How to Sell a Buy-to-Let Property: A Step-by-Step Guide
If you’re thinking about selling your buy-to-let property then there are a lot of pros and cons that you must consider first. Here’s a step by step guide to the easiest way to sell your buy-to-let property successfully.
Should you Sell your Buy-to-Let Property?
Before asking HOW to sell you should probably ask yourself IF it is a good time to sell your buy to let first.
Good reasons to sell are if you want to raise cash, are no longer making money perhaps due to Section 24 tax reasons, have problem tenants or just no longer want to be a landlord.
But selling a buy to let house or flat is not the same as selling an ordinary property. To get the best price in the fastest time you need to think about the best way to sell your buy to let first.
Should you Sell your Buy-to-Let Empty or with Tenants?
The next question to ask is whether it is better to sell your buy to let with tenants, or without tenants .... assuming it is currently rented of course. Selling a buy to let with tenants is known as selling with tenants in situ or selling with sitting tenants. Selling a buy to let without tenants is known as selling with vacant possession.
There are pros and cons of both approaches to selling a buy to let property:
Selling your Buy-to-Let with Vacant Possession
The main disadvantage of selling a tenanted buy to let without its tenants is that you will need to wait until the current tenancy expires, or until it can be ended legally. Depending on your tenants and the tenancy agreement this could take time, be complicated and be expensive.
Sitting tenants do not have to co-operate with the selling process. Tenants do not necessarily have to allow valuers, surveyors, estate agents or potential buyers into the property. Even if there is a clause in the tenancy which allows this they do not have to give access to your property at any time or without advance notice.
The main advantage of selling an empty or vacant buy-to-let is that you will be able to sell it on the open market just like any other property sale. However, many estate agents will tell you it is harder to sell an empty property, and takes longer, than an occupied one.
A big disadvantage of selling an empty buy-to-let is that once it is empty your rental income will stop. You will still have to pay the mortgage and maintenance costs until the sale completes, which could take many months.
You may have to spend time renovating or cleaning an empty buy-to-let before a sale. You may also have to clear out any furniture or fittings if it is a furnished let.
Selling your Buy-to-Let with Tenants in Situ
You can sell your buy to let with sitting tenants and it does offer some advantages: You will keep earning rent right up until completion day. The buyer will have a ready-made rental income. Your tenants may not have to move out, nor be affected at all.
Selling your buy to let with tenants might actually be more straightforward and faster than without. There are landlords, investors and house buying companies who will buy houses with tenants, take over existing the tenancy or offer the tenants a new assured shorthold tenancy.
One disadvantage of selling your buy to let with tenants is that the market for your house or flat will be smaller. Owner-occupiers are unlikely to buy your property and the market for it will be mainly limited to landlords and investors. This could affect the value of your property.
Selling your buy to let with tenants may be more difficult if you have problem tenants. If, for example, there are rent arrears, your tenants have damaged your property or are refusing to leave your property.
Do I Have to Tell my Tenants I am Selling?
No. You do not have to tell your tenants you are planning on selling your buy to let. BUT it is good practice to do so.
If tenants are kept fully informed they are more likely to co-operate with the sales process. For example, they are more likely to be willing to let potential buyers view the property.
Bear in mind that when you tell your tenants you want to sell your buy to let you may find they were planning to move out anyway, or decide to do so before your property is sold. If this happens you will not be able to sell your buy to let with tenants in situ.
You do not have to offer your tenants the right to buy your property. However, and even though many tenants will be unable to buy anyway, offering your tenants, first-refusal can help to keep them onside.
Can I Evict my Tenants to Sell my Buy-to-Let?
No. You cannot evict your tenants just because you want to sell your buy to let. Your tenants are legally entitled to stay in your property under the terms of the tenancy until the tenancy ends or can be legally terminated.
