Selling a Buy-To-Let Property

Quick navigation

If you own a buy-to-let home, even if it’s generating a decent amount of extra monthly income for you, it could be time to sell because you want to retire, reduce your workload, or any other reason. This guide outlines the issues to consider if you’re thinking about selling your buy-to-let property, including the various options you have available for how to try finding a buyer.

1. What is a buy-to-let property?
2. Factors affecting the sale of a buy-to-let home
3. Tax issues with selling a buy-to-let home
4. Can you sell a buy-to-let home with tenants?
5. Options for how to sell a buy-to-let property
6. Top queries about selling a buy-to-let home

What is a buy-to-let property?

There is no single statutory or regulatory definition that everyone uses for what qualifies as a buy-to-let property in the UK, but it generally refers to any house or flat that someone buys with the intention of renting out to others, and never using the home as their own residence.

For many property investors large and small, buy-to-let homes are often seen as a good idea because, in theory, the monthly or annual rent that tenants pay the owners to live in the house or flat generate extra income. This additional cash can then be used for many purposes, such as helping the owner save for retirement, funding the purchase of additional buy-to-let homes, and many other reasons.

If someone owns more than one buy-to-let home then they are considered to have a property portfolio, and the greater the number of properties someone owns, the larger the portfolio that they own.

Owners of buy-to-let homes are landlords, meaning they are responsible for general maintenance and upkeep to ensure that the property is safe for tenants to live in. The exact terms and conditions of what you’re required to do as a landlord, and what the tenants are required to do or prohibited from doing – such as not being allowed to paint the interior walls.

Factors affecting the sale of a buy-to-let home

Being the owner of one or more buy-to-let properties can be a good way to earn some extra money through the rent that your tenants will pay, but it can also be quite stressful.

You will likely be responsible for paying all or part of the monthly electricity and other utility bills for the property, you’ll have the duty to quickly fix any major problems in need of repair – which can be anything from a blocked toilet through to broken windows or a damaged roof – and all of this work will require a significant amount of time, energy and cash from you. And the more buy-to-let homes that are in your portfolio, the greater the resources you’ll have to invest.

That’s just one of several issues that you should consider when you are preparing to seek a buyer for your rental property, and there are others that it’s important to review.

Deciding whether to sell the property as buy-to-let

One early decision you will have to make is whether you want to sell the house or flat characterised as a buy-to-let property, as a regular residence for sale. This could affect the people that might notice the home and be interested in making an offer on it.

If you want to sell the property with the existing tenants remaining in it, you must sell the home as buy-to-let, as the guide explains later. In this situation, buyers will be landlords or other types of investors who are interested in taking over as owning and renting out the home.

Should the property be vacant at the time of sale, you might consider seeking a buyer for it as a conventional house or flat, without the strings attached of an existing tenancy agreement. This could potentially expand the audience of potential buyers, which might speed up a sale.

Whether to fix any repairs the home might need

Another important step that you will have to take when you’re getting ready to sell your buy-to-let property is looking closely at the exterior and interior of the house or flat and honestly reviewing if there are any problems, and whether to fix them before selling.

There are some issues that might be impossible to resolve, for example if the reason why buyers don’t like the property is that it’s located in a high risk flood zone. But there are other issues that could be turn-offs for buyers yet are possible to fix before attempting to sell. You’ll have to assess your own budget before deciding if such repair work is the right approach.

For example, properties that have low Energy Performance Certificate (EPC) ratings – which are government-mandated statements of a home’s energy efficiency – can be harder to sell. One recent press article suggests that buy-to-let properties with good EPC grades are selling at an average of 16 percent greater value than those with poor grades.

If you’re in this situation, you will have to make a choice on whether it’s best to sell the property “as is” without fixing the problem, or spending time and money to address it. With an EPC, you could invest in some more energy efficient appliances and take other steps to improve the rating, like adding more insulation. All of this work will require resources, but the upshot is that some buyers might be willing to pay a greater price for a home with a higher EPC grade.

But you might not have the time, funds or energy to pursue such work, and it’s still possible to sell a buy-to-let home with a low EPC rating. You might just have to accept that certain buyers will make lower offers to buy your property compared to the asking price, because they may see the home as less valuable, or realise they’ll have to spend money to address the issue once they own it.

Use the EPC situation as an example for any other problems that your buy-to-let house or flat might have, as it will help to inform how you might address the issues ahead of selling.

Potential fluctuations in the property market

You should also pay close attention to the fluctuations of the property market, and current demand for purchasing buy-to-let properties, as this might also affect when you sell.

