How To Go About Selling a Property Portfolio
From wanting to retire to needing to liquidate some capital, there are a lot of reasons why an investor would want to sell their property portfolio, either in-part or entirely but the truth is few investors have their exit strategy planned.
If you are in this situation, you need to be aware of all the available options and weigh-up what matters most for you: Is it getting the maximum amount of money for the portfolio that you can or is it selling-up as fast as possible?
But before continuing, a caveat: while an investor wanting to sell their portfolio has the option of selling it piecemeal through estate agents to the homeowner market, this isn’t a strategy we will be examining here. It might make sense in some circumstances to do this but for most, it would be too complicated and/or expensive to consider.
Instead, the more mainstream approach to this problem would be selling your buy-to-lets as buy-to-lets, either in bulk or through a series of individual sales to other property investors or landlords either directly, or through a third party specialist agency or auction house.
You need to take stock of your situation and examine the options carefully, before forging ahead.
One, sometimes-complex element to selling a property portfolio is the issue of tenants and whether or not you decide to try and sell your properties with tenants in place.
Before looking at this we need to distinguish between a tenant and a sitting tenant, the latter being a tenant who, under the term of an assured shorthold tenancy agreement, enjoys significant legal protection against eviction.
You might think that having a tenant in situ (under the term of an AST) would make a property more desirable to a fellow landlord as it means a ready-made and guaranteed income for them but sadly, your would-be buyers might not see things this way. Firstly, your buyers do not know whether the tenant is good or bad and might prefer to vet their tenants themselves, rather than inherit them. Secondly, they might have plans for the house and be looking for somewhere, where they can make their mark, through a refurbishment. And thirdly a tenant with legal protection can affect one's access to finance.
Which isn't to say that a house with sitting tenants is unsellable, it isn't but there is a markedly reduced market for these kinds of properties and you might require more specialist assistance with the sale.
Once the term of an AST (normally 6 months) has lapsed then the tenancy will become a periodic tenancy; often referred to as a 'rolling contract'. If you have tenants in this situation it reduces the risk for any landlord, looking to buy the house, making it easier to sell than if the tenant was under the original AST. You prospective buyer now knows that if the tenant is a problem, they can evict them at the end of the required notice period. They will also have more options for raising finance.
Amongst landlords and investors, the market size for tenanted properties is still not as large as the market for empty homes but it is more straightforward to sell properties with tenants under rolling contracts than it is to sell those whose tenants are protected by an AST.
That said, there are a few, very good reasons to keep your tenants on, rather than seeking to sell your property portfolio, as empty.
The Advantages of Keeping Your Tenants On
As we have said, it can be easier to find a market for an empty property, than one that is tenanted. But this doesn't mean that in preparation for selling a portfolio, you should start evicting tenants. There are good reasons not to do this and proceed with finding a buyer with your tenants in place.
The first reason is cash flow. If you evict your tenants then you cut your income to zero while still having to service your costs. Should your sale fall through then however long you expected to be in that situation will be extended - and that's quite a risk.
The second reason is more personal. For single, young professionals, it might not matter too much if they were asked to find somewhere else to live but say you have had a family in one of your properties for a decade or more. On a human level, you may prefer to give them the best chance they have, of staying in their home.
And finally, it requires time, work and management to evict tenants. There is a balance between the speed of a sale and the amount of work that has been put into achieving it. While it might be harder to sell properties that are tenanted, there is a question as to whether that additional effort is more than it would take to evict those tenants, particularly when you are thinking about multiple properties.
So, to sum-up, when you are preparing to sell a property portfolio, you need to take stock of all your tenants (and your cash flow) and make a decision about whether or not you want to try and sell your properties tenanted, or as empty.
Selling your Property Portfolio Piecemeal, Through Estate Agents
If you have a small number of buy-to-let properties, then it is more than possible to sell them through local estate agents, either tenanted or empty. Should you intend to sell them with your tenants still in residence then it should go without saying that your buyer will need to be a landlord or property investor so, it will be important for you to make sure, that you choose an estate agent or agents that are suitably experienced in this market.
While there are national, estate agent chains of, most are small to medium-sized businesses who serve a particular local area. As such, when selling your properties then you may find that you have to use a different estate agent for each one.
This is not so much of a problem if you have three or four properties but if you have nine or ten, across the country then not only will the estate agents' fees become collectively very large but this will also become a stressful and time-consuming experience, full of phone calls and excess paperwork.
And furthermore, as is the nature of estate agents, sales will fall through, adding to the already significant amount of time that it takes to sell a property in this way.
But the truth is, that the portfolio is unlikely to be worth the sum of its parts, meaning that if you take your time selling each property individually, you will likely receive more money than selling the portfolio as a whole.
Again, there are many variables at play, from your tenants to the state of repair of your portfolio, to the locations of your houses and flats. As with most things you have to strike a balance, based on your personal preferences and circumstances, between time and effort, on the one hand, and money, on the other.
Alternatives to Estate Agents
Estate agents are far from the only route to selling buy-to-let and investment property and often their approach can be a little limiting. Other avenues to explore could include:
- A Private Sale
It will always be possible to sell single properties from a portfolio or the entire collection to other landlords in your network. There are no end of online forums, local, in-person networking events, seminars, conferences, Facebook groups and Discord servers, where you can meet fellow investors.
If you are not sure where to start, we run a Facebook group of 1,000 investors, that you can join and start networking with other investors.
- A Landlord-to-Landlord Service
Companies exist to serve landlord-to-landlord contact and to assist in facilitating transactions between parties. These companies can be extremely useful, but they can only help people already in their database. If a company such as does not have someone on their books who wants to buy your offer, then what they can offer, from that point on, can be limited.
- A Quick Sale Company/Fast Buying Service
These companies come in many different forms but typically they have the cash in reserve to buy a house or a number of houses, outright. You should be prepared to take a hit on what you will make from a sale of a portfolio to a company like this but what you lose in cash, you will make up for with the speed of the sale. Also, the hit might not be as large as you'd expect.
You must tread carefully with this route and make sure that the buyers you are talking to are members of the National Association of Property Buyers.
- Property Auctions
Property Auctions are great places to sell individual buy-to-lets and yes, it is entirely possible to sell a property portfolio at auction as well. But you will, of course, need to understand your reserve price and there will need to be buyers in attendance who fit the profile that you have of an expected buyer.
- A Hybrid Approach
There are companies that approach the matter of buying portfolios of buy-to-lets by combining the above. They will have the cash in reserve to buy a portfolio outright (for a certain discount) but will also auction the properties on your behalf to specialist investors for market value. The reason they can do this is that they are specialised and well-connected in the investment industry.
We are partnered with one such company. So, if you are interested in selling a portfolio or a number of buy-to-lets you can fill in the form on this page or you can find out more, by clicking here.
Selling a Property Portfolio - Conclusions
- You need to take stock of the situation.
Your tenants, monthly cashflow and the speed in which you would like or need to liquidate your capital will all dictate how you decide to move forward. Furthermore, you will need a clear idea about what you think your portfolio is worth, taking into consideration locations and the state of repair that your properties are in and you need to realistic, in yourself, about how much effort you, personally, are willing to put into the deal.
- The number of houses you have, matters.
Selling two or three properties, through the normal estate-agent route doesn't necessarily present too much of a challenge. However, selling seven or eight might prove to be a different matter. While you might receive more the properties themselves, your fees will be high, the timescales long and the hassle, potentially not worth it. A quick sale company, a private sale, an auction to sell the portfolio in one or some kind of hybrid approach could see your portfolio sold quickly and for market value.