Are you thinking of selling your rental property?
If so, you're likely facing a dilemma: to go ahead and sell with tenants in situ or evict them before putting your property on the market.
Here's some advice to help you to make your decision.
Why are you selling?
Why are you putting your rental on the market? Before you can start looking at the pros and cons of selling your property tenanted, having a clear idea of why you're selling up is a great starting point, as this could help you to work out what you do next.
Are you selling because you no longer want to be a landlord? Or are you thinking of reducing your buy-to-let portfolio?
Your reasons for deciding to sell might not be the same as other landlords. However, by keeping the rationale behind selling as the focal point, you may find this helps you to begin to work out whether you want to evict your current tenant or keep them in the property.
Are you selling because you want to reduce your portfolio, for workload or financial reasons, are you selling to raise capital or is it because you no longer want to be a landlord?
What's the current market like?
As with any property sale, the local market's current status can impact the price you get for it. However, there is an additional layer to this when you add a tenant in situ, and you might find that the area you're in will likely sell for a better price if it's a vacant property.
Another reason to consider the local market demand is to help you determine who you will sell to. If it's a popular rental area, you could have more interest from another landlord, but if your rental property is the only one among a street filled with homeowner-owned houses, you might find it easier to sell to someone who wants to make it their own.
If you are selling to another landlord or property investor
Selling to another landlord or an investor can potentially be easier and ensure you receive rental payments up until you sell the property. The downside is that you could achieve a lower price for the property, but not necessarily – in the right scenario, a high-yielding property could achieve a higher value than on the open market.
To sell to another landlord, you must determine the property's appeal to investors.
Investment buyers will want to know what the yield is. This is a crucial piece of information as they'll want to know how much return they'll get for their investment.
Focus on any recent updates you've made, such as adding a new boiler or investing in double glazing, as this shows you have made improvements which could increase its rental value and be one less issue a new owner may have to fix.
How long have your tenants been in the property? With this, it's a case of the longer, the better, as it shows that the rental payments have been a steady prospect.
Whilst we've all heard of Rightmove, Zoopla and other property sites, you may find that using a dedicated specialist landlord sales portal can be more appropriate for your target audience. These can help you to generate more target leads on the house sale than a more home-buyer-focused site.
If you are not selling to a landlord or investor
Putting the property up for sale means you are likely to attract interest from potential buyers who aren't landlords or investors. Choosing to sell to someone who isn't a landlord means you will need your tenants to leave, as the new buyer will likely want to move in as soon as the sale is completed.
In this instance, you will need to serve a Section 21 notice, which gives your tenants two months' notice to leave the property.
Whilst you could come to an agreement with your tenants to put the property on the market whilst they are in situ, they don't legally have to allow access for viewings. Additionally, they may not show the property in its best possible light, which you could likely achieve if you were to show the property vacant. Ideally, you may want to consider whether to evict your tenants before you put the property on the market. By ensuring the property is empty before you put it up for sale, you can take the time to make repairs and updates where necessary to get the best price possible.
Speak to your tenants
When deciding how to sell, it could be worth talking to your tenants directly. For instance, if you are open with them about the sale, you could find that they are interested in buying the property from you. This would save you the trouble of finding a buyer and removes the issue of evicting them and losing several months' rent during the sale process.
Alternatively, if your tenants aren't interested or able to buy the house from you, they may be willing to help smooth the sale in return for a reduction in rent. For example, you may be able to negotiate with them to allow you to refurbish the property, ensure it's in a presentable condition and allow viewings. However, it's important to remember that even if they agree to do so, they could renege on this agreement at any time, and the law would be on their site regarding their right to 'quiet enjoyment' of their property.
Other considerations to make
How quickly do you want to sell? It can be faster to sell to a fellow landlord or investor if you allow the tenant to stay. This is because you're selling an attractive proposition, provided the property is achieving a reasonable yield.
Similarly, selling a vacant property can mean you're losing out on monthly revenue from the rent, but you're opening up the property to the entire home-buying market. This makes it attractive to a broader group and could provide you with more potential purchasers.
What will you decide?
Ultimately, it depends on why you're selling and whether you want an easier sale or are happy to take on more work for a potential higher price. Think carefully about the financial implications at each stage to help you make your choice.