Can I sell my rental house with tenants in Arizona?

Sell occupied or wait for it to be vacant?

• Occupied, to an investor: one walkthrough, rent keeps coming in, no turnover costs. The price reflects that the buyer can't move in.
• Vacant, to a retail buyer: usually the highest price for a house in good shape, but you lose rent while it's empty and pay to clean, repair, and show it.
• End of lease, then list: works if the lease ends soon and the tenant will leave on time. Under ARS 33-1375, a month-to-month tenancy can be ended with 30 days' written notice from either side.

What the law says about the lease and deposit

A sale doesn't end the lease. Under ARS 33-1325, once you sell in good faith and notify the tenant in writing, you're relieved of liability for later events, but the deposit has to be accounted for. It is normally credited to the buyer on the closing statement, and the buyer takes over the obligation to return it. Give the tenant the new owner's name and address, as ARS 33-1322 requires.

Showings without a fight

ARS 33-1343 says a tenant may not unreasonably refuse access to show the house to buyers, but the landlord must give at least two days' notice and come at reasonable times. Bundle showings into a few windows, offer a rent credit for cooperation, and consider one walkthrough with a single investor buyer instead of an open house.

If the tenant isn't paying

For nonpayment, Arizona lets a landlord serve a five-day written notice, then file a special detainer if rent isn't paid (ARS 33-1368). The summons sets trial three to six days out (ARS 33-1377). If you win, the court issues a writ of restitution. You can sell before, during, or after that process; an investor will often buy mid-eviction. Cash for keys, where you pay the tenant to leave by a set date, is often faster than going to court.

Taxes to ask a CPA about

• Depreciation recapture: depreciation you took (or could have taken) is generally taxed when you sell.
• Capital gain on the rest, at long-term rates if you owned it more than a year (IRS Publication 544).
• A 1031 exchange can defer the gain if you buy another investment property within the required time limits.
• If you once lived in the house, part of the gain may be excludable (IRS Publication 523).

Paperwork to gather

• The current lease and any renewals
• The deposit amount and any pet or other fees
• A rent ledger showing what's paid and owed
• Your rental registration with the county assessor (ARS 33-1902)
• Any notices you've served

Dealing with this now? Sell a rental with tenants

General information for Arizona homeowners, not legal, tax, or financial advice. Huge Cash Offer is a home buyer, not a law firm, lender, or housing counselor.