If you are a sole trader landlord and reading this, it may be that you have had a wake-up call about what is known as Section 24.
Section 24 of the Finance (No.2) Act 2015, which received Royal Assent on 18 November 2015, will start to apply from the 2017-18 tax year and, in graduating stages up to 2020-21, will reduce a landlord’s ability to offset mortgage interest costs against rental profits before calculating the amount of tax payable to the Government. It essentially means landlords will be taxed on their income, not their actual profit.
This may push some landlords into a higher rate tax bracket and/or may see landlords paying tax on a loss! It will especially impact on sole trader landlords who are highly leveraged with mortgage finance.
It is because of this that the Residential Landlords Association believes that 1 in 4 landlords may well exit from their BTL investments. This was the result of a survey of over 800 landlords by the RLA and there are many landlords posting on the social web that they are intending to sell up because their BTL properties will no longer be viable. If you are one of these landlords, then you are in the right place!
Selling a property with sitting tenants in situ always provides landlords with a problem
If you serve notice on your tenant, then you may be left trying to sell an empty property with no income from rent, while you are awaiting the sale to complete. This also means paying council tax on the empty property, increased insurance premiums, standing utilities, and having your prize asset exposed to additional risk of damage to the property and/or asset theft and vandalism.
For this reason, many landlords choose to keep their tenant in situ during the sales process. However this can have its own challenges. The tenant may not be amenable to viewings, and is entitled to “quiet enjoyment” of their property throughout the tenancy. They are not obliged to allow viewings or they may put a restriction on when viewings can take place.
The tenant may not have kept the property clean and tidy, which may impact on the impression of prospective buyers during viewings.
If you are selling a tenanted property, then you will probably receive the best price by selling to an owner occupier. However this demographic of buyer may struggle to see the attributes of the property if a tenant is in situ, and, if they are buying using a mortgage, then their lender will require “vacant possession” to allow completion. As a tenant on an assured shorthold tenancy is legally required to be given two months notice, then you, as the landlord, have to time the serving of notice very carefully - and even then you may still end up with an empty property due to a delay in the completion.
On rare occasions, the tenant may not move out on the designated day, and this can cause a huge headache to the landlord and could result in the sale falling through. The landlord would then need to apply to the court for possession and this can become expensive and time consuming with court delays.
The other option is to sell the property with a tenant in situ to another landlord, but most landlords expect to get a discount and would not pay market value. If they require mortgage finance, there could be further delays and/or landlord buyers may be in short supply due to the impact of Section 24 across the wider landlord community.
So, as Section 24 impacts, there are going to be more and more landlords selling and potentially less landlords buying personally. The solution for landlords would be to incorporate and buy in a limited company.
This is where Landlordbuyer can help buy your property with sitting tenants
We are professional property buyers wish a significant cash fund to buy rented property throughout England.
Our directors have over 30 year’s experience buying tenanted properties and we have set up a new entity specifically to assist landlords who wish to sell property with sitting tenants.
We will make a no obligation cash offer for your property in England within 48 hours of contacting us. There are no estate agent fees, no need to serve notice on the tenant, and no worries about an empty property.
We consider buying any property type in any condition and will consider any type of tenancy agreement, including life tenancies and regulated tenants.
We have made our service as simple and hassle-free as possible. We will typically pay around 85% of the market value (the added advantage being your capital gains tax liability may be reduced), and we can complete in a timeframe to suit you.
You have nothing to lose by putting our service to the test and giving us the opportunity to work with you. You may be competing with other landlords all affected by Section 24, and therefore prices may drop as a result of many properties coming onto the market.
You can by-pass all that hassle and worry by selling direct to us for cash.
We pride ourselves on our professional service and are genuine cash buyers. We can supply evidence of cash funds in place (via our solicitor) if needed.
There will be many companies making all sorts of claims about buying properties for cash, but make sure you choose a company who is the real deal, with a track record of purchasing, and who are transparent about the fees involved. We are also a member of the Property Ombudsman, giving you peace of mind that we operate to professional standards and an industry code of practice.
We pay all your legal fees and will work with you to reach a swift completion.
Please get in touch if you would like to know more or arrange a valuation of your tenanted property.