Lettings isn’t for everyone, as many landlords are discovering in a highly compliant, highly changeable sector. After a turbulent 18 months, the private rental sector is finding its new equilibrium – and it’s not necessarily a good balance for property investors.
The latest figures from proptech supplier Goodlord showed rents in October 2021 dipped an average of 8.9% when compared to September. In addition, voids are creeping up, sitting at their highest average since May 2021 at 19 days during October. Owed money is another issue bubbling under the surface, with the Joseph Rowntree Foundation estimating some 950,000 tenants are thought to be in rent arrears.
This latest ‘state of the market’ snapshot comes at a time when landlords are still adjusting to recent tax changes, the incoming threat of ever-tightening minimum energy efficient standards and the prospect of investing in heat pump systems after 2035, thanks to an incoming ban on the sale of conventional gas boilers.
On the flipside, average property values have reached their highest ever peak, topping £250,000 for the first time after a 9.9% price rise in the last 12 months, reports Nationwide. If the prospect of increasing compliance and slim rental margins wasn’t enough to exit the lettings market, cashing in on property prices may help you decide your next step. Here are some considerations:-
Sell everything to fund retirement
Using property as a pension is a popular choice as, for many years, buy-to-let yields and capital appreciation have dwarfed returns seen via stocks, shares and savings accounts. The end goal usually involves selling an investment property - or an entire portfolio - for cash to fund a retirement, especially if the rental yield is negligible but the capital appreciation is high, thus providing a ‘windfall’ payment. In these instances, a quick sale is desirable if the landlord’s salary is due to end.
Sell to become mortgage free
Many portfolio landlords have underperforming properties and rather than hold on to them, which can be a drain on financial resources and time, it can be practical and profitable to offload those that are the most hassle. One popular strategy is to use the sale proceeds to pay off the mortgage on any remaining buy-to-lets to boost income, or use any profit to clear a residential mortgage.
Pricing to sell quickly
If you’ve made the decision to sell buy-to-let property, the pricing strategy will be very different to that seen in the sales market. If your let is empty, every week it’s unoccupied will count as a void period – something that should be avoided at all costs, especially if you still have a mortgage on the property. If you have a ‘problem property’ or a short lease, your let’s value will also be compromised and it may take an extremely long time to find a buyer on the open market.
When taking these aspects into account, it’s almost inevitable that you’ll achieve a below market value sales figure. The best way to mitigate this is to sell as quickly as possible as the longer you’re on the open market, the greater the chance your agent will ask you to consider a price reduction.
Appealing to a wide audience of buyers
A word of warning for those with sitting tenants – your most likely buyer will be another landlord and with so many planning to exit the lettings market, you may have a very limited buying audience. It’s worth remembering that LandlordBuyer purchases buy-to-lets even if tenants are in situ at the time of the sale, giving landlords a guaranteed sales option.
Choose a smart sale that saves you money
Selling a buy-to-let and capital gains tax go hand-in-hand, so it’s important to keep your selling costs as low as possible to protect your profit. A High Street agent will charge a commission to sell your property, and your bill from them may also include EPC charges and professional photography fees. And don’t forget to factor in a solicitor’s costs, which can run to thousands of pounds - especially if your let is leasehold or of a non-standard construction.
Keep your cash & get it quickly
When you sell to LandlordBuyer, there are no fees for you to pay. You get to keep all of your profit, minus what the tax man takes (even we can’t stop that happening). We do pay your legal costs and any EPC charges, plus we don’t charge any agency fees.
We also offer a quick cash sale service, with completion in as little as seven working days. This ensures void periods are minimised and your proceeds are available as liquid assets as soon as possible – earning you interest or becoming available for investment elsewhere.