Selling a rental property with current tenants

wookie6

Hi,

I am looking for advice on selling a rental property where the rental property has current long term tenants at the time of deciding to make the sale.

Specifically, does anyone have any advice on how to retain the tenants for as long as possible whilst a buyer is found / a sale goes through?

Given costs start to mount up as soon as a rental property is vacant, its not an ideal situation if you market a property and the tenants then give their notice almost immediately. It could then take months to find a buyer and make a sale, and that assumes the sale actually goes through without issue!

Also not sure if this is a crazy thought or not, however Is it possible to sell a property already rented (i.e. the buyer purchases the property along with a transfer of landlord responsibility for the current tenants)?

Thanks in advance for any advice!

Slithery

wookie6 wrote: »

Specifically, does anyone have any advice on how to retain the tenants for as long as possible whilst a buyer is found / a sale goes through?

Given costs start to mount up as soon as a rental property is vacant, its not an ideal situation if you market a property and the tenants then give their notice almost immediately. It could then take months to find a buyer and make a sale, and that assumes the sale actually goes through without issue!

You should make sure that the tenants have vacated before marketing the property. Anything else is unfair on both your tenants and any prospective purchasers. No-one sensible who doesn't wish to be a landlord will spend any money on solicitors/searches etc until they are out. The cost of this is already taken account of in your business planning, yes?

Also not sure if this is a crazy thought or not, however Is it possible to sell a property already rented (i.e. the buyer purchases the property along with a transfer of landlord responsibility for the current tenants)?

Perfectly reasonable, in fact nothing extra is needed on the legal side. The transferring of responsibilities is the legal norm.


Just be prepared to take a hit on the price...

AnotherJoe

It's not a crazy thought at all, many wannabe LL's or indeed existing ones would I am sure be happy to take on a property that's already a going concern. Why not?
You are of course restricting your market , to LL's and clueless private buyers, (and perhaps canny private ones who would expect a discount for the risk). This might lower the price you can get. On the other hand you may not be in a rush to sell with subsequent price pressure if its got good tenants paying the rent.
But please don't try to have your cake and eat it by evicting tenants last minute. Any switched on private buyers will write you off as a chancer.
So you'll have to do the maths for the trade off.

G_M

If I were interested in buying as a landlord, I would want to know everything there is to know about the current tenants, and the type of tenancy (plus of course details of deposit scheme used etc etc etc.)

I would then offer/pay somewhere below 'market value' for the property.

If I were interested in buying as an owner-occupier, I would not even make an offer until the property was vacant..

wookie6

@Slithery / @AnotherJoe - Thanks for the responses, all makes perfect sense. I guess its more the fact that it would be a real annoyance to lose long term tenants and then not be able to make a sale at a price you are happy with, at which point you may have had the property vacant for a long time and then actually look to re-let and next time not get good tenants.

Do you have a ball park % on how much of a hit on price you could be looking at if selling with tenants occupying?

wookie6

@G_M - Thanks for your feedback, this is good to know. Assuming good long term tenants with no issues or missed / late payments, How much below market value (% wise) would you say is fair if selling with current tenants?

anselld

wookie6 wrote: »

@G_M - Thanks for your feedback, this is good to know. Assuming good long term tenants with no issues or missed / late payments, How much below market value (% wise) would you say is fair if selling with current tenants?

There is no particular reason to sell below market value (unless you want to sell to G_M). If it is a decent property in an area with strong rental demand then it can be attractive to investment buyers to have ready made tenants (so long as the paperwork is squeaky clean).

You have a smaller field of potential buyers if you target only investors, but that does not necessarily imply a lower price.

wookie6

anselld wrote: »

There is no particular reason to sell below market value (unless you want to sell to G_M). If it is a decent property in an area with strong rental demand then it can be attractive to investment buyers to have ready made tenants (so long as the paperwork is squeaky clean).

You have a smaller field of potential buyers if you target only investors, but that does not necessarily imply a lower price.

Also good to know... Assuming as you say good ready made tenants and squeaky clean paperwork, providing you are not in a hurry to sell it seems that trying to sell with tenants in place could be a good first option.

I guess it could also make little difference as once the tenants know you want to sell they may get nervous and start looking for somewhere else anyway...

AnotherJoe

wookie6 wrote: »

@Slithery / @AnotherJoe - Thanks for the responses, all makes perfect sense. I guess its more the fact that it would be a real annoyance to lose long term tenants and then not be able to make a sale at a price you are happy with, at which point you may have had the property vacant for a long time and then actually look to re-let and next time not get good tenants.

I suggest you need to make your mind up. Are you selling for the maximum you can get from private individuals, or from BTL investors. Then just go with that course.

wookie6 wrote: »

Do you have a ball park % on how much of a hit on price you could be looking at if selling with tenants occupying?

A moot point since you arent going to sell to anyone with a brain who is not a LL. Ask EAs for quotes with price as residential or existing tenants.