Selling flat with tenant

nicolabell

Hi,
I have a 2-bed flat in South London with a good tenant, I am thinking about selling it and wondered how best to find a buyer who may be interested in buying it 'with' the tenant. It's a nice flat, prob valued around £190000k, tenant paying £850, very nice family who wish to stay for few more years.

Can anyone help me?

nicolab

BitterAndTwisted

How badly do you want to sell this flat? Without selling with vacant possession your only likely pool of buyers would be investors who would pay cash or purchase with a Buy-To-Let mortgage because no residential mortgage lender would release funds without vacant possession.

G_M

BitterAndTwisted wrote: »

your only likely pool of buyers would be investors who would pay cash or purchase with a Buy-To-Let mortgage

I think that's exactly what the OP was asking for help with!

Visiting local estate agents AND letting agents and asking whether they can find an interested landlord.

But it's not a good time for BTL sales and there's no way you'll get the same price for the property as you would with vacant possession. I applaud your wish not to disrupt your tenants' lives though.

Annisele

Well, you go to an estate agent and ask them to market the flat to 'investors only', and you say in the particulars that it's already let, fixed term extends on xxx date / the tenancy is periodic, and the rent is yyy per month.

However - I'm assuming the £850 is per month, in which case I think you'd struggle to sell it to investors.

£850 x 12 = £10,200

£10,200 / £190,000 = 5.4%

So even assuming that there are never any void periods and no maintenance is ever needed, the yield is only around 5%. Once the prospective new landlord has made allowances for voids/various costs, you could easily be looking at a yield of 4% or less.

nicolabell

BitterAndTwisted wrote: »

How badly do you want to sell this flat? Without selling with vacant possession your only likely pool of buyers would be investors who would pay cash or purchase with a Buy-To-Let mortgage because no residential mortgage lender would release funds without vacant possession.

Reasonably keen, would accept a lesser amount than full value to make it easier for everyone, maybe 10%. Know it's a difficult market anyway and it would be better for me if I found I couldn't sell as I would still have the security of the tenant. Would that make a difference to who to sell to though?

nicolab

nicolabell

G_M wrote: »

I think that's exactly what the OP was asking for help with!

Visiting local estate agents AND letting agents and asking whether they can find an interested landlord.

But it's not a good time for BTL sales and there's no way you'll get the same price for the property as you would with vacant possession. I applaud your wish not to disrupt your tenants' lives though.

Good idea, thank you, I will do that. To be honest though, don't want to appear a saint, it's not all altruistic, as I can see an advantage to me too in keeping tenant during the process, especially if it didn't work out in the end,

nicola

nicolabell

Annisele wrote: »

Well, you go to an estate agent and ask them to market the flat to 'investors only', and you say in the particulars that it's already let, fixed term extends on xxx date / the tenancy is periodic, and the rent is yyy per month.

However - I'm assuming the £850 is per month, in which case I think you'd struggle to sell it to investors.

£850 x 12 = £10,200

£10,200 / £190,000 = 5.4%

So even assuming that there are never any void periods and no maintenance is ever needed, the yield is only around 5%. Once the prospective new landlord has made allowances for voids/various costs, you could easily be looking at a yield of 4% or less.

Thanks for that, do you know what yield a professional investor would be looking for?

nicola

00ec25

nicolabell wrote: »

Thanks for that, do you know what yield a professional investor would be looking for?

nicola

close to double digits yield, look at it this way, professional investeors are looking for a positive income yield, they never rely only on capital growth to generate their return:

a cash buyer locks up 190K at your gross yield of 5%, from that they pay all the normal LL costs and this end up with a net yield (before tax) close to what they would get simply depositing the cash in a bond (without any of the hassle of being a LL), so no point

a buyer funded by a BTL mortage can offset the mortage against the tax but even so the mortage rate will be pretty close to the yield you are offering so again no point with only a 5% yield

PasturesNew

nicolabell wrote: »

Thanks for that, do you know what yield a professional investor would be looking for?

nicola

Professionals, I've heard Sarah Beeny say, would be looking for 10-12%, before costs. So 10%-12% before voids/maintenance.

poolboy

no way, I have a nice flat in SW London & gross 5% tops. Never had a void in 6 years & after costs (service charge, bits & bobs) I net 4%.

Its a fair return, the days of double digits are long gone in mature residential areas.

I bought a flat with a tenant in situ, good deal for everyone, seller, buyer, tenant as T stayed on despite change of ownership.

Tenanted flats do come up - I actually look for them as you get the T & contents included so worth a months rent.

190k for 850 pcm is a bit toppy in the current climate, I could buy a flat grossing 850 pcm for 175 without looking too hard & pressing the seller too much. The auctions are the place to look as the distressed ones are in there.

Sadly the market is in decline despite what anyone tells you - look at what people actually sell for not what they were asking.