10 August 2022

Selling a buy-to-let property: a guide for landlords

Selling a buy-to-let property: a guide for landlords

So, you’re thinking about selling your buy-to-let property. Perhaps you’re thinking about slimming down your portfolio of investment properties or selling your current buy to let to allow you to purchase a new property.

Selling a buy-to-let property is a little different from selling a residential property, so once you’ve decided to sell there are a few useful things to bear in mind. Read on for our guide to all the key things you need to know.

What to do about your tenants

You’ll need to think about whether to sell the property with a tenant in situ or as a vacant property. Both approaches have advantages and disadvantages. We’ve already produced a handy guide to selling a property with tenants in residence.

Selling a buy-to-let with tenants in situ

Selling the property with sitting tenants means that you can continue to collect rental income right up to the point of sale, and you won’t have to go through the process of evicting your tenants. If you’re selling your property through traditional means, this limits your pool of potential buyers to other landlords looking for a buy-to-let property. These kinds of buyers are likely to be attracted by the prospect of receiving rental income from day one of the sale, which is an advantage over selling the property without tenants.

One of the drawbacks of this approach, however, is that many estate agents and almost all auction houses, will not sell properties with tenants in residence. If you do want to sell a tenanted property you may find that an iBuying service, like UPSTIX, is your best option.

Ending your tenancy agreement

If you decide to sell the property as a vacant possession, you may be able to command a higher price, and you’ll have more options when it comes to how to sell your property and who you sell it too. If you take this approach, you will need to make sure that you have followed all the legal requirements to evict your current tenants. You’ll need to check the terms of your tenancy agreement and make sure you are within your rights to ask them to quit the property.

It pays to know the ins and outs of your rights and responsibilities as a landlord in this situation and we’ve compiled a helpful guide to the ways you can end a tenancy early, from activating break clauses to applying for possession under the Housing Act 1988. It’s always a good idea to seek professional advice if you’re unsure.

Talk to your tenants

You are under no legal obligation to tell your tenants that you are planning to sell your property, but it is generally good practice to do so. Sitting tenants do not have to co-operate with you as you try to sell, and if they are not kept informed, may refuse to allow access to the property (for estate agents, surveyors or buyers, for example) unless they have advance notice, which may be difficult to obtain if you are trying to move fast on the sale.

Tenants talking to landlord
Taking the time to talk to your tenants can make selling your buy-to-let that much easier.

You may also find, in speaking to your tenants about your plans, that they had plans to move out anyway, or that they would be willing to move earlier than planned if the sale goes ahead. This makes selling the property as a vacant possession much easier.

Tax implications

Of course, a significant consideration when selling your property is tax. When you sell your buy-to-let property you will be liable to pay Capital Gains Tax (CGT). CGT is charged at 18% for basic-rate taxpayers and 28% for higher-rate taxpayers.

Remember that you are able to offset some costs against your tax bill, including any fees and charges associated with the sale of the property. You also have a tax-free capital gains allowance that you should deduct from your total taxable gains.

Capital Gains Tax must be declared and paid within 30 days of the completion date of the sale.

Mortgage implications

You should also be aware of any impact the sale of your property might have on your buy-to-let mortgage.

If your mortgage product is a fixed-rate mortgage, with a set period for repayment, you may be liable for burdensome early repayment charges should you decide to sell before the fixed term period has elapsed.

Refurbishing the property

You may also want to consider whether you need to refurbish your property.

If you’re selling the property without tenants, this may be a good way to encourage more interest from potential buyers, but make sure to take into account the risks of losing any rental income during the decorating period.

It’s also important to note that redecorating doesn’t guarantee a higher sale price.

Renovating a buy-to-let could increase the resale value but will mean you’re not collecting rent and return on investment isn’t always guaranteed.

How to sell your property

Once you’ve made decisions about all of the tax, mortgage and tenancy status issues discussed above, it’s time to sell your property. There are several routes you might take to get it to market:

Use an estate agent

As with any residential property sale, you can decide to work with an estate agent to sell your buy-to-let property. This can be harder if you have tenants still in residence, as most estate agents will be trying to appeal to people buying property to live in themselves, and not to let out. You’ll also have to pay the agent’s fees, and sales can be slow.

Take it to auction

You could go to auction with your buy-to-let property. Generally, auction houses will only sell vacant properties, so if your tenants are still in residence, you’ll need to wait until they’ve moved out to sell this way. You’ll need to be prepared to pay the auctioneer’s fees and wait until a relevant auction comes up. There’s also no guarantee that your property will sell if you go down this route.

Sell directly to another landlord

If you want to sell directly to another landlord this may be an option for you, but you’ll need to know someone who is in the market for a buy-to-let property, and interested in buying from you.

Use an iBuying service

If you’re keen to sell quickly and with maximum convenience, then an iBuyer might give you the peace of mind you’re looking for.

Services like UPSTIX will make an instant cash offer on the property, regardless of whether you have sitting tenants or not. Our offers are instant, and we can customise the sales process to your timelines, completing on a date of your choosing. Offers will be slightly below the market rate – typically around 11% lower – but there are no extra fees or charges associated with the sale.

To explore a stress-free way to sell your buy-to-let, try our valuation tool here.

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Value and associated costs used for illustrative purposes