Should You Sell Your Tucson Rental Property With a Tenant in Place or Vacant?

By Heather Leask, REALTOR® | Head of Growth at New Concept

If you own a rental property in Tucson and are thinking about selling, one of the first decisions is whether to list the property while the tenant is still living there or wait until the property is vacant.

There isn't one right answer.

For some Tucson rental properties, keeping a reliable tenant in place can make the property more attractive to an investor. For others, selling vacant can open the property to a much larger pool of buyers and potentially lead to a stronger sales price.

The right strategy depends on the lease, current rent, property condition, likely buyer, and what you're trying to accomplish financially.

Can You Sell a Tenant-Occupied Property in Tucson?

Yes.

A Tucson rental property can be sold while it is occupied by a tenant. However, an existing tenancy needs to be considered as part of the sale. A property changing ownership does not automatically mean an existing lease simply disappears, so the lease terms and applicable Arizona requirements should be reviewed before deciding how to market the property.

Arizona law also addresses access to occupied rental properties. Under A.R.S. § 33-1343, tenants generally may not unreasonably withhold consent for a landlord to enter to exhibit the property to prospective purchasers. Except in certain circumstances, landlords are required to provide at least two days' notice and enter at reasonable times.

From a sales perspective, though, I recommend thinking beyond what is technically permissible.

The goal should be to create a showing and transaction process that works for the seller without unnecessarily disrupting the tenant.

A cooperative tenant can make an occupied sale dramatically easier.

When Selling With the Tenant in Place Makes Sense

Keeping the tenant in place can be an advantage when the likely buyer is another real estate investor.

Investors are evaluating more than the house itself. They may also be evaluating:

  • Current monthly rent
  • Lease expiration
  • Security deposit
  • Tenant payment history
  • Utility responsibilities
  • Property-management expenses
  • Maintenance history
  • Current operating expenses
  • Potential future rent
  • Expected cash flow

If the property has a good tenant paying a competitive rent, an investor may like the fact that the property is already producing income.

They don't have to purchase the property, prepare it for rent, advertise it, screen applicants and wait for a new tenant before receiving rental income.

In that situation, an existing tenancy can be an asset.

When the Existing Rent Is Below Market

This is where the analysis becomes more interesting.

Imagine two similar Tucson rental properties.

One is leased at $1,500 per month.

The other could potentially rent around $1,900 per month under current market conditions.

Even if both homes are physically similar, an investor may value them differently because the income is different.

A below-market lease doesn't necessarily mean you need to wait until the tenant leaves. But it can affect:

  • The type of investor interested in the property
  • The price an investor is willing to pay
  • Expected cash flow
  • Financing calculations
  • How the property should be positioned

This is why I prefer to analyze rental properties as both real estate and operating assets.

Looking only at comparable home sales tells part of the story.

Looking only at rent tells part of the story.

For an investment property, you often need both.

When Selling Vacant May Be Better

There are also situations where waiting for vacancy makes more sense.

A vacant property may be easier to show, photograph, clean, repair and prepare for the market.

More importantly, vacancy can expand the buyer pool.

Instead of marketing primarily to investors willing to inherit the existing tenancy, the property may appeal to:

  • Owner-occupant buyers
  • First-time homebuyers
  • Relocation buyers
  • Investors
  • Buyers who want to renovate before moving in
  • Buyers who want to choose their own tenant

That increased buyer pool can matter.

If comparable owner-occupants are willing to pay materially more than an investor can justify based on rental income, exposing the property to the traditional residential market may produce a better result for the seller.

Tenant-Occupied Properties Need a Different Showing Strategy

This is one of the most overlooked parts of selling an occupied rental.

An owner-occupied listing can often accommodate showings relatively easily.

A tenant-occupied property is different.

There are schedules, notice requirements, privacy concerns and day-to-day living to consider.

I generally want the process organized before the property goes active:

Who communicates with the tenant?

How much showing notice is required?

Are there specific days or times that create problems?

How will inspections be coordinated?

Are there pets?

Will the tenant be present?

Who coordinates access with the property manager?

The smoother this process is, the easier it is for agents to show the property and for serious buyers to complete their due diligence.

Poor access can hurt an otherwise good listing.

Get the Rental Documents Organized Before You List

For an investment-property buyer, the documents can be nearly as important as the photos.

