If you have decided that the time is right to sell your investment property, you need to think about the best approach for selling. You may want to sell your current buy-to-let property and invest in a new one, cut down on your investment portfolio or quit investment property altogether. The reasons for selling your property will usually dictate the best approach to take.
Selling a buy-to-let property brings different challenges to a typical sale. In this guide, we explain the different routes to selling an investment property, as well as all the information you should be aware of before putting your buy-to-let property on the market.
Selling Investment Property
Once you have decided to sell your buy-to-let property, it is a good idea to talk directly to your tenants. If they have the financial means to do so, it is possible that the tenants may wish to buy the property. If your tenants do not want to buy the property, the next step is to decide whether to sell the property as vacant or tenanted. Whether you choose to sell your investment property as vacant possession or with sitting tenants, it is always good to clearly communicate to your tenants and maintain goodwill.The Process of Selling an Investment Property
The process of selling an investment property will differ depending on the specific circumstances of the sale. However, typically the process of selling a buy-to-let property is as follows:- Decide on whether it is the right time to sell the property based on the current market and your personal circumstances
- Choose whether to sell the property as vacant possession or with sitting tenants. If you are selling as vacant possession, consider the correct process for eviction of the current tenant
- Get a valuation for the property
- Choose your estate agent
- Prepare the property to put on the market (particularly relevant if selling as vacant possession)
- List the property on the market
- Accept an offer
- Agree a completion date and the exchange of contracts
- Deal with all necessary administration (particularly relevant if selling with tenants in situ)
- Understand Capital Gains Tax and mortgage implications of the sale
Should I Sell My Property With Vacant Possession?
If you want to evict your tenants before selling the property, you need to adhere to the contract terms detailed in the tenancy agreement. It might be a relatively simple process if the tenancy period is coming to an end, if the tenant is on a rolling contract or if there is a specified break clause in the contract. In any of these situations, you can serve a Section 21 notice which will give your sitting tenants two months to leave the property. In other circumstances, you will have to try come to an agreement with the sitting tenants. This might involve providing some financial compensation for moving out early. But bear in mind, in this situation, legally the tenants are under no obligation to leave the property. The benefits of selling a vacant property without sitting tenants is that the home will be sold on the open market, which often results in a higher selling price. However, selling a property with vacant possession means that the property will be empty when you put it up for sale, which brings an obvious loss of income for landlords. If a landlord has a mortgage to pay, the loss of income from a sitting tenant can be a considerable drain on cash resources. Also, depending on the state of the property, you may need to spend money on sprucing it up to make it more presentable for selling. Still, there are certain things which you do not need to fix when you sell a property.Selling With Sitting Tenants
The main benefit of selling an investment property with tenants in situ is that you will avoid a situation where the property is empty and the resulting loss of incoming money. In comparison to selling with vacant possession, selling a rental property with tenants in place is less disruptive for tenants and landlords and can make the whole process of selling the property smoother. Selling with tenants in situ means that your target market is almost definitely going to be limited to other landlords who are looking for their next investment property. This often means that you can sell the property quicker as the buyer will be looking to buy the property as an investment rather than as a place to live. Tenants in situ provide investors with a guaranteed income with little effort on their part, which is a very attractive prospect for investment. This is particularly true if the tenants are known to be reliable and trustworthy. Investors are often more experienced buyers too, and you may not have as many chains to contend with. However, you will usually have additional admin procedures to deal with including providing the Right to Rent records and the tenancy agreement and arranging for the protected tenancy deposit to be transferred into the name of the new landlord. Tenants may need to undergo new reference checks and sign updated contracts and paperwork after the sale has been completed too. Did you know that Chancellors estate agents help investors sell their buy-to-let properties? We offer a range of services, which can be tailored to your needs. Get in touch with us to find out how we can help you to sell your investment property.Showing Investors Who Their Tenants Would Be
An investor will usually be keen to know the type of sitting tenant in the property. They might be an investor who is particularly keen on properties rented out by students, or young families, for instance. When advertising the property, it is a good idea to display photos which clearly indicate the type of sitting tenant. For example, showing signs of a property which is bright and airy will usually give the impression that the property is suitable for young professionals. An investor who knows the type of buy-to-let property they are buying is likely to be keen to buy your property quickly.Can I Sell My Buy-to-Let Property If It is in Bad Condition?
Properties which are not in the best condition can still sell. However, there is no getting away from the fact that the state of the property will have a bearing on its valuation and sale price. If you are selling your property with tenants in situ, the quality of your relationship with your tenants will make a difference. This is because your tenant is more likely to make the effort to clean and tidy the property for the viewing if they have a good relationship with you. If you are selling the property in vacant possession, it is a good idea to spruce up the property before you put it on the market. This might involve:- Improving the kerb appeal
- Cleaning any mould in the property
- Sorting out door or window handles which have broken
- Adding a lick of paint to tired walls
- Arranging a professional clean of the property
- Dealing with leaking taps
- Dealing with structural cracks to walls
- Replacing missing or broken roof tiles
Selling at an Auction
Another option is to sell your investment at a property auction. At an auction, it is possible for landlords to sell properties with vacant possession or a tenanted property. The main benefit of selling a property at an auction is the relatively quick sales process and receipt of funds. You can also virtually guarantee a sale by not placing a reserve price on the property, though this is not something we would recommend given that you could end up selling the property significantly undervalue. Also, it is important to keep in mind that landlords usually need to pay an entry fee, as well as percentage of the selling price to the auction company if their property is sold (usually around 1-2 percent).
