Selling an Investment Property

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Investment properties include buy-to-let homes and houses or flats that you’ve bought in order to renovate them and hopefully resell at a profit. If you’re thinking about selling your investment property, this guide offers important details on some of the obstacles that you might face. The good news is that it is possible to sell the home fast and without too much hassle.

1. What is considered to be an investment property?
2. Issues to consider when selling an investment property
3. Selling an investment property with tenants
4. Potential tax liability with selling an investment property
5. Methods for selling your investment property
6. Frequently asked questions about selling an investment property

What is considered to be an investment property?

An investment property can have several different meanings, such as a commercial property like a shop or office space, or a house or flat that the buyer intends to profit from but will not use as their residence.

For the purposes of this guide, an investment property refers to a freehold or leasehold house or flat where the owner does not live. Instead, they are using the home as a way to make money. One way that they achieve this goal is by renovating the property – including renovating it by building an extension, or simply redecorating it – in order to hopefully increase its value, and then relisting the house or flat for sale with the goal of making a profit when doing so.

Another way that buyers can make money from properties is to use them as buy-to-let homes, which means someone else lives in them for a contractually binding time, usually months or years, in exchange for paying the owner a set amount of rent and any other fees. Whatever money the owner makes above the mortgage payments and other upkeep costs for the investment property will then be considered profit from owning that flat or house.

Although investment homes have historically been seen by many people as a solid financial decision with an almost guaranteed return on the amount of money spent on buying the property upfront, certain tax changes and other issues might make them less desirable.

For example, one news article from The Times notes that councils throughout England will soon have the ability to charge twice the amount of council tax on homes that are not occupied. This could be bad news for people who bought properties just to let them out, only to struggle to find anyone willing to rent the homes and therefore they are currently sitting vacant.

The guide below elaborates on those potential tax disadvantages, as well as other important issues to think about when trying to find a buyer for your investment property.

Issues to consider when selling an investment property

There are many reasons why you might be thinking about selling your investment property, and the experts with quick home buying company LDN Properties have heard almost all of them.

Perhaps you need to generate funds fast to pay for a move overseas or elsewhere in the UK. Or maybe you and your partner are divorcing and no longer want to have any ownership in an investment property that you bought together. Another reason might simply be that the upkeep of the second home is having too much of a negative impact on your finances, which could happen particularly if you bought a buy-to-let home and it does not have any tenants paying rent to help offset those costs.

Whatever the reason, some recent statistics suggest from Landlord Today that demand for buy-to-let properties remains strong, with more than £70 billion made in such home purchases from 2021 to 2021, which represents a 13 percent spike over the previous figure. That could be good news if the investment property you’re trying to sell is one designed for renting out to others.

But even if the market looks tempting to find a buyer for your investment property, there are a few factors that you should review before making a final decision on when and how to sell.

Return on investment: It might be too early to sell your investment property at a profit, particularly if you have only owned it for a year or two. You’ll likely have several upfront costs after buying the home that includes redecorating and maybe renovating it – and it’s possible that the value of the property simply hasn’t increased enough in that time to guarantee that you’ll recoup those costs and also make a profit when selling. You should always try to avoid selling any property at a loss, and this is especially true when dealing with investment properties.

Quick or slow profit: Selling your investment property should hopefully produce a decent profit, which you can then use to buy another investment home or for whatever other goal you have in mind with the funds. But not selling can also be profitable, albeit on a much slower schedule. If you have a buy-to-let home with reliable tenants on long rental agreements, it could be a more stable way to make the same profit as a fast sale, just over many more years.

Market fluctuations: It’s possible that you are thinking about selling exactly when the property market is suffering a slump, which can have the effect of reducing demand for buying homes, in turn lowering the average asking price for a house or flat. If that happens, you might find the potential asking price of your investment property dipping to a level that would make you only break even, or even risk making a loss, on the home compared to what you paid for it. That could be enough to make you decide to delay finding a buyer for several months or longer.

Your own situation: This can often be the determining factor about whether to sell your investment property, regardless of three preceding issues. If there’s a major personal reason for selling, such as a divorce or other change in your family situation, you might simply not be able to wait any longer before trying to find a buyer. If that’s the case, then keep reading to learn about the various options available for selling with the goal of doing so fast and profitably.

Selling an investment property with tenants

If your investment property is a buy-to-let home that has sitting tenants who pay you rent to live in the property, you will have to consider them when trying to find a buyer for house or flat.

These renters are called "tenants in situ" and by law they can stay in the property for whatever time period you set out in the tenancy agreement that you all signed ahead of them moving in. Generally, you are not prohibited by any statute or regulation from trying to sell the property. But there usually only two options for how you might plan on finding a buyer for the home.

