As a landlord, you've likely seen the many benefits of investing your money into property. The monthly revenue generated is no doubt a welcome addition to your salary. For most landlords, the process of renting a property and providing a tenant with somewhere to call home is a positive one. And it requires almost no effort from yourself if you opt for an agent to manage the tenancy for you, leaving you to carry on with your life without any problems.
But, as with most things in life, there is a downside to renting out property - liquidity. Over the years of your ownership, the property's value might have increased. Coupled with any mortgage contributions you have made over the years, a sizeable amount of equity could be tied up in the property. But it is just out of reach, and you're unable to spend it.
Of course, there are ways to increase the borrowing on the property and release some of the funds, but there are consequences. Namely, your monthly outgoings will increase as you increase the loan amount, reducing your profit from the rent.
Many landlords, particularly as property prices have risen in recent years, find the temptation of getting their hands on this tied-up equity too much to resist, and so they've sold up. This might be you - planning to sell your property to give you a healthy little payday and release that equity that is tied up. But there are some key things to consider first.
- Will you serve notice to the tenant and ask them to leave?
- How will you make mortgage payments while the property is on the market for sale when no rent is coming in?
If a tenant lives in your property, their rent will cover the expenses, but if you move the tenant out to allow you to sell up, you will lose that income and have to find the money to pay the bills yourself.
The answer may seem obvious - don't serve notice to ask your tenant to move out until the property is sold. But, as you might expect, it is not as simple as that. Here is why: Access. To sell the property, you will need access for viewings, but if you aren't living there, you rely on the tenant giving you permission to enter the property. This is far from ideal and doesn't make for a great selling experience. So what can you do instead?
Sell with the tenant in situ. This means the new owner will keep the tenant in the property. This way, you get the property sold, the tenant gets to stay where they are, and a new landlord can benefit from the investment. But again, it might come as no surprise that there are downsides to this option, too.
Making the property available only to landlords will dramatically reduce the number of people who could potentially buy the property. A reduced market, in other words, reduced demand, will naturally have an impact on the price. In short, you might have to sell the property for less money.
So, really, you have to weigh it up. If you keep the tenant in the property whilst you try to sell it, you will still receive your monthly rental income during the sale process. As we all know, the property market could take a few months to find a buyer and a few more for the legal process to complete. If the tenant is going to have to move out because of the sale, they will likely start to look for a new property immediately, which could leave you with an empty property and no tenant or buyer.
But, if you sell to landlords, keeping the tenant in the property and benefitting from their rental payments throughout the process, you may sell the property for less than you might achieve otherwise. However, this approach ensures a steady income during the sale process, providing a sense of financial security.
There's no guarantee you'll be able to sell faster or for a higher price, but you will undoubtedly have to pay the outgoings on the property out of your pocket until it sells.
There's no right or wrong answer, just whatever works best for you. If you can't afford for the property to stand empty, your decision may have been made for you. However, with careful planning and the ability to save up some reserves, you can accommodate the empty property, giving you a sense of control over the situation.
If you have a property rented out and are considering selling up, why not contact our team of property experts? They might be able to find you a landlord buyer from their database without any fuss, whilst also providing you with the support and guidance you need in this process.
