Although the demand for rental property has never been higher, one in four landlords are considering selling up. Some blame falling profits and others say that stricter government legislation has made it harder to generate a reliable income. Add in the pressures of a global pandemic, and it’s little wonder why some landlords are reconsidering their retirement plans.
Before you hang up your keys, we thought we’d put together some considerations to make.
Perhaps the most important thing to consider is why you’re looking to sell your property or investment portfolio. Have you decided that you no longer want to be a landlord? Do you need to free up some cash? Do you want to reduce your buy-to-let portfolio? The truth is that every landlord’s circumstances are different, and understanding your rationale behind selling will allow you to make a more informed decision. It’s easy to see something like COVID-19 and begin to panic, immediately wanting to free up capital and remove yourself from the rental sector. You might even have faced headaches with a nightmare tenant and decide you’re ready to quit - but the truth is that there are always solutions to temporary problems.
Taking a step back can allow you to see the bigger picture. Selling one property to free up some capital could help you, and handing over the day-to-day management to an agent could save you time and allow you to enjoy an early retirement. Consider your options before immediately withdrawing from the market; it may be a decision you regret in years to come.
Checking out current market conditions is also important before selling your buy-to-lets. The UK government recently lifted the Stamp Duty Tax threshold to £500,000 until March 2021, which is expected to give the market a major boost and increase demand for property. If you own properties that would be suitable for first-time buyers, now could be a great time to sell.
On the other hand, you might want to sell to other property investors with tenants in situ, and that will make your property more appealing. They’ll be buying an asset they can sit on and that will generate them revenue month in, month out, and you don’t have to worry about the stresses of ending a tenancy or telling valued tenants that they’ll have to leave their home.
Although selling to other landlords is often the most straightforward solution, you might end up receiving lower offers than if you were to sell to a first-time buyer. To maximise your chances of selling to a landlord quickly, emphasise the property’s yield and spotlight any recent investments you’ve made - like installing a new boiler or upgrading the kitchen.
As soon as you’ve decided that you’re going to sell your property, you should talk to your tenants and keep them informed. They might even be interested in buying the property from you themselves and make an offer, which would cut out the middleman and remove any unnecessary stress. You wouldn’t have to find another buyer, evict them from their home, and you wouldn’t miss out on rent - they’d continue to pay until the sale went through.
If that’s not possible, it’s important that you keep your tenants on your side. After all, they’ll be responsible for keeping the property looking its best for viewings, and moving out when you do find a buyer. Updating them throughout the process and offering them access to a discount or another property could sweeten the deal/ensure they don’t move out too soon.
Something else to take into consideration is timescales. The chances are that, once you’ve decided that you’re ready to sell, you’ll want to complete the transaction as quickly as you can. In that case, selling to another property investor or landlord is the most sensible choice, as your tenants will be allowed to stay and you won’t need to wait until their tenancy is due.
If you’ve got time to spare, you might want to serve notice on your current tenants and sell the property vacant. That way, you’ll be able to make improvements to the property - giving it a good lick of paint before putting it on the market - and host viewings without distractions.
Be realistic and review similarly-priced properties in your area. Though demand is on the up, properties can take months or even years to sell, so exercise patience or look into alternative methods of disposing of assets. That could mean selling for less than the property is worth.
Check back to the Billing Better blog soon for more tips for landlords and property investors. If you’re looking to increase revenue, consider our bills management service for landlords, allowing you to offer rent and bills in one package and generate additional income.