is the smaller buyer pool. You won’t be able to attract families that are starting out or senior citizens looking for a place to retire.

You’ll be limited to local California real estate investors who are looking for profit-generating properties. 

These real estate investors are also more calculated when buying an investment property. It’s an “investment buy” for them, so it would be hard to appeal to their emotions during negotiation.

Nevertheless, this may turn out well for you if the rental needs a lot of repairs since investors buy as-is.

Difficulties in Open Houses and Showings

difficulties in open houses and showings California

There are many reasons why it can be difficult to show your rental property if a tenant still lives in it. For starters, it is hard to set a schedule that suits both the buyer and the tenant.

Most tenants also want to be present during showings since they aren’t comfortable opening their dwelling place to strangers. This may prevent the buyer from fully checking out the house.

There’s also the possibility that the tenant is messy. You would have to hire a cleaning team just so the rental property looks presentable during the showing.

Lower Selling Price

lower selling price California

Setting a very high asking price can further limit your already small buyer pool. You won’t have any choice but to sell the rental property at a low price when tenants are in place.

Potential buyers may also put in conservative offers because your rental property is quite risky, what with existing tenants that may or may not pay them when they become their landlords.

Buyers Fear Dealing with Bad Tenants

buyers fear dealing with bad tenants California

Even if your asking price for your tenant occupied property in California is very low, you may still scare potential buyers away. 

From their perspective, the cheap price of your rental would not compensate for being the landlord of potentially bad tenants. They wouldn’t want to invest in a rental property that can give them a headache later on.

How to Sell a Rental Property with Tenants in It in California

how to sell rental property with tenants in it California

Earlier, we mentioned that the process and timeline of selling your rental home in California depends on the type of rental agreement you signed with your tenant. In this section, we have detailed how to get started with the sale of a rental depending on these agreements.

When the Tenants are on a Month-to-Month Lease

A month-to-month lease or rental runs for an indefinite time. In other words, the lease remains active until either the landlord or the month-to-month tenant agrees to terminate the lease agreement.

If you plan to sell your investment property in California and the tenant is on a month-to-month lease, you likely won’t encounter any issues in selling it so long as you provide the tenant with advance notice. 

Generally, the notice should be issued at least 30 days before they need to vacate the rental house.

However verify the specific laws in California, as landlords may be required to issue a notice 60 to 90 days before the date of the vacancy. This depends on how long the tenant has lived in the rental home.

Be sure to check the California laws regarding the required days so you won’t face any legal issues.

When the Tenants are on a Fixed Term Lease

A fixed term lease is a rental agreement with a start and end date. Usually, a term lease can last anywhere from 6 months to 3 years. 

Since there is a contract that binds the landlord to the tenant, the sale process is much more complicated and time-consuming.

Detailed below are six ways to sell an investment property with a tenant on a fixed-term lease in California. 

Wait Until the Active Lease Expires

wait until the active lease expires California

If you are not in a hurry to put your rental property on the California real estate market and still have good cash flow, it is best to wait for the lease to end. There are actually many benefits to doing this.

For starters, you can make repairs and upgrades to the vacant property without disturbing any tenants. A better-looking rental property translates to a higher asking price. Even if you waited months before selling it on the real estate market, you end up with more cash.

Another great thing about waiting for the tenants to move out is that you can increase the rent potential of the vacant property. Doing this would raise the buyer’s potential rental income, which also dictates the worth of the property.

The drawback of waiting for the lease to expire is dealing with mortgage payments and property taxes in California. You would still have to pay the monthly mortgage dues and taxes until the lease ends, which can be problematic if it expires in a few more years.

Negotiate Settlement for Early Move Out

negotiate settlement for early move out California

Negotiating with your tenant for the possibility of an early move-out is an excellent option if you have a sure buyer waiting for you to settle the lease. Early move-out means you’ll ask the tenant to leave before the lease ends.