The first option is possibly to encourage your tenants in situ to move out of the house or flat, and then you will be able to advertise it for sale as a vacant home that might be more attractive to some buyers. You could either give the tenants formal notice that they need to vacate the home, or you could simply wait for the tenancy to end if there isn’t long left on the rental agreement. Most tenancy agreements specify the amount of notice to vacate that you must give to tenants.

Alternatively, you might try to find a buyer subject to the existing terms of the agreement that the tenants in situ signed. Anyone who was interested in purchasing the property would also agree to become your tenants’ new landlord and maintain the agreement they signed with you. This can be a simple solution for both the buyer and your existing tenants if they both agree.

Note that in some worst case scenarios, you might have problem tenants who refuse to vacate. You might have to resort to a formal eviction procedure known as a Section 21 notice, which could be necessary if the tenancy agreement lacks a final end date or in other situations. But this can be a lengthy and costly process that you should try to avoid when selling a home.

Potential tax liability with selling an investment property

As noted earlier in this guide, there are some tax issues with selling an investment property that you should know about so you’re fully informed about the pros and cons of finding a buyer.

The threat of some councils in England levying double council tax on vacant homes can put pressure on your to sell even quicker, and if that’s applicable to you then the next section of this guide will outline how you might be able to sell your property speedily whilst earning a profit.

Other tax changes are also complicating matters for the owners of investment properties, notably those homes that someone purchase as a buy-to-let house or flat. An article on the property sales website Yopa notes that the UK government has made changes to the tax code that have made owning a rental home less enticing, particularly when there’s still a mortgage on the property.

Previously, landlords could reduce the tax that they had to pay on the rent they collected from tenants by citing the costs of their mortgage payments. For example, an owner who took in £10,000 in rent per year but also paid out £7,500 in interest for their mortgage could only be taxed on their net profit, or £2,500. The government has since eliminated this tax relief, and now a landlord would be required to pay tax on the full £10,000, albeit with a 20 percent mortgage interest credit. That can make an investment property less attractive to some buyers.

Methods for selling your investment property

When you are ready to find a buyer for your investment house or flat, you will typically have to select between using an estate agent, trying your luck with an auction, selling to a fast buyer like LDN Properties, or attempting to sell on your own. There are advantages and disadvantages to all of these choices, and some will take more time and cost more money than other options.

Read over the details of the four selling methods below, and then prepare a budget for the sale of your investment property that honestly lists the amount of funds, effort and time you are prepared to spend on finding a buyer. See which of the selling strategies most closely matches your unique situation and needs, including how speedily you want to secure a buyer.

Using an estate agent to sell your investment property

An estate agent does almost all of the work in selling a home, starting with producing a listing that features photographs of the property’s interior and exterior and descriptions of its main features, such as total number of bedrooms and bathrooms. They will advertise this listing in their office, online, and in local newspapers to generate interest from potential buyers. And they’ll organise viewings for people to tour your home, and oversee any serious offers.

For this work, estate agents will usually charge sellers commission based on your investment property’s final sale price. This fee will be deducted from the sale proceeds, which will lower the amount of net profit you can expect to make.

Selling this way can also be rather slow, and you might be waiting for more than a full year, or at least several months, until a genuine buyer makes an acceptable offer for the property. That could be at odds with your needs if the main priority when selling is doing so as fast as you can.

Some estate agents could try to convince you to use their services for finding a buyer with the trick of telling you a very attractive price for selling the investment home – even if they secretly realise that buyers are only likely to be interested at much lower values. They want to persuade you to use them for selling your property so that they can charge you fees if they find a buyer.

You can easily avoid falling for this routine with a little research. First, visit property sales websites and write down the prices of homes similar to yours for sale in the same area. Second, call or email other estate agents for free quotes of your property’s possible sale price. Then take all these values and calculate the average amount, and that’s the more realistic estimate of what your investments house or flat might be able to achieve when sold this way.

A good tip is to always search the name of specific estate agents online before deciding whether to use their services. It’s a free and simple way to potentially discover any negative news articles or poor customer reviews that might have been written about a certain company, which might discourage you from wanting to use them for selling your investment property.

Trying your luck by selling the property via an auction

Auctioning your investment property is another option, where you’ll set a reserve price – the lowest value at which you agree to sell the home – and then people will place bids on it. Your hope is that several people want to buy the property, which would lead them to outbid each other with increasing prices for your home, resulting in a high final sale price and good profit.

Just remember that auctions can be a gamble, and you could get zero bids, in which case your property won’t sell and you’ll have to start again with trying to find a buyer. Another outcome is that you might just get a single bid at the reserve price, and this is a binding agreement to purchase your property that the seller could enforce if you try to then cancel the sale.

