Selling rented condos: What to take into consideration?
Selling a rented condo is usually more complicated than selling a vacant apartment – yet it is by no means an exception. Often times, inheritance leads to the sale of rented properties, but also in the case of a real estate win that only exists on paper until the property is sold, or an investment strategy change can be good reasons for selling real estate. With the right kind of plan and competent consultants at your side, selling a rented apartment at premium prices can be managed. The David Borck Immobiliengesellschaft has great expertise in this area. The company knows what buyers and sellers should be taking into consideration:
In addition to considering the existing lease agreement between tenant and landlord into which the buyer will be entering, the apartment should also be examined and assessed. Brokers or real estate buyers offer this service free of charge, whereas appraisers or attorneys charge a fee. In any case, professional help should be requested for this task, so that the market value of the property can be put into exact numbers and all contract documents can be examined in detail.
Right of first refusal
In certain cases, the current tenant of the apartment is granted a right of first refusal. According to that, the tenant can enter into the agreement negotiated between the buyer and the seller, resulting in the buyer coming away empty-handed. Such a right of first refusal is valid for example, when the residential property had been converted into a condo during the rental period, and then sold. Furthermore, the current tenant can’t have waived their right of first refusal yet. If the tenant is not informed about their right of first refusal, which is against legal regulations, you might be faced with high compensation payments – which can be easily prevented by legally impeccable behavior and competent advice in advance.
Marketing of a rented condo
Also, the marketing of a rented condo usually works differently than the marketing of a vacant apartment. Usually, these investment properties are rather acquired on the basis of return expectations than by interested parties who want to purchase the condo for private use. What is more, viewings are possible only after consulting with the tenant: Therefore, potential buyers will usually receive a viewing appointment after all the details have been clarified. That is why the sales calls should preferably be made by people who are experienced in the sale of investments, in order to clarify all details in advance and put the viewing appointments to good use.
Contract of sale does not break tenancy agreement!
This strict principle applies today more than ever. The existing lease agreement therefore remains mostly untouched. In fact, the buyer is obliged to continue the existing rental contract in unchanged conditions. At the same time, the buyer is not entitled to the rental income until the transfer of beneficial ownership has taken place. Exceptions are, for example, if a temporary lease agreement is in place, or if the rental contract contains a sales clause that allows for the contractual relationship to be resolved at an early stage.
Special case: Claiming the property for personal needs
Since the new owner is taking over not only the apartment, but also the existing lease agreement, the current tenant cannot be expelled, neither can the lease terms be changed. However, the buyer can claim the property for his personal needs in certain cases. To do this, he has to prove that he himself or a member of his family needs the property for personal residential purposes – and there are many pitfalls to consider here. Therefore, it is highly recommended to seek advice from a professional, such as specialized brokers and lawyers. There are, for instance, certain vesting periods for the first sale of a rental conversion after it was converted into a condominium. In Berlin, this is period is 10 years – only after this time period, the lease can be terminated due to claiming personal use.
A lot of potential
Selling a rented condo surely is exciting: Although its market value usually is lower than a vacant apartment’s value, but the seller can make a lot more money through the sale than through the rental income that is usually limited. As for the buyer, there is a high potential for value increase that can be realized when the tenant moves out. If well advised, both sides will benefit from the sale this way.
Benefit from our experience
Are you considering selling your rented condo, or are you intending to complete a sale for your portfolio? Then, feel free to get in touch with us for a non-binding conversation, and we will gladly provide you advice on investment strategies and marketing opportunities.
We look forward to hearing from you!
David Borck Immobiliengesellschaft
Schlüterstraße 45 | 10707 Berlin | firstname.lastname@example.org
Telefon 030 – 887 74250 | Telefax 030 – 887 742525