Note, however, that the tenant has the right to reject your terms. But there’s a high possibility that they’ll agree with you if you offer them some incentives.

  • Pay for rent difference. If your tenant is indecisive about moving because the rental they plan to move into has a higher rent, pay for the rent difference. This agreement can cover the months left on their fixed-term lease.
  • Cover their moving costs. Leaving your investment property in California can bring inconvenience to your tenant. Covering their moving fees is a small price to pay.
  • Pay for their security deposit. Remember that when moving to a new rental, your tenant has to pay a security deposit. You might want to pay for this deposit to entice them to move out.
  • Offer payout. Offering a payout is the most expensive way to convince a tenant to move out. However, it can be effective. The payout you’ll offer should be computed based on your rental income and how much you’ll earn from the potential sale. Beware of tenants who will take the money and require you to evict them (which can take months).

Sell the Rental Property to the Tenant

sell the rental property to the tenant California

If your long term tenant loves living in your California rental home, it would be difficult for them to move out. In this case, it would be better to have them buy the house from you.

This option is one of the fastest and easiest ways to sell your occupied rental property.

Here’s how you can proceed with this option. 

  • Lease-to-own: In a lease-to-own agreement, the tenant would buy the rental property eventually. The monthly rental payment will serve as the down payment. 
  • Seller Finance Agreement or Seller Financing: With seller financing, you would act as the lender of your current tenant. In other words, you collect a down payment from the tenant as well as a monthly mortgage. If they fail to pay, you can take the rental property back. 
  • Lease-to-own with a Non-Refundable Option Fee: In this agreement, the tenant will pay an additional fee on top of the rent so they can buy the rental at some point in the future. This is only a one-time fee that gives the tenant more incentive to keep paying.

Terminate the Lease

terminate the lease California

Most lease agreements have an early termination clause. Essentially, the early termination clause states that a lease can be terminated within 30, 60, or 90 days after the closing of the rental sale. This clause can be executed for any reason as long as it is reasonable for both parties.

Here are the most common reasons for an early termination clause to be executed:

  • Delinquent tenants who fail to pay rent and cause negative cash flow
  • A violation of a clause in the lease agreement
  • A violation of a responsibility set by local laws

When terminating a lease agreement, the landlord must issue proper notice to the tenant months before the rental property needs to be vacated.

Sell the California Rental with the Help of a Real Estate Agent

sell the rental with the help of a real estate agent California

As mentioned, you can legally sell a house on the traditional real estate market even with tenants in it in California. In doing this, real estate agents would be of great help.

Note, however, that it would be difficult to find potential buyers who are interested in a house with tenants.

Even if you have a great real estate agent, it can take time to land a great offer since most retail buyers want homes that they can move into. In other words, they don’t want to be landlords.

Sell the California Rental to a Cash Buyer or Real Estate Investor

sell the rental to a cash buyer or real estate investor California

Selling to a local California cash buyer or real estate investor is your best option if you want to get rid of a rental property with tenants in it.

These potential buyers are really looking for investment properties they can add to their portfolios

Moreover, having existing tenants can be beneficial to most real estate investors since it saves them time to find new ones. Remember that these buyers are looking for a high return on investment and a great cash flow in a short period of time. 

Aside from buying properties with renters in them, real estate investors also purchase as-is. In other words, they won’t force you to make repairs for your rental property in California.

How to Smoothly Sell a California Rental with Tenants

how to smoothly sell a rental with tenants California

When selling an occupied property in California, the last thing you want is an uncooperative tenant. If you are too aggressive with having them leave their primary residence, they may use the lease agreement to sue you in court. 

Since, technically, you are asking the tenant for a favor in order to proceed with a home sale, you should be extra cautious when communicating with them

That said, here are a few tips that can ensure you’ll be able to handle the tenants correctly and proceed to a smoother rental sale.

Inform the Tenant Regarding the Sale

The first thing you have to do if you’re a landlord selling a rental property in California is to inform the tenant of your decision. You can do this by meeting them in person and sending proper notice.

