Accidental landlord trying to sell

samp17

Like a lot of people, I became an accidental landlord when I moved in elsewhere with my partner, and started renting out my apartment. I have been doing this with consent to let on my mortgage. 

Because of the changes in landlord tax (40% on the property), the fact that I still need to rent elsewhere in order to rent this property out and the occasional repairs I need to do on the property, I realise that most months this actually cost me to own the property, and that for what I pay, I only make a small amount back in equity on the property.
I also cannot afford to keep the property if I want to purchase a home for my family, so I need to sell this. 

I have had long term tenants, and to make the sale simple, tried to push this as an investment property with tenants in situe. Whilst this has been on the market now for several months, there has been little interest due to the low yield. 

I was advised to raise the rent as this had not been done in three years, and on doing so the tenants handed in their notice.

This leaves me in a pickle. Next month is the end of my fixed term mortgage and repayments start getting crazy, on top of this, if the tenants move out I will be responsible for council tax on the property. In short this will be costing me over £1k a month for a vacant property. 

At the same time, being out of my fixed term means there is no early repayment charge if I sell the property, it should be more desirable without tenants in it (at least for residential buyers), but there's no guarantee I will get any interest or how long this could go on for with a vacant property. 

I tried looking at the 'we buy your house' companies, just to see how much lower the offer would be, and it's about 74% of the market value. I am not yet desperate enough to take the offer. 

Does anybody have some alternative views on this, or ways of prioritising?  My main goal is to sell the property (ideally without losing a lot of money!).  What would you do in the same situation and why?

Mstty

That is quite the pickle.

Do you mind me asking what the property is worth, the equity you have in it and what other similar properties have sold for locally.

samp17

Absolutely.  The property is valued at £200k. (I have just dropped to £190k two weeks ago). I have £119k remaining on the mortgage. 

Based on properties in the area it appears to be valued correctly, as it is in a desirable part of town. It is a 3-bed duplex apartment with garage. Any other apartments are either 2-bed, smaller and sit around £180k,  or a house which sits around £290k.

samp17

To add to this it shouldn't be too difficult to get new tenants as the updated rent is in line with similar properties in the area, and there do not appear to be many properties advertised for rent currently. 

Mstty

How many viewings since you reduced the price (bearing in mind this is a traditionally quiet period for property hunting)

Is your property leasehold if so be prepared for a longer sale period than a house due to things such as the management pack.

The good news is you have good equity and where you say in post 1 it was costing you having tenants was that in reality paying off the mortgage so that is now shown as equity?

Unfortunately there is no quick fix when leaving the rental business either big drop with tenants in situ or take some fees like council tax and for those with a mortgage left interest only payments(ask your lender for the six month interest only break) 

Brie

Surely being empty will make it a more desirable property to purchase particularly if you can get a cash buyer.

samp17

Income from the property was £895 pcm. Expenses including tax, management, and interest portion of the mortgage come to 740. So yes, I was making something off having tenants that went to pay son repayment for the mortgage. 

Without adjusting the rent, when my fixed term ends, I wouldn’t be seeing any profit at all. 

Sadly the property is leasehold (990 years left) so yes, I hear what you are saying. Even if I found a buyer straight away, the property could be vacant and costing me for some time until the sale completes. 

I do not know about the six month interest only break. That could be exactly what I am looking for to help bridge this in between time without taking out a new product which may have additional charges and ERC for selling the property early. 

I think in the agent has two viewings lined up next week. But I don’t think they’ve had many overall. 

NameUnavailable

Having tenants will put a lot of potential buyers off (advice here is often not to consider a tenanted property regardless of what the vendors say as there's no real guarantee the tenants will leave when it gets to the time to exchange).

You're probably best waiting until they have left, give the place a bit of a makeover (lick of paint where needed etc.) and pricing it keenly to ensure lots of interest/offers.

Zoe02

If selling, do not rent as ending tenancy takes 6+ Months. 

BobT36

"I became an accidental landlord when I moved in elsewhere with my partner, and started renting out my apartment."
That doesn't sound very accidental to me? More like you made that decision, and didn't fully grasp the future financial consequences. 

The only true "accidental landlord" is someone who's ended up inheriting something with tenants in situ.

_Penny_Dreadful

samp17 said:

To add to this it shouldn't be too difficult to get new tenants as the updated rent is in line with similar properties in the area, and there do not appear to be many properties advertised for rent currently. 

If you want to sell do not get new tenants.  You cannot have your cake and eat it.