The goal should be trying to sell your house or flat at a time when demand is high, which means there’s less supply and more people trying to own buy-to-let homes. Limited demand often leads to higher selling prices, because sellers have more choice in terms of interested buyers.

The inverse is also true, and if demand for properties calls, this can have the effect of leading to lower house prices, which in turn means a reduced profit. That’s why some landlords might wait a few months to sell during such a market, hoping for a turnaround in the near future.

Tax issues with selling a buy-to-let home

There can be some tax complications involved with selling a buy-to-let house or flat that you might not otherwise have to consider if you were trying to sell your freehold place of residence.

The money that you take in from your renters will be taxed as income tax, and that’s something you’re probably already familiar with if you have been the landlord for any amount of time.

But some councils across England can levy up to double the existing council tax fee for vacant properties, which could become very expensive for you if the buy-to-let home you own currently doesn’t have any tenants living in it. If this is your scenario, you may want to contemplate the quickest possible ways for selling, such as getting in touch with a fast property buyer.

There are additional tax complications if you’re the owner of a buy-to-let property, including the fact that the UK government has implemented various revisions to tax regulations that have deterred some people from wanting to own rental properties – and this especially true if the house or flat still has any amount of balance outstanding on the mortgage.

In the past, landlords were able to cite the expense of their mortgage repayments to lower the amount of tax that they owed the government on whatever rent their tenants paid them. That means a landlord who receives £15,000 every year in rent yet pays £10,000 in mortgage interest would only be taxed on the net profit that they made, which would be £5,000. Unfortunately, the government has scrapped that policy and instead landlords must pay tax on the full amount, in this example the £15,000 that the owner takes in through annual rent.

This change has made buy-to-let properties appear less enticing to some potential investors, but you should still be able to find someone willing to buy a home in such a situation.

Can you sell a buy-to-let home with tenants?

Having current tenants can be welcome for the extra income that they bring in during the time that you’re trying to sell the buy-to-let property. But their presence also raises the question of whether it’s permissible to seek a buyer for a home with tenants on a lengthy rental agreement.

Existing tenants are also known as "tenants in situ" and they have the legal right to remain in your buy-to-let home for the duration specified in the original rental agreement. This right doesn’t prevent you from trying to sell the house or flat, but it does limit your choices in the ways that you’re able to try finding a buyer.

The first choice is asking the current tenants to leave the property voluntarily, which would then allow you to sell the home as vacant, possibly making it more enticing to buyers. Another way to achieve this goal is to issue formal legal notice to the tenants demanding that they leave your property, and yet another option is to wait until the rental agreement ends if the expiration date is soon.

The second choice is to try finding someone who is willing to purchase your buy-to-let property with current tenants and take on the existing rental agreement. This is perhaps the more streamlined of the two approaches, because it simplifies the process by transferring the tenancy agreement from you to the new landlord without any changes – if the tenants agree to it.

There might a third choice in which you have to pursue legal action to evict your existing tenants if they refuse to leave when you’re trying to find a buyer for the home. This is possible to by filing a Section 21 notice, which is the start of a formal legal procedure to evict the tenants. You want to avoid such an outcome where possible, because it can result in long-running and costly litigation if the tenants still refuse to leave, and will likely make it harder to sell your home.

Options for how to sell a buy-to-let property

If you bought a buy-to-let property as an investment strategy but now to sell it fast, you’ll first have to decide on which method you’d like to use for finding a buyer.

The four most common options are using an estate agent, using an auctioneer, using a fast property buyer, or selling on your own. There are advantages to each method, but there are also disadvantages with a few choices that can result in a slower or less-profitable sale. Read the summaries of each approach below before you making a final decision on how to sell.

One useful task you can do is to create a budget for the sale of your property, which lists the amount of money and time that you can spend with trying to find a buyer. Also write down other important factors, such as how much work you’re willing to put into the sale. Consider all of these elements to help you make a choice on selling that works best for your wants and needs.

Using an estate agent

When you use an estate agent to sell your buy-to-let property, they will start by preparing a listing that features photographs of the home along with text describing its features, such as how many bedrooms it has. They’ll advertise this listing in local newspapers, online, and their office, and they will arrange viewings for potential buyers to tour the home’s interior and exterior The estate agent also takes on the responsibility for taking calls from anyone making an offer to buy a home, and overseeing serious offers hopefully through to exchange of contracts.

But they will expect to be paid commission for all of this work, typically charged as a percentage of the final sale price that they’re able to get for your home. This fee will be deducted from the eventual proceeds from the sale before you receive any money, which will in turn reduce the net profit that you can count on making.