If your property is let on an assured shorthold tenancy check the date on which it ends and plan the sale of your property accordingly. You will need to give your tenants an appropriate period of notice using a Section 21 notice. The normal period of notice is two months.
You can evict your tenants earlier to sell your buy to let if they have broken the terms of the tenancy and you have the appropriate legal grounds to do this. In this case, you may be able to issue a Section 8 Notice.
Important. Changes to evictions procedures brought in during the Coronavirus pandemic may make it impossible, or take longer, to evict tenants from your property for as long as these measures remain in force.
Some landlords who wish to sell their buy to let without tenants may consider offering their tenants a financial incentive to leave before they are legally required to.
If you need more advice on evictions you should consult a lawyer.
More Things to Check when Selling your Buy-to-Let
Check your mortgage. If you have a fixed-term mortgage there is likely to be a redemption penalty if you wish to sell your buy to let before the fixed term expires.
Check the tax implications. Selling a buy to let property will create a liability for Capital Gains Tax or CGT. CGT has to be declared and paid within 30 days of the sale completion date.
The amount of CGT that may be payable depends on your capital gains and your income less your annual CGT allowance and any other allowances you can claim.
Check the paperwork. If you’re planning on selling your buy to let with tenants make sure all your tenancy documentation is up to date, to show to prospective buyers. Make sure you have available: The tenancy agreement. Right to rent documents. Tenancy deposit documents. Safety certificates, ie. gas and electrical safety. Any legal notices you have served on the tenant.
Should you refurbish your buy to let? If your buy to let property has not been refurbished for some time, has not been well looked after, or has even been damaged by your tenants then you may consider refurbishing it first.
Refurbishing your buy to let before selling may well get you more viewings and more interested buyers. However, it will not necessarily add to the value of the property.
The Best Ways to Sell a Buy-to-Let Property
Once you have decided to sell, here are the different ways to sell your buy-to-let:
Sell using an estate agent. You can sell your buy to let using an estate agent. However, few estate agents will be able to sell a property with sitting tenants. Estate agents will usually only be able to sell your buy to let for you if it is vacant since most of their prospective buyers will be owner-occupiers.
To sell your buy to let using an estate agent you will pay the estate agent’s normal fees. The average time taken to sell a property this way is around 4.2 months.
Sell using an auction. You may decide to enter your buy to let into an auction. If you do this most property auction houses only sell empty buy to let property. Auctions rarely sell property with sitting tenants.
To sell your buy to let at auction you will pay the auctioneer’s normal fees. You will need to wait for the next suitable sale and there is no guarantee that your buy-to-let will sell at the auction.
Bear in mind that selling your buy-to-let at auction may not achieve the best price as many auction buyers are investors who are looking for a bargain.
Sell directly to a buy-to-let landlord or investor. There is nothing to stop you from trying to sell your buy-to-let directly to a buy to let landlord or investor either with or without tenants. The main snag with selling your buy-to-let this way, however, might be actually finding landlords or investors who are ready and able to pay your asking price and willing to accept your tenants.
Selling your buy-to-let direct to a house-buying service. One option you might consider when selling your buy-to-let is to sell it directly to a house-buying service. This can be a fast method of selling your buy-to-let on the best price for a fast-sale basis.
Most house-buying services will consider buying your property either empty or with tenants in situ. Many house-buying services can handle all the admin. related to transferring or ending the tenancy. Some house-buying services will buy your property even with problem tenants.
With this method of selling your buy-to-let, you should be able to get a fast sale and a guaranteed completion date.
How to Sell a Buy-to-Let Property: A Simple, Four-Step Guide
Step 1: Consider whether or not to sell your buy-to-let. Check tenancy details, financial and tax implications, liaise with tenant etc.
Step 2: Consider whether to sell your buy-to-let empty – or with sitting tenants.
Step 3: Consider how to sell your buy-to-let – either using an agent, auction or to a house buying service etc.
Step 4: Choose the best option and sell your buy-to-let.