Original article by James Donohue from LP Exchange

Why it’s better to sell your property with tenants in place

If you want to sell a rental property, estate agents will usually advise you to offer it with vacant possession. The logic is that this makes the property more attractive to a wider pool of buyers – not just investors but also potential owner-occupiers – and therefore you will stand a better chance of getting the highest price.

But is it necessarily the right choice? There are plenty of good reasons to sell with tenants in place, especially if they are long-standing and reliable. Not only does it mean the landlord has less hassle and less to do before selling, but there’s the obvious benefit to the tenants themselves, and the wider private rented sector.

In the run-up to the general election, it has been highlighted the acute shortage of private rented property in the UK, with an average of 15 applicants for every available property. In fact, the number of homes available for rent is now 33% lower than before the pandemic, according to figures from Zoopla.

The pros

As a landlord, there are several benefits of keeping your tenants when you want to sell:

1. There’s no loss of income. You carry on receiving rental income right up to the date the sale is completed. Long delays are by no means uncommon when selling – if you get stuck with a vacant property that doesn’t sell, you could face a significant loss of income. The buyer also benefits from having a guaranteed income from day one, with no wasted time looking for new tenants.
2. It’s quicker. Even assuming there is not a fixed tenancy term in place, you are required to give your tenants 60 days’ notice to leave the property, so if you wait until the property is vacant before marketing it, you are immediately adding two months to your timeline. And with the court system struggling under a huge backlog of cases, you could face far longer delays – and months of stress and loss of income –  if tenants are uncooperative and refuse to leave
3. It’s less disruptive. Telling your tenants they need to leave is not a pleasant job, for them or for you. If you sell to another landlord, the tenancy agreement can carry on unchanged. You also save time and money on between-tenancy cleaning, redecoration etc.
4. Your property stays secure. Vacant homes are at greater risk of being damaged, whether through vandalism, squatting or burglary, leaks going unnoticed, or lack of heating and ventilation causing damp problems. Having reliable tenants in place means you know your property is being looked after.
5. A reliable tenant is a selling point. You can show prospective buyers the tenants’ payment history and track record in keeping the property in good order. If there is a managing agent in place, this arrangement can also be kept on, meaning one less thing for the buyer to deal with.

The cons

It has to be recognised that there can also be drawbacks to selling with tenants in place. Many of these relate to the estate agent sale process: getting valuations and photographs, hosting viewings and so on can be difficult when there are tenants to consider. After all, tenants are entitled to “quiet enjoyment” of their home and are not obliged to allow access for these. If they are concerned that a sale may lead to them losing their home, they may be uncooperative – so if you are planning to sell the property tenanted, you can reassure them of this. You don’t want the first time your tenant hears of a sale to be when an estate agent shows up at the door, or they see the property listed for sale online.

A better approach?

There is a way to avoid many of these potential pitfalls, however: by selling off-market. Instead of listing the property publicly with an estate agent, it can be marketed directly to other landlords. This approach can have a number of benefits:

• Targeted approach. Property details will be seen by investors who have expressed an interest in buying properties of that type, reducing the chance of time-wasters.
• Properties don't appear on agents' websites or property portals. If you are happy to wait for the right offer, you can “test the water” without the stigma that comes with having a property showing up as unsold. For landlords selling larger portfolios, this is particularly beneficial, as it avoids flooding the market.
• Maintaining the rental sector. By selling directly to other landlords, you will be helping to preserve the supply of rented property.

The buyer’s perspective

Buying a tenanted property can make perfect sense for a landlord: they save time, they know what income they will be getting, and they can see evidence of the tenants’ reliability. However, such properties can be hard to find on the open market, and there could also be more competition from regular buyers who might want to evict the tenants and take the property out of the rental pool.

By registering their interest in purchasing tenanted properties off-market, buyers can hear about investment opportunities ahead of the competition – without having to sift through endless listings on property portals that are tailored to the wider market.

Introducing Landlord Property Exchange

Landlord Property Exchange was created by landlords with years of experience in the real estate industry, to provide an innovative off-market sales service for tenanted property. We offer landlords a discreet and efficient way to sell their properties or portfolios to other landlords, without the need for public listings or extensive marketing campaigns.

Whether you are looking to buy or sell, find out how we can help at lpexchange.co.uk.

What’s your view?

We’d love to hear from NWLA  members and get some discussion going on the forums.

Have you bought or sold tenanted property? If so, did you encounter any problems going through the traditional sales process?

Would you be tempted to buy or sell off-market, and if so what would be likely to influence your decision?