Selling your rental this year: vacant, occupied, or exchanged

Last updated October 6, 2026

By Cade Cashman, Principal Agent, Ascension Estates at Equity Union Real Estate. DRE #02222044.

Choose your buyer first, because the buyer decides the rest. An investor buys with the tenant in place, so the lease and the rent carry on and nobody has to move. An owner occupant wants it empty, which takes a lawful way to end the tenancy, a notice period and often relocation money. Then choose between cashing out and a 1031 exchange, which gives you 45 days to name the next property and 180 days to close on it.

This page sets the two sale paths side by side, then the exchange, then a 90 day plan for each. The tenancy rules come from the California Civil Code, and cities add their own on top. Have a landlord tenant attorney check your property before you serve anything.

Should you sell with the tenant in place or deliver it vacant?

Each path has a different buyer, a different calendar and a different cost.

How do you lawfully deliver a rental vacant in California?

Start with whether the statewide Tenant Protection Act covers the home. Once a tenant has lawfully lived there for 12 months, a covered home needs a just cause to end the tenancy, stated in the notice (Civil Code section 1946.2). A sale is not on the list of just causes. The no fault causes include an owner or a close relative moving in, taking the unit off the rental market, and a substantial remodel, each with conditions. For a lease signed on or after July 1, 2020, an owner move in works only if the lease allows it or the tenant agrees in writing.

A no fault ending under that section owes the tenant one month's rent, paid within 15 days of the notice or given as a waived final month. Many single family homes owned by individuals are exempt, but only when the tenant received the exact exemption notice the statute spells out, in the lease for tenancies from July 1, 2020 on. Check the lease for it before anything else.

Where a month to month tenancy can lawfully end, the landlord's notice is 60 days for a tenant who has lived there a year or more and 30 days for under a year (Civil Code section 1946.1). There is a 30 day path tied to a sale. It applies when you have opened escrow to sell to a natural person who in good faith intends to live there for at least a year, the notice goes out within 120 days of opening escrow, and no notice was given under that section before (section 1946.1, subdivision (d)).

Local rules may add requirements. The City of Los Angeles rent stabilization ordinance and Los Angeles County's own rules can apply on top of the state law, with their own causes, registration and relocation amounts. Check your parcel with the city or county housing department, and have an attorney read any notice before it is served.

Should you cash out or do a 1031 exchange?

A 1031 exchange swaps the rental for other investment real estate and defers the tax on the gain. Since January 1, 2025, California, like federal law, limits like-kind exchanges to real property (source: the Franchise Tax Board's 2025 Form 3840 instructions).

• 45 days to identify. You must identify the replacement property within 45 days after you transfer the property you give up (source: IRS Publication 544).
• 180 days to receive it. You must receive the replacement by the 180th day, or by your tax return's due date with extensions for that year, whichever comes first (Publication 544).
• Keep your hands off the cash. If you actually or constructively receive the money before you receive the replacement, the IRS treats it as a sale. The usual safe harbor is a qualified intermediary that, under a written exchange agreement, handles both transfers so the proceeds never reach you (Publication 544).
• California follows the gain. Exchange California property for property outside the state and you file Form FTB 3840 for the year of the exchange and each year after, generally until the California sourced gain is recognized (Form 3840 instructions).

Cashing out is simpler and taxed now. Federally, the part of the gain that comes from depreciation is unrecaptured section 1250 gain, taxed at up to 25% (source: IRS Publication 544). California has no lower rate for capital gains and taxes the gain as ordinary income (source: Franchise Tax Board). If you lived in the home for 2 of the 5 years before the sale, the home sale exclusion may still cover part of the gain, but never the depreciation taken after May 6, 1997 (IRS Publication 523). Bring your depreciation schedules to a CPA before you list.

What does a 90 day plan look like on each path?

These are illustrations of the order of work. Your dates depend on your lease, your city and your buyer.

The side by side worksheet

Fill in your own numbers and take the page to your CPA and a landlord tenant attorney.

1. Monthly rent: $______. Deposit held: $______. Lease end date: ______.
2. Months the tenant has lived there: ______. Exemption notice in the lease (yes or no): ______.
3. Your city or county rent rules (from the housing department): ______.
4. Occupied path. Likely price to an investor: $______. Days to close: ______.
5. Vacant path. Notice days: ______. Relocation owed: $______. Months of carrying costs while it empties: $______. Likely price to an owner occupant: $______.
6. Depreciation taken to date, from your returns: $______.
7. Exchange or cash out: ______. If exchanging out of state, Form FTB 3840 every year: ______.

When you know which path you are on, the next number you need is the price. The Free Equity & Exit Report shows what the home is worth from real sales near it.

This is general information about California and federal law as it read on October 6, 2026. It is not legal or tax advice. Tenant protections come from state law, city ordinances and county ordinances at once, and they change. Talk to a landlord tenant attorney before you serve any notice or sign a move out agreement, and to a CPA before you choose between a sale and an exchange. Ascension Estates does not provide legal or tax services.