If you're looking to sell a property that's currently being rented out, you may be wondering if it's possible to sell the property while the tenants are still occupying it in San Francisco & Marin. The answer is yes, but there are some important things to keep in mind to ensure that you're following the law and respecting your tenants' rights. Having the tenants on your side is a valuable component of moving an occupied property in the current market climate. 

Provide Adequate Notice to Your Tenants

Before you start showing the property to potential buyers, you'll need to provide your tenants with adequate notice. In California, landlords are required to give at least 24 hours' written notice before entering a rental property, including for showings. However, it's always a good idea to give your tenants even more notice than required to be respectful of their privacy and schedule. 

Be Mindful of Your Tenants' Comfort and Privacy

During the sales process, it's important to be mindful of your tenants' comfort and privacy. Work with your real estate agent to schedule showings at times that are convenient for your tenants, such as on weekends or during the evening hours. Make sure the property is clean and well-maintained before showings to ensure that your tenants are comfortable with potential buyers coming into their home.

California Tenant Law: Understanding Your Obligations

If your tenants have a lease agreement that extends beyond the date of the sale, you'll need to honor the terms of the lease. This means that the new owner of the property will become the landlord and will be responsible for fulfilling the obligations of the lease, such as collecting rent and maintaining the property.

In California, there are additional tenant protections that you'll need to be aware of if you're selling a rental property. With the current eviction moratorium climate in San Francisco and surrounding counties, evictions prior to sale aren’t advised, or really possible. If your tenants have a lease that ends after the sale, you'll need to provide them with written notice of the new owner's name and contact information.

Marketing An Occupied Property

Similar to other property listings;  the better presented a property is, the more attention it will garner. The challenge is trying to present ‘other peoples stuff’ in listing photos. Legal ramifications aside, unless your tenants have quite the design eye, a property rarely looks like they do on Zillow with professional staging & photography. Luckily, with the advancement of rendering technology, it's easily possible to scrub interior photos completely clean of furniture & stuff, replacing with stylish, graphic renderings of brand new furniture in place of the old. We do this for every listing, here’s a good example of the power of virtual staging:

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Who Are Prospective Buyers In The Current Market:

Given tenant occupied properties have many nuances, the buyer pool they appeal to is also quite segmented. Below are a few (not all) of the buyer types, and what they’re typically looking for:

Portfolio Investors:

These buyers are typically wealthier individuals, or groups/syndications looking for properties with strong cash flow, a high cap rate (4.64% was the avg. cap rate sold in San Francisco in 2022) and long term tenant contracts in place. Portfolio investors typically want a long runway of current numbers (eg. long term leases in place) and not need to make any immediate changes/upgrades to the property

FHA/Owner occupants:

FHA loan limits allow a buyer to purchase duplexes, triplexes and quad-plexes with as little as 3.5% down. The terms of the loan require buyers to occupy one of the units for a minimum of 12 months. These buyers are typically outpriced in the 20% down market, or are savvy investors and looking to build their real estate portfolio. If your property has one unit vacant, it may qualify for FHA financing, thus massively increasing the pool of buyers that might be interested. 

Bottom Line

Selling a house with renters is possible, but it requires careful planning and compliance with California tenant laws. Always provide your tenants with adequate notice before showings, be respectful of their privacy and comfort during the sales process, and make sure you understand your obligations under any existing lease agreements. With these steps in mind, you can successfully sell your rental property while maintaining positive relationships with your tenants.

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Call Tim if you have specific questions; 415 691 9272
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