Meet In-Person

Meeting the tenant in person can help you communicate your intentions clearly. They may have questions and this gives you a chance to address them immediately when you’re face to face. 

When meeting with your tenant, explain how the sales process will go, but also be apologetic about your decision because of the inconvenience it might cause them. If they see that you are concerned with them, too, they may be more agreeable.

Send a Written Notice

send a written notice California

Prior to meeting with your tenant in-person, you should also send them a written notice regarding what is about to transpire. To guide you, here’s what a proper notice should include:

  • Basic Identification: This includes the date, tenant’s name, and the address of the rental property in California.
  • What Will Transpire: This covers when the rental property will go on sale, what the tenant’s role will be during the sale, if you will have showings, etc.
  • Property Showing Notice: If you would schedule showings for the rental, attach a rental property showing notice so the tenant is aware of when it would happen. Also, this should detail if they should leave the property while there is an ongoing showing. The same goes for open houses.
  • Bonus Incentives: In case you plan to give your tenant some incentives like rent rebate or paying for moving expenses.

Aside from these required details, you should also assure the tenants in the notice that you won’t allow a lot of unknown strangers or prospective buyers to parade inside the rental simultaneously.

Know the Legal Rights of the Tenants in California

The laws governing tenants’ rights vary from state to state. Thorough research of the California laws will help avoid breaking the law and facing charges.

Typically, tenants aren’t required to vacate the rental just because you are selling it. They are paying rent and you signed a lease agreement with them which may span from months to years.

In other words, unless you have a reason to terminate the current lease legally, they could stay in the rental property as the lease terms should be followed.

Ask a California Real Estate Attorney for Guidance

ask a real estate attorney for guidance California

If you are confused regarding the California state laws and the whole process of selling a rental property with a tenant in it, you should ask a real estate attorney for guidance and real estate advice.

A real estate attorney in California can also help you settle an issue with your tenant, so you can avoid going to court while selling rental property.

Take Care of the Upkeep of the Rental Property

Remember that your tenant doesn’t really have a stake in the sale of the rental. Therefore, you should take responsibility for keeping the rental property clean and in great condition. Hire a cleaning service to help you with this if there’s a lot to take care of.

Don’t Put “For Sale” Signages Outside the Rental Property

As respect to the tenant’s privacy, do not put a for sale sign outside the rental property. If there’s a for sale sign, there’s a chance potential buyers would knock on their door and disturb them.

The real estate transaction should be controlled by you, including showings and this shouldn’t burden your tenants.

Adjust Showing Times According to Tenant’s Schedule

California and local governments have laws regarding showing times for occupied property. You should set showings based on these laws while considering your tenant’s schedule. You don’t want to inconvenience them further, especially if they have already agreed to move out.

Ask the Tenant to Be out During Showings

It would be awkward for a buyer to be followed around by a tenant as they explore the property. To avoid this, incentivize the tenant to leave the rental property during showing hours. Give them a gift card to a café or have the tenant stay in a nice hotel if you have multiple showings in a day. 

Ensure that the Tenant is Paying Rent on Time

ensure that the tenant is paying rent on time California

While some landlords are lenient in letting tenants get behind in their rent payments, this should be avoided when planning to sell a rental. To illustrate, when you list your house on the California real estate market or sell to an investor, they would look into the payment history of the existing tenant.

If they find out that you have a delinquent tenant that would give them a headache when they collect rent, they might forgo the sale or give you an offer that is below market price.

Schedule Repairs According to Tenant’s Convenience

Suppose the property needs a lot of repairs. In that case, you should schedule fixes when the tenants are out so they won’t be disturbed.

If they work from home, however, it can be a bit difficult. You would have to ask them to work at a nearby café with a great internet connection and pay for it.

Meanwhile, if the repairs would take days, you would have to shoulder their stay in a hotel just like you would during showings.

