How to go about selling rental property

lizziesmum

Hi

we currently rent my husband's flat but are looking to sell it to finance a relocation. I have absolutely no idea how to go about this. We'd like to offer the tenants first refusal but do we do this directly or through the lettings agent? Then, if the tenants aren't interested, how do we market it? Can we put it on the market while the tenants are still living there or do we need to end their contract (6 months rolling with 3 months to go) and then market it vacant - not sure how we'd afford that option.

As you can see, I really am clueless so any help would be gratefully received.

Thank you

Pixie5740

You can contact the tenants directly if you wish, it's the landlord the tenants have a contract with. Beware that your contract with the letting agency will probably have some clause about a fee if you sell the property to the tenants.

If you sell the property to another party then it's highly likely that party will want vacant possession so the tenants will need to be out. Evicting the tenants could take anything from 2 months upwards.

Selling with tenants in-situ can be difficult depending how amenable the tenants are when it comes to viewings. If the shoe was on the other foot would you want strangers traipsing through your home when the viewings are of no benefit to you?

What kind of tenancy is currently in place? Do you have a good relationship with the tenants?

lizziesmum

Thanks for your response. It's an assured shorthold tenancy agreement although I'll be honest, I don't know what that means!

We don't really have much of relationship with the tenants as everything is done through the agents, although we always complete maintenance etc as soon as we are notified of a need and the tenants pay the rent on time, keep the flat in good condition etc. so everything is very professional.

I really want to do this to cause as little disruption as possible to the tenants but we can't afford to have the flat sitting vacant as we have a significant mortgage to pay on in.

Would you suggest contacting the tenants as the first step or is there something else I should do first?

booksurr

why do you think the tenants can afford to buy it from you? There is after all a reason why they rent rather than own

are you prepared to sell it to them at a discount because it saves you fees (except of course as mentioned by Pixie the letting agent will have a clause about fees payable fro selling to tenants they introduced)

part of being a LL is the fact you must be able to cover voids. Clearly you are accidental LL and if you cannot afford to have a gap between rent coming in and the place being sold then you are not going to win friends by treating your tenants as cash cows up to the date of sale then throwing them out. In your circumstances it is normal to offer a rental discount for the disruptions you are causing your tenants whilst the property is being marketed. Or you evict now and sell when vacant.

lizziesmum

Booksurr, I am not using the tenants as cash cows neither will I 'throw them out' when the property sells. I will issue proper notice under the terms of the tenancy agreement. I want to offer them first refusal because it seems the decent thing to do, not because I am making any assumptions.

I can afford to cover voids to a point but I came here to ask for advice as to what is the right thing to do to minimise the disruption to everyone. If I was in the tenants position -as I have been in the past - I might welcome the extra time to find a new place, then again, I might prefer to start looking now. Let's not forget, they have the choice to serve notice too. I want to contact them so that are completely in the loop and everything is as fair and transparent as possible.

Pixie5740

Do you know if there is a fixed term AST or periodic AST in place?

I think you are right to keep the tenants in the loop and perhaps be a bit flexible with notice dates. I know that as a tenant I would be flexible if the landlord was flexible with me too.

jjlandlord

You need a good estate agent involved to advise.

If there is a high demand for BTL properties in your area you will probably be able to sell at full price with the tenant in situ.
This would be the best outcome for everyone involved, IMHO.

Otherwise you will have to sell with vacant possession.

Many on this forum are quick at accusing landlords of being greedy, but why evict and lose rent before having a firm buyer?
This is a business, not a money-burning party.

One thing to keep in mind however is that it may take up to 6 months to forcibly evict a non-cooperating tenant.

I agree with others that keeping the tenant in the loop and be nice and flexible would be a good idea. As would serving them with a s.21 notice as soon as possible (with the oral, informal assurance that they can stay until a firm buyer is found).
They may then give notice and leave earlier that you would have wished but you can't have you cake and eat it too.

lizziesmum

Thank you all for your advice.

Jjlandlord, surely if I involved an estate agent at this point that would preclude selling to the tenants as the agent wouldn't get their fees? I'm not aassuming that the tenants would want to buy but they are a professional couple and I have a feeling they are renting in order to save a deposit so it would seem to make sense to explore this first. What order would you do things in? Should I contact the lettings agent - unfortunately they don't do sales - to keep them in the loop too?

HappyMJ

lizziesmum wrote: »

Thank you all for your advice.

Jjlandlord, surely if I involved an estate agent at this point that would preclude selling to the tenants as the agent wouldn't get their fees? I'm not aassuming that the tenants would want to buy but they are a professional couple and I have a feeling they are renting in order to save a deposit so it would seem to make sense to explore this first. What order would you do things in? Should I contact the lettings agent - unfortunately they don't do sales - to keep them in the loop too?

Just talk to the tenants...if they are saving they could be a few years off getting a decent deposit together.

Is the flat suitable for raising a family or just a good investment property? I'd never want to buy a flat to live in as my forever home but they are good for investment as you can rent it to a wide variety of tenants who are at different stages in their life.

benjus

jjlandlord wrote: »

Many on this forum are quick at accusing landlords of being greedy, but why evict and lose rent before having a firm buyer?
This is a business, not a money-burning party.

The standard advice on this forum to prospective owner-occupying buyers is not to spend any money on searches etc on a property with tenants still in it. At least one side has to be prepared to make concessions or nothing will happen. Whether that's the buyer or the seller largely depends on the local market.

catshark88

Just be aware that serving an S21 does not guarantee your tenants will move out. They could decide to stay and you would need to go to court. If they were in a position where they were seeking social housing, some councils may even encourage them to stay until it has gone to court in order to delay their having to provide such help.

This is a bit of a doomsday scenario, but you need to take it into account when dealing with the timing complexities of a sale. Having tenants move out before the sale process can be important in achieving a smooth sale.

It all depends on demand though. As someone has said, many investment buyers would be happy to buy with a tenant in situ.

I suspect that if the tenants wanted to buy the house, they would have contacted you about it.