Showing an Occupied Rental

Showing property to prospective tenants is a great way to meet the candidate and it’s usually the only way you’ll sign a new tenant. They’re going to want to see before agreeing. When you’re hoping to keep the rental income flowing, you may want to show a space that’s occupied — and that can complicate things — especially when your current tenant’s not very receptive to the idea.

There are ways you can build your lease that allow you access to your rental space for showing purposes, but it’s wise to take into account how your current tenant may color the experience.

Adding to the complexity, you’ll need to be sure you’re working within the constraints of landlord-tenant laws at the state and local level. Most areas allow landlords to show their rentals, when proper notice has been given. However, you’ll likely need to provide at least 24-hours’ notice before you can legally enter.

The Pros and Cons of Showing an Occupied Rental Unit

Showing a tenant-occupied space has many upsides. Getting a new tenant situated and paying rent without missing a beat helps keep the money coming in. But there may be a few hidden drawbacks too. You’re depending on your tenant to cooperate, and honestly — sometimes they don’t. If you take it all in stride, and approach the situation professionally, the pros may outweigh the cons of showing an occupied rental unit:

Decreased vacancy. By showing the rental with an active tenant, you’ll reduce the amount of time the space is left unoccupied. That translates into less prorated days where no one’s paying the rent.

More consistent cash flow. Tight turnaround can mean greater financial stability for your business. Avoiding a week or two of income loss annually can be a hit, but over a decade, you’ll potentially be out thousands of dollars.

Utilities transfer between tenants. If you do allow the space to go vacant for a while, you’ll have to manage the utilities between tenants after the current one exits. By showing an occupied unit, you may not need to switch the gas, power or water into your business’ name. Keeping the space rented means less busy work for you and your staff and financially it’s a win as well.

The tenant may comply. When you’ve got a great tenant, the space may look beautiful for the prospective tenant. If they’re okay with leaving the rental while you’re showing the unit, you can further control the walk-through and get a better feel for the candidate.

There are some important cons of showing an occupied rental unit, too:

Tenant may not comply. If the tenant decides to stay on site, things can get tricky. Write terms in your lease requesting the tenant vacate during showings to help your walk-through go smoothly.

Limited turnover window. If the current tenant’s move-out date is delayed, your new tenant’s move-in date will be pushed back as well. That could mean you’ll have to impose fines on the current tenant and then prorate the incoming tenant’s rent.

Less control over the unit’s condition. Untidy tenants can impact the way your rental shows to newcomers. Pet odors and messy spaces can leave a lasting impact on them. Schedule some time to meet with the current tenant in the days before the showing and review the lease terms and reiterate your clean-up expectations. They may be more good-natured about the showing if you invest that time.

Define Terms for Showing the Space in the Rental Agreement

By clearly stating your expectations for a showing, your tenant will have a better idea of what to expect. Here are a few tips on how to define terms for showing the space in your rental agreement:

Leverage the lease. Make the process understood early on by including a “showing clause” into your rental agreement. When it comes time to show the space, you can remind the tenant of the contract and walk through your requirements.

Define right-of-entry terms. Be sure to include a statement in the lease that gives you access to the rental space when you’ve met state and local advanced-notice requirements. Make certain you’ve also got language discussing your right of entry when the tenant refuses. This way, you’ll be able to show the space even with a problem tenant occupying the space.

Secure the pets. If animals are in the rental, consider asking that they be locked in a kennel or taken off-site during showings. Pets can be unpredictable and dogs can be a liability, sometimes around unfamiliar faces. And they may make the prospective tenant uncomfortable – not everyone is a dog person!

Consider an open house. In the lease, mention that open houses may be used to market the space. Be sure to highlight the convenience for the current tenant versus multiple individual showings.

Insuring Your Real Estate Investments Carefully

Keep in mind that building out your lease to best suit your business needs is an important responsibility as a landlord and it can make or break the financial success of your business. Equally important, insuring your real estate investment properly can help to protect your finances if the unexpected should happen. Explore your insurance options with an American Family Insurance agent (Opens in a new tab) today and feel more confident with a well-crafted policy that protects everything you’ve worked so hard for.