Before listing a Tucson rental, I like to understand what information is available regarding:

  • Current lease
  • Lease expiration date
  • Monthly rent
  • Security deposit
  • Additional tenant charges or fees
  • Which utilities are owner-paid
  • Which utilities are tenant-paid
  • Property-management agreement
  • Recent maintenance
  • Major system ages
  • Rental history
  • HOA information, when applicable

The cleaner the information, the easier it is for a serious investor to evaluate the opportunity.

Unanswered questions create uncertainty.

And investors often compensate for uncertainty by lowering what they are willing to pay.

Don't Automatically Vacate a Good Tenant Just Because You're Selling

One mistake I see rental owners consider is assuming they need an empty property before contacting a real estate agent.

Not necessarily.

Before making a decision that affects the tenancy, I would first determine:

  1. What is the property worth to an owner-occupant?
  2. What is it worth to an investor?
  3. What rent is currently being collected?
  4. How does that compare with current market rent?
  5. When does the lease expire?
  6. What condition is the property in?
  7. What improvements would actually increase the likely sale price?
  8. How much income would be lost while the property sits vacant?
  9. How quickly does the owner need or want to sell?

Sometimes the math clearly favors selling occupied.

Sometimes it clearly favors vacancy.

And sometimes the difference is small enough that convenience, timing or tenant considerations become the deciding factor.

What About Out-of-State Tucson Rental Owners?

This is especially important for owners who no longer live in Arizona.

I've worked with rental-property owners who are coordinating a Tucson sale from another state — and even from another country.

Those transactions require more coordination, not necessarily more stress.

The important part is having one process connecting the seller, tenant, property-management team, buyer, inspectors, contractors and title company.

An out-of-state owner shouldn't need to fly to Tucson every time somebody needs access to the property.

That coordination is one reason my work in real estate sales and alongside New Concept's property-management operation fits particularly well with rental-property dispositions.

Should You Make Repairs Before Selling a Tucson Rental?

Not automatically.

For every proposed repair, I want to know:

Will this improve marketability?

Will it increase the likely sales price?

Will it expand the buyer pool?

Or are we spending $10,000 to create $5,000 of additional value?

A rental property does not always need to look like a fully remodeled owner-occupied home.

Investors may care far more about the roof, HVAC, electrical system, plumbing, rent and operating expenses than decorative upgrades.

On the other hand, if the strategy is to sell vacant to an owner-occupant, presentation can become significantly more important.

The sale strategy should determine the preparation strategy — not the other way around.

Is an Investor or Owner-Occupant Likely to Pay More?

This is the question I ultimately want to answer for the seller.

An investor usually starts with economics.

An owner-occupant may place much more value on the home itself, neighborhood, layout, finishes, yard, schools, commute or lifestyle.

That can create two different valuations for the same property.

Before recommending an occupied or vacant sale, I like to look at both sides:

Residential market value:
What are comparable Tucson buyers paying for similar homes?

Investment value:
What income does the property produce, what expenses come with it, and what return might an investor reasonably expect?

That comparison gives the owner a much better basis for making a decision.

So, Should You Sell Your Tucson Rental Occupied or Vacant?

As a general rule:

Selling occupied may make sense when the tenant is cooperative, the rent is strong, the lease terms are attractive and investors are the natural buyer for the property.

Selling vacant may make sense when owner-occupants are likely to pay substantially more, the property needs work or presentation improvements, the current rent is significantly below market, or the existing tenancy materially limits the buyer pool.

But I wouldn't make that decision based on a rule of thumb.

I would run the numbers both ways.

Thinking About Selling a Rental Property in Tucson?

I'm Heather Leask, a Tucson REALTOR® and Head of Growth at New Concept. I work with residential sellers, real estate investors and rental-property owners throughout Tucson, Vail, Oro Valley and Marana.

My background in engineering and data analysis, experience as a real estate investor, and work alongside an established property-management operation shape how I approach rental-property sales.

If you're considering selling a Tucson rental, I can help evaluate the property from both perspectives: what it is worth as residential real estate and what it looks like as an investment.

From there, we can determine whether selling tenant-occupied, selling vacant, making improvements or taking another approach makes the most sense for your situation.

This article is for general informational purposes and is not legal or tax advice. Property owners should consult the appropriate attorney, tax professional or other adviser regarding their individual circumstances.