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The Many Benefits of Selling with Tenants in Situ

There comes a time in a landlord's investment journey when it is time to sell up and move on. Thi...

There comes a time in a landlord’s investment journey when it is time to sell up and move on. This may be for a variety of personal circumstances such as divorce, retirement or emigration or you may want to release the equity that has appreciated over time and use it for another project.

The problem that faces landlords, when selling compared to standard owner occupiers, is what will happen to the tenants when you sell. Selling with tenants in situ is the perfect solution for landlords who need to sell as soon as possible but the tenants aren’t leaving any time soon due to a fixed term tenancy agreement.

Selling a tenant occupied property works almost in the same way as selling with vacant possession, the main difference is that during the conveyance process, documents such as the tenancy agreement and deposit registration certificate will need to be supplied to the buyer’s solicitor. The solicitor is usually able to assist with apportioning rents if the purchase completes during a rental period and providing advice over notifying the tenant of a change in landlord.

The benefits of selling with tenants in situ are numerous for all parties involved, making it an attractive sales strategy:

No loss of rental Income

The idea that you have to sell a property with vacant position is a myth and in fact, it can be much more profitable for both the buyer and seller to keep the property occupied by a tenant. By allowing the tenants to stay and selling the property occupied you would still benefit from the rental income up until completion, meaning you can continue paying the mortgage and potentially receiving an income.

Equally, when the buyer becomes the new owner, they will receive rental income from day one. This means they save money on advertising costs and avoid a void period which helps to maximise the return on investment.

The market is still open to all buyers

If you put a property on the market whilst it is tenanted, that doesn’t mean you have to sell to investors, or that the property will still be occupied when you exchange contracts. This does depend on the type and length of the current tenancy agreement. If the tenancy is a periodic Assured Shorthold tenancy, both you and then tenants have the right to serve notice at any time, as long as you give a minimum of 60 days notice. Once you have given notice, you can then put the property on the market and explain to buyers that the property will be vacant after a certain period.

The Tenant doesn’t have to move

If you are planning on selling the property to another landlord or investor
then you won’t have to serve notice on your tenant and they will get to keep their home. Tenants are often much more cooperative with access and viewings when they know that it is your intention to sell the property to another landlord and they may not have to move. The disruption upon a tenant if their landlord changes during their tenancy is very minimal and causes them very little inconvenience.

When selling to another investor, the tenancy agreement is transferred to them and they “stand in the shoes” of the previous landlord. This means that the tenancy terms will stay the same for the tenants, including the rent, at least for the duration of the tenancy term.

Tenanted Property is Appealing to Investors

A recent study by Countrywide found that in 2014, 11% of all properties bought by a landlord came with tenants in situ, which is a 400% increase since 2008. The market is predicted to grow further now that tax relief for landlords will start to be cut, and more landlords look for an exit route.

It makes sense from an investment point of view to buy a tenanted property, particularly if you are new to investment. The property comes as a ready functioning rental home, with no need to find tenants. Agents such as Belvoir can facilitate the sale by providing the buyer with detailed property history and a tenant reference so the buyer knows what to expect, including potential returns.

 

Belvoir Peterborough specialises in selling with tenants in situ and has sold nearly 40 occupied properties in the two years we have been established. We have a comprehensive database of motivated buyers who we can market to directly, to find a buyer for your investment property. Please contact our sales team to see how we can help.

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