A tenant, a major issue for resale
When we visited a plex we’d put up for sale, everything seemed ideal: a sunny courtyard, a first floor in excellent condition, and a tenant on the second floor for quite some time, with a rent of $1,000 – certainly below market, but nothing too alarming. We received a first offer within the week, which we accepted enthusiastically.
However, when we visited the second apartment, the buyer quickly realized that the tenant had three cats, and the smell of cat urine was very strong. On our first visit, the apartment wasn’t perfectly clean, but it was tolerable. The buyer, disappointed by this discovery, decided to withdraw from the transaction.
Loss of momentum on resale
Once the property was back on the market, we lost some of the initial momentum. The property remained on the market for another two months before a new offer was made. This time, potential buyers wanted their parents to live on the second floor. However, despite some improvements, the smell hadn’t really disappeared, and the new buyers also decided to pull out.
A tenant can make or break a sale
A third buyer finally appeared, but this time we pointed out that the condition of the tenant’s unit left much to be desired. We accepted a purchase offer $15,000 lower than the previous ones, but we were relieved to be making progress.
Upon inspection, we discovered moisture problems, exacerbated by the lack of maintenance in the tenant’s apartment. Despite this, the buyers went ahead with the purchase, but with a further reduction of $20,000. In total, we ended up with a purchase offer $35,000 lower than the one we had initially accepted, solely because of the tenant.
Conclusion: Choosing the right tenants is essential
The impact of tenants on the value of a rental property is often underestimated. As this example shows, it wasn’t the building itself that was the problem, but the tenant. Choosing the right tenants is essential to avoid significant financial losses when reselling your property.