However, if you sell a rental property to a real estate investor in California, no repairs are necessary. Further, with a fast sale you can pay less in property taxes and other fees.

Keep Up with Your Landlord Duties as the Property Owner

While selling your property in California, you should not forget your duties and responsibilities as a landlord.

You should still attend to your tenant’s needs and address the issues they’re experiencing with the house. This would help maintain your good relationship with them, which can translate to lesser problems when selling.

Help the Tenant Find a New Rental House

help the tenants find a new rental house California

If the situation calls for it, you may have to help your tenant find a new rental house. You can help them find local online listings or contact someone you know that has an available property in California. If you have other rental properties in another California neighborhood, you may offer them to move there, too.

Communicate to the Tenant After the Sale

After closing the sale of the property, you should send a letter to the tenant regarding the sale and where they should direct the payments moving forward.

A more personal approach would be introducing the tenant to the new owner of the property. If the tenant only deals with the property manager and not the new owner, there’s no need for this.

Final Thoughts: How to Sell a Rental Property with Tenants In It California

Selling rental property with a tenant in it in California can be overwhelming when you initially think about it. Hopefully this guide sparked ideas to help you have a smoother rental property sale.

If in case you’re still facing difficulties, it may be best to explore selling to a real estate investor. They would gladly accept being the new landlord of your old tenants or getting the tenants out of the property. Plus, they won’t ask you to make repairs before closing.

Here at Sell My House Fast, we give fair cash offers to rental properties with tenants in it in California. What’s more, we don’t charge fees, and we even cover closing costs!

To start selling your occupied property in California, fill out our form below or call us at (844) 207-0788‪.

Sell My House Fast For Cash!

  • This field is for validation purposes and should be left unchanged.

California Resources

Selling a Fire Damaged House CaliforniaSelling a House during Divorce California
Selling Inherited Property CaliforniaHow to Sell a Hoarder House California
Selling a House in Probate CaliforniaCan You Sell a Condemned House California?
How to Sell a House by Owner CaliforniaCan You Sell a House in Foreclosure California?
How to Sell Rental Property CaliforniaHow to Sell Rental Property with Tenants California
Stop Foreclosure CaliforniaTaxes on Selling a House California