That’s why it’s crucial you set the reserve price at an amount that will still result in you making a profit from the sale of your investment property, even after paying the auctioneer their fees. Usually, auctioneers will make you pay fees usually based on your home’s final sale price, and this charge will be subtracted from the sale proceeds, which will lower your net profit. You may be able to transfer the obligation for paying some fees on to the winning high bidder, so it’s always work asking specific auction houses about whether this might be a possibility.

Selling this way will take at least a few months from beginning to end, with the first delay occurring between the date on which you list your property for sale and the date on which the auction takes place. If the home does sell, the buyer then has an average of 28 days to finalise all of their required steps for completing the purchase, such as signing mandatory legal documents. Note that this is only an average timeline, and some auctioneers could provide buyers with more or less time, so you should always check this issue with specific companies.

Some auction houses may give you the choice of selling either via the modern method or the traditional method. If you use the modern method, as soon as your property listing is active, people can place bids on it 24 hours a day, seven days a week, until the time and day you have chosen for when the listing expires, at which time the highest bid is deemed the winner. If you use the traditional method, the auctioneer will advertise your listing for several weeks or longer, and then hold an auction when the listing ends at which point people can place their bids. They’ll have only a limited time to bid on the property before the auction comes to an end.

Contacting a quick home buyer to sell your property

Fast home buyers can be an ideal way to sell your investment property speedily whilst also generating a decent profit.

These companies, like the London-based LDN Properties, have the financial power to buy all types, shapes, sizes, ages and conditions of freehold and leasehold homes immediately. They don’t have to wait for weeks or months to win approval for a mortgage to complete the purchase, and this dramatically cuts the amount of time it takes. Usually, a fast buyer can exchange contracts and pay an owner their proceeds within just a handful of weeks.

Quick home buyers provide one of the most straightforward, no-hassle and stress-free ways for selling a property, because it requires minimal work from the homeowner.

Fast buyers can usually give owners an initial offer within the first hour of talking with them. If you accept this tentative offer, you’ll only have one visit from a representative of the company who will inspect the inside and outside of your investment property before the fast buyer makes a final offer. Should you accept that offer, the company will then work swiftly with your solicitor to complete all of the required paperwork, exchange contracts, and pay you the proceeds.

And they will consider making offers for practically any property, so you can still get a fair offer even if your investment home has a structural flaw like subsidence or some feature that other buyers might deem undesirable. The long list of properties that LDN Properties has offered to purchase since launching in 2003 includes vandalised houses, flats with dry rot, homes that are close to unsightly mobile phone masts, dilapidated flats, probate properties, plots of land, flats with short leases, properties with asbestos, lock-up garages, and many other varied examples.

A further benefit of selling via this approach is that the legitimate speedy buyers will never make you pay any commission. That means you are guaranteed to receive the total proceeds from the sale price that they quote you, which is perfect when profit is your top priority when selling.

If you’d like extra reassurance about using a quick home buyer, ask specific companies if they have registered with The Property Ombudsman (TPO). This is a third party entity that writes policies which shield homeowners from potential fraud within the speedy buying industry. All true TPO members must commit to following those rules, giving you extra peace of mind because you’ll have the knowledge that they’ll protect you from fraud.

Thankfully, it’s free, simple and swift to check whether a fast home buyer is genuinely a registered member of TPO – just visit the organisation’s website, then look for the tab marked "Find a Member" on the welcome page’s left side. You’ll be asked to type in the name of a specific company, and if they are truly registered, you’ll be shown their membership details. If they are not a legitimate TPO member then you won’t get any results.

Attempting to find a buyer for your property on your own

Alternatively, you might be interested in trying to sell your investment property without any help. In this scenario, it’ll be your responsibility to prepare the listing for the home, advertise it, organise and lead any viewings, and handle any genuine offers from buyers through to hopeful completion. This is a very large amount of work that can be stressful even for the best trained estate agents, and it’s only suggested if you have any experience with selling a property – or know a family member or friend that might be willing to do this work voluntarily for you.

There are no general timelines for selling this way, although it’s rare that your property will be one of the few that sell within days of being on the market. It could take a number of months, or possibly even more than an entire year, before you are able to find a buyer for the home.

People who choose this difficult method of selling say that they often do so because of the benefit of not having to pay a large amount of commission to a third party, such as an auctioneer, for finding a buyer. However, you can achieve this exact same outcome by selling to a quick property buying company, because they do not charge fees to owners selling their homes. It’s a much less stressful way to secure a buyer without the risk of paying commission.

Top queries and answers about selling an investment house or flat

Landlords thinking of selling their investment properties quickly often have a few questions for us, ranging from selling a property with tenants in situ to selling a house in poor condition. Here are some of the top questions we’re asked about selling an investment property: