Many owners decide to keep their first home or condo as an investment. But should they later decide to sell while tenants are still living there, the initial excitement around owning a rental property can quickly turn to disappointment.
Katia Samson, founder of Katia Samson Real Estate Group and Certified Real Estate Broker AEO, possesses more than 25 years of experience in property sales and rentals. Here, she explains why there can be significant drawbacks to renting out your property.
About the lease
“It is essential to know about tenants’ rights and associated issues when you decide to sell,” Katia explains. “What’s more, a home must be sold and notarized six months before the end of the lease if the buyer wishes to occupy it, which is difficult to predict when placing a property on the market.” If the sale is not finalized in time, the lease is automatically renewed. A seller may not give a six-month vacancy notice. And it is unusual to find a buyer who is willing to wait six or seven months before moving into a new house or condo.
In addition, Quebec law clearly states that when a building is put up for sale, the landlords must give tenants verbal or written notice 24 hours prior to any visit from a potential buyer.
According to Katia: “We have repeatedly seen tenants who are uncooperative when it comes to visits. The dwelling is often messy and unclean, clearly not presentable to potential buyers.” Brokers also know from experience that a rented property is not easy to prepare for a sale. It is almost impossible to arrange proper home staging when tenants live on the premises.
In the event a property is purchased six-to-seven months before the end of the lease, the new owners must honour the rental agreement and all the responsibilities that this entails. This is something not everyone is willing to do, especially in the current market where buyers are looking for “turnkey” properties with few-to-no problems.
Thousands of dollars lost
“I have seen tenants being offered thousands of dollars to move out because the owners wanted to sell their condo,” notes Katia.
Another important aspect to consider when selling a rental property is the issue of capital gain. Unlike the sale of a principal residence, where profits derived regardless of the amount are never taxed, according to Revenu Québec: “When a profit is made on the sale of a rental property, this amount is a capital gain that must be included in the income tax return.” Therefore, this amount is taxable. Again, thousands of dollars down the drain …
If you would like further information about selling a rental property, feel free to contact us. At Katia Samson Real Estate Group, we are always ready to answer your real estate questions!