selling rental property: better empty or leased?

May 15, 2018 7:11 AM

I have a four-unit apartment building which I may want to sell in the next year. This is in Santa Cruz, CA, where the city council have recently imposed rent controls including prohibiting tenant removal at end of lease, and a more punitive rent control measure is likely going on the ballot in November. Some of my tenants are moving out soon. When selling the building, would it be better to have all apartments leased and paying rent, or have apartments empty? What is better for a prospective buyer, and what are they likely to prefer?
posted by windsock to Work & Money (6 answers total)

Other people will have better info. But I can say that when a friend sold his 3-unit building in San Francisco (which is not Santa Cruz) two years ago, he needed to pay lots of money to relocate the two tenants still in the building. In his case at least, having the apartments empty made the building more appealing to buyers because they could update the units, rent at market rates, etc. So that is a sample of one in an entirely different city. (Please note: my friend did not illegally evict his tenants, and I think it was just fine that he needed to fork over money to them so please don't growl at me.)
posted by Bella Donna at 7:32 AM on May 15, 2018 [1 favorite]

If this were the UK, I would ask ask one or more local real estate agents for their advice, they're more likely to know the specific market conditions?
posted by humph at 7:33 AM on May 15, 2018

Sounds like SC is a unique situation. I would ask a pro, but based on what you wrote about the law changes, empty would be my plan.
posted by AugustWest at 8:12 AM on May 15, 2018 [1 favorite]

What's the going rate for a move-out payment in Santa Cruz? I hear in San Francisco they can run into six figures. But aren't you going to use an agent whose whole purpose in life should be to answer these questions with local knowledge?
posted by wnissen at 10:29 AM on May 15, 2018

In a rising market? Empty. In an untested market or where it's hard to find tenants? Leased. Or so I've been told by our local realtor. She said, at least wait until one nice unit is vacant in case you get someone who would like to owner occupy.
posted by slidell at 10:38 AM on May 15, 2018

In a rent-regulated situation, "delivered vacant" is usually the preference. But it could well be idiosyncratic by market.
posted by praemunire at 9:21 PM on May 15, 2018 [1 favorite]