How to Sell Rental Property with Tenants California

Los Angeles CaliforniaSan Diego CaliforniaSacramento California
San Jose CaliforniaBeverly Hills CaliforniaFresno California
Oakland CaliforniaModesto CaliforniaLong Beach California
San Francisco CaliforniaIrvine CaliforniaBakersfield California
Monterey CaliforniaRedding CaliforniaSanta Rosa California
Stockton CaliforniaGlendale CaliforniaSan Bernardino California
Anaheim CaliforniaMerced CaliforniaPasadena California
Santa Clarita CaliforniaRiverside CaliforniaSanta Ana California
Santa Barbara CaliforniaPalmdale CaliforniaRichmond California
Berkeley CaliforniaTurlock CaliforniaNewport Beach California
Corona CaliforniaWest Hollywood CaliforniaInglewood California
Santa Monica CaliforniaTorrance California Whittier California
Burbank California West Covina California Chula Vista California
Temecula California Palm Desert California Victorville California
Fontana California Fullerton California Garden Grove California
Oxnard California Visalia California Clovis California
Fairfield California Concord California Fremont California
Yuba City California Rancho Cucamonga California Pomona California
Escondido California Oceanside California Coachella California
Moreno Valley California Menifee California Huntington Beach California
Ventura California San Luis Obispo California Santa Maria California
lancaster California Redwood City California Hayward California
Vallejo California Walnut Creek California Rohnert Park California
Lodi California Roseville California South Lake Tahoe California
Oroville California Compton California Downey California
Lakewood California Thousand Oaks California Ontario California
Carlsbad California Vista California Redlands California
Hemet California Perris California San Clemente California
Camarillo California Arvin California Porterville California
Menlo Park California Napa California Pinole California
Pleasanton California San Leandro California San Rafael California
Santa Clara California Tracy California Auburn California
Elk Grove California Rancho Cordova California Cameron Park California
Chico California Culver City California Gardena California
Hawthorne California Redondo Beach California Buena Park California
Carson California Chino California Covina California
El Monte California Monterey Park California Diamond Bar California
Upland California Alhambra California Encinitas California
San Marcos California Indio California Banning California
Palm Springs California Rancho Mirage California Yucca Valley California
Apple Valley California Barstow California Yucaipa California
Hesperia California Rialto California Lake Elsinore California
Murrieta California San Jacinto California Lake Forest California
Dana Point California Costa Mesa California Laguna Hills California
Mission Viejo California Tustin California Brea California
Yorba Linda California Simi Valley California Wasco California
Lake Isabella California Arroyo Grande California Lompoc California
Madera California Palo Alto California San Mateo California
Danville California Antioch California Castro Valley California
Moraga California San Ramon California Petaluma California
Los Gatos California Watsonville CaliforniaSanta Cruz California
Scotts Valley California Jackson California Manteca California
Citrus Heights California Rocklin California Vacaville California
Red Bluff California Hermosa Beach California Huntington Park California
Lawndale California Lynwood California Malibu California
Manhattan Beach California South Gate California La Palma California
La Habra California La Mirada California Montebello California
Norwalk California Pico Rivera California Stanton California
Cerritos California Bellflower California Hawaiian Gardens California
Lomita California Seal Beach California Signal Hill California
Monrovia California San Fernando California Baldwin Park California
Chino Hills California Claremont California South El Monte California
Hacienda Heights California Rowland Heights California Montclair California
Rosemead California San Dimas California San Gabriel California
Temple City California Imperial Beach California La Mesa California
Lemon Grove California El Cajon California Fallbrook California
Santee California Solana Beach California Beaumont California
Blythe California Calexico California Cathedral City California
Desert Hot Springs California El Centro California Joshua Tree California
Twentynine Palms California Grand Terrace California Calimesa California
Loma Linda California Phelan California Homeland California
Wildomar California Laguna Woods California Laguna Beach California
Laguna Niguel California Westminster California Fountain Valley California
Norco California Moorpark California Santa Paula California
Avenal California Coalinga California Corcoran California
Delano California Earlimart California Farmersville California
Hanford California Lemoore California Lindsay California
McFarland California Pixley California Shafter California
Taft California Tulare California Woodlake California
Atascadero California Cayucos California Grover Beach California
Morro Bay California Paso Robles California Pismo Beach California
Solvang California Mojave California Rosamond California
Tehachapi California Chowchilla California Dinuba California
Dos Palos California Los Banos California Mendota California
Oakhurst California Orosi California Reedley California
Selma California Seaside California Daly City California
Pacifica California San Bruno California Sunnyvale California
Los Altos California Foster City California Alameda California
Benicia California Pleasant Hill California Lafayette California
Orinda California Pittsburg California Dublin California
San Lorenzo California Union City California Emeryville California
Campbell California Capitola California Gilroy California
Atwater California Lathrop California Livingston California
Oakdale California Ripon California Riverbank California
Sonoma California Carmichael California Fair Oaks California
Folsom California Woodland California North Highlands California
Orangevale California Placerville CaliforniaRio Linda California
Antelope California Gridley California Magalia California
Paradise California Corning California

Want a fast, fair, no hassle offer? Sell My House Fast buys houses in California for cash! (844) 207-0788

Author: Andy Kolodgie

Andy Kolodgie is an experienced real estate investor with a network that expands nationwide. As owner of Sell My House Fast, Andy’s goal is to provide home sellers with more options to their real estate problems than a traditional home sale. He’s been featured on multiple publications including Yahoo Finance, MSN, HomeLight, Credit.com, Apartment Therapy, Business.com, LegalZoom, Zolo, and Creditcards.com.

Facebook | LinkedIn