Sell property with tenant or vacant?

Chad9219

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#1
I own a four Plex which I am considering selling in Edmonton

wondering what the group here thinks about selling a property tenanted or vacant?
I'm not having a problem finding tenants so I'm just wondering if I should put a tenant in and then list it or leave it vacant for the new owner.

Thanks for your input.
Chad
 

CorySperle

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#3
Who will your buyer be? For single family I would say vacate, slap on a coat of paint then list. A 4 plex will likely attract mostly investors. Plus what if you don't sell for several months? You are out a lot of cash. I would consider it a multiple unit dwelling and be looking hard at the income numbers hence any vacancy would be negative. You could empty one suite and really spruce it up in the event there is a buyer who is looking for a place to move himself, and rent the rest of the units but this would be rare.
 
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Martin1968

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#7
You absolutely want to sell the 4 PLEX as fully tenanted as you can. Don't even leave a suite open for viewing. Only when an excepted offer (with condition of viewing written in the offer) you should show.
The reason you want to sell it fully tenanted is that when appraisal is done you want the income to show as part of the evaluation and your PLEX will appraise higher with (decent) rents and all documentation in place.
For the investor it's advantageous as well as lenders will see it as a solid investment.
 

Alvaro Sanchez

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#9
Alvaro, not really a helpful comment.
As a business owner the more income you show that your business produces the more valuable it becomes (real estate or non-real estate). If I were you, I would focus on getting a tenant in there on market rents (or above market rents) in order to ask for top dollars for the property (or easily justify your asking price).

As an investor when I see property with vacant units, I immediately assume that owner no longer interest in maximizing his returns, no time to properly manage, etc. Therefore, I would be more aggressive on my offers.
 
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Chad9219

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#11
Well at least there are some people on these boards who can handle an honest question.
For those of you who have the need to be sarcastic or unhelpful why don't you just butt out and move along:
 

kfort

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#12
There are some lenders who look at full properties more favourable in the sense that they will lend to 80% vs. Only 65% if not currently rented.

TD for example does this
 

kfort

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#14
Having not used all, I'm not sure. Scotia has always let me go 80% and request vacant/ partial vacant possession.
 

Martin1968

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#15
I'd say all are like that.
When 75% or more empty, it still qualifies for 20% down with many lenders, depending on strength and experience of applicant, with the request to the appraiser to show market rents.
With a bit of luck you find out from your broker or bank specialist what that market rent has to come in at. If it shows, then 20% down despite units being vacated is possible, bu if market rents don't show, count on 35%. I have experienced both. Best experience i have had with RBC. Worst with Scotia.
But there is no doubt you make it a whole lot easier to sell it fully tenanted. It just shows better. If you let them move out first, count on making the empty units presentable for an X amount of dollars.
 

Sherilynn

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#16
The reason you want to sell it fully tenanted is that when appraisal is done you want the income to show as part of the evaluation and your PLEX will appraise higher...
This really only applies to multi-family mortgages. A four-plex still falls within the category of residential mortgages where rental income does not affect appraised value.

Although I can see why some banks may prefer to see established income, a market rent analysis should suffice. Furthermore, as an investor and landlord, I would rather put my own tenants in the property. Not only do we normally charge above-average rents, but also we prefer our leases and other documentation.

Inherited tenants often equates to inherited problems.
 
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ThomasBeyer

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#17
This really only applies to multi-family mortgages. A four-plex still falls within the category of residential mortgages where rental income does not affect appraised value.

Although I can see why some banks may prefer to see established income, a market rent analysis should suffice. Furthermore, as an investor and landlord, I would rather put my own tenants in the property. Not only do we normally charge above-average rents, but also we prefer our leases and other documentation.

Inherited tenants often equates to inherited problems.
Well said. A 4-plex as such is different than a normal multi-plex and as such, different rules apply.
 

Martin1968

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#18
This really only applies to multi-family mortgages. A four-plex still falls within the category of residential mortgages where rental income does not affect appraised value.

You are right about 4 plexes falling under the residential mortage product.
However, the mortage product itself doesn't determine what lenders will ask for. It's been my experience that when many empty units they will ask for market rent as part of the appraisal. As long as it shows what they are looking for you will be good.

Also, Just because a property qualifies under residential mortgage guideline, it does not mean that rental income does not affect appraised value. When you have an income producing multifamily property the rental income will affect the value of the property. (Think legal basement suites since CMHC allows the rental income as part of ones application)

As far as advising about selling vacated or tenanted, when looking at it from the sellers perspective, you want to sell it tenanted. When empty you have a lot of cost to carry, mtg, prop tax, insurance etc.
Just because a buyer likes his or her own lease contracts and other paperwork, that's an argument from a buyers perspective. As a buyer, it wouldn't worry me as it's very simple to put your own paperwork in place if you so wish.
 

Martin1968

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#19
I'm obviously having trouble with how to post a reply to someone's response.
I apologize for that.
 

Martin1968

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#20
Well said. A 4-plex as such is different than a normal multi-plex and as such, different rules apply.
Well said maybe, but based on my experiences with 4 plexes not exactly right. 4 plexes is all I do so far and have experienced quite differently.