10 Tips When Selling Your Rented Property
12 October 2018
In recent years, it’s fair to say that landlords haven’t had an easy ride. Whether it’s Section 24 of the Finance (No. 2) Act 2015, the Stamp Duty surcharge, Prudential Regulation Authority (PRA) stress-testing criteria or the plethora of other regulatory constraints, the negativity surrounding the sector is palpable.
Of course, most won’t get much sympathy. Much of the general public still views the sector as ‘money grabbing hoarders’ and any limits to the profit-making objectives are often welcomed.
Yet, despite all the pessimism, some 1,600 buy-to-let properties are still being purchased every month as professional investors capitalise on the modern status quo – typically though Limited company structures (exempt from the effects of Section 24).
Others, frustrated with the changing operational environment, have decided to either consolidate their buy-to-let holdings to reduce their exposure or exit completely. Across much of London and the South East of England, for instance, with rental yields so low, it can make sense to release accumulated equity through selling – especially given the strong capital growth seen since the post-crisis housing market recovery. This is even more true when considering that refinancing is frequently a major challenge at the moment.
Our 10 Tips for Selling Your Rented Property
If you’ve decided to join the other 4,000 landlords that the Ministry of Housing estimates are selling up every month, you’ll often come across a number of extra hurdles to get over compared to a normal sale.
Extracted from our extended guide to selling a rented property, below we have listed some tips as to how you can make the process as smooth and stress free as possible.
- Get the right advice – before making any kneejerk decisions, speak to a qualified accountant and tax advisor. If Section 24 is the main reason you’re thinking about a sale, for example, it’s worth engaging in some detailed cashflow analysis with a professional to see if some kind of restructuring would make more sense. Also note that you will incur Capital Gains Tax when you sell (although there may be some reliefs if you have previously lived in the property);
- Explain to the tenant that you are selling – this can be a tricky situation to handle, especially if the tenants are happy in the property, have always paid on time and are worried about what will happen next. Start by writing an informal letter or email explaining your reasons for the sale and then schedule a convenient time to visit them. Remember to be fair and respectful – even if it delays things. Dealing with a disgruntled tenant and a costly eviction process is the last place you want to be. Make sure they have a place to go to (check the property portals and speak to local lettings agents and/or landlords you may know of in the area). As a gesture of goodwill, you may want to offer a free month’s rent or assistance with their deposit on their new place;
- Organise a viewing of the property – respecting the terms of any existing Assured Shorthold Tenancy (AST) agreement, viewing the property will give you the chance to address any concerns the tenant may have. With their permission, take a good look at the property and note any issues that you will have to deal with before you start the marketing process;
- Check local sold price data to get a realistic price – it’s never been easier to check sold prices registered at the Land Registry. Removing any rose-tinted spectacles, observe the real-time valuations of comparable properties that are fully refurbished compared to those that need work. Some recommended sites include Net House Prices, Mouseprice, Property Price Advice as well as house price tools now integrated into Rightmove and Zoopla. It’s sometimes possible to check previous listings on these portals to get a feel from what has been sold in the past;
- Weigh up whether you should sell with tenants “in situ” – if your conversations reveal that your tenants really want to stay in the property, it’s worth considering whether you should sell to another landlord. Although you’re narrowing down the pool of buyers and will probably get a lower sales value, you’ll receive rent right up to the point of exchange, not have to incur expensive refurbishment works or deal with a series of other hassles.
It’s true that you’re likely get more money if you refurbish and then sell – but remember to factor in all the cost savings, post-completion tax liabilities plus the fact you will have to pay council tax and other bills whilst the house is empty. Selling properties on the open market these days can often take longer than people think. Check out our cost-benefit calculator which will help you decide on the best course of action;
- Speak to local estate agents – look for experienced and knowledgeable professionals that have genuine experience of selling buy-to-let properties in your local area. Properties with sitting tenants are trickier to sell on the open market as buyers may be wary about the associated implications. Also watch out for ‘too good to be true pricing’ – a common estate agent tactic to win business;
- Consider an auction house or private (direct to vendor) buying company – by and large, you’re dealing with serious and ‘business minded’ buyers with their finances in place. Although most are accustomed to buying properties with problems, you may need to take a hit on the price to factor in the added risks. The better private buying companies can complete in as little as 7 days where necessary and will cover your legal costs. You also won’t have to worry about estate agency fees;
- Organising viewings in the right way – it’s understandable why tenants would not want their belongings and private lives in the shown public domain (which is often why most advertised buy-to-let properties just show external photos). As mentioned above, you should respect their rights and only organise viewings with their explicit permission. It’s often a good idea to organise block viewings and open days to minimise the level of disruption;
- Dealing with problem tenants – if the occupants of the property are refusing to leave, ignoring you or, even worse, have stopped paying rent, you may need to start eviction procedures. As much will depend on the individual circumstances, we would always advise seeking legal advice before moving forward;
- Understand your buyer profile – if you have vacated the property and refurbished it to a good standard, a good estate agent should be able to find you a buyer. If you are selling to a landlord-buyer, expect to be asked for tenancy agreements, bank statements, previous credit reports, gas/electrical safety reports, confirmations that you have met your responsibilities as a landlord and other relevant information. Making sure you have all of this in place will mean the sale can move forward more smoothly.
Ruban Selvanayagam and James Durr are co-founders of the hybrid estate agency Property Solvers that offers quick cash house sales and express estate agency services across the UK.
This content has been provided to us by the writer. Whilst believed to be factually correct, we cannot accept responsibility for content contained within it.