It can also take a long time to sell your buy-to-let property through an estate agent, usually at least a few months and in worst case scenarios more than an entire year. Homeowners wanting to find a buyer within a few weeks should consider alternative methods for selling.

One trick some estate agents might use that you should be aware of is to give you an elevated quote of the price at which they think your home will sell, even when they secretly know that you’ll only get offers at a lower value. They do this with the hope that the high price will convince you to use their services for selling your home, and then they’ll get the eventual commission.

Thankfully, it’s fairly easy to avoid falling for this trick, and it won’t cost any money or much time. Start by asking several estate agents to give you a free, no-obligation for the price at which they think your buy-to-let property can sell. Then browse home sales websites like Rightmove and Zoopla to check the current and past sale prices of houses or flats like yours and in the same neighbourhood. Take all of those values and calculate the average, and this is a much better estimate of the price at which your home might generate interest from buyers.

A significant disadvantage of selling your home through an estate agent is the fact that anyone who makes an offer to buy the property can walk away from the sale without zero penalties, all the way until just before you exchange contracts on the flat or house. This adds a lot of worry and uncertainty into the process, and you have no power to force the sale through.

Using an auctioneer

Alternatively, you might want to think about using an auctioneer to sell your buy-to-let home. Like an estate agent, they will also be responsible for producing and advertising a listing for the property, and hosting the auction where people can make bids on the flat or house.

You may be given a choice between selling via the traditional or modern method of auction. With the traditional method, your listing will be advertised for a certain amount of time, usually a few weeks or longer, and the auction will be scheduled for a specific day. When that day arrives, the auctioneer will take bids for a short period, and the top price bid at the end will be the winner. By contrast, with the modern method, the listing will be live for a certain duration and people can place bids on it 24 hours a day, seven days a week. Whenever the listing reaches its prearranged deadline, the highest bid at that time will be considered to be the winner.

Most auction companies will charge their fees as a percentage of the final sale price you’re able to get for your property, and this amount will lower the net profit that you can make because it will be subtracted from the proceeds before you receive any.

You should ask individual auctioneers whether they might be willing to waive their fees, or make the buyer responsible for paying them, because this can help to reduce your costs.

Selling this way can take quite a long time for the entire process. You’ll have to wait at least a few weeks from the date on which you first list your home for sale until the auction ends. And even if the property manages to sell, the buyer then has an average of 28 days to satisfy all of their requirements, such as signing the legal paperwork involved with purchasing the property.

Using a fast property buyer

You could try selling your buy-to-let property using the serves of a quick home buyer, like the London-based LDN Properties. These companies have the funds available to immediately purchase freehold and leasehold houses or flats, without having to wait for weeks or months to first get approved for a mortgage that will cover the cost of the sale. This means they can usually finalise the process of buying a home within just a handful of short weeks.

Legitimate fast buyers also never charge sellers any commission, which means you could count on receiving the full proceeds from whatever sale price they offer for your buy-to-let property.

Another benefit of selling this way is that quick home buying companies can consider making offers for almost any type of property – it doesn’t matter if your buy-to-let house or flat is currently vacant or has tenants, or even if it has a problem like a structural flaw or other issue. These companies will still make a fast and competitive offer for buying your property.

Selling on your own

Another option is to try finding a buyer on your own, but this will require a lot of work, time and money, and can be incredibly stressful. You’ll be responsible for every step of the sale from the initial listing through to seeing any orders to completion. It’s only recommended if you have a friend or family member who has experience selling homes and is willing to help out for free.

The only clear advantage of selling this way is to avoid having to pay an estate agent or other third party any commission in exchange for finding a buyer. However, you can achieve this exact same outcome and with much less stress by selling your buy-to-let house or flat to a quick buyer, because the legitimate companies will never charge you any commission.

Beyond the stress and workload involved with selling via this method, you could also be waiting a very long time before you get a genuine offer from a buyer. It’s possible that you have a highly sought after buy-to-let property in a popular area and could get an offer within just a few days after the home is listed for sale. But what’s far more likely is that you’ll be waiting for many weeks or months before you get a serious offer that can be taken through to completion.

And just like selling via an estate agent, a drawback of this approach is that the buyer can walk away from their offer at any point until contracts are exchanged, and you don’t have any options to enforce the sale – instead, you’ll have to start over with trying to find a buyer. This can add a lot of time to your schedule for selling, which is at odds with trying to sell fast.

Top queries and answers about selling buy-to-let property

Investors thinking of selling their property quickly typically have a few questions for us, ranging from the repairs they should do before selling through to selling a tenanted buy-to-let property. Here are some of the key questions we’re asked about selling buy-to-let property: