Should Landlords Sell Property at Auction with Tenants in Situ?

As there has been a rise in landlords selling at auction, it’s important to consider whether it’s better to sell property tenanted or vacant.

Here we’ll cover some of the most common reasons landlords are currently selling their properties, their options and how to decide whether it’s best to sell with tenants in situ or after they leave. And we’ll also talk about how auctions are proving to be a good option for selling in either way!

Reasons landlords are selling up

With landlords facing increasing regulation and tax burdens, this is causing a number of property investors to sell. For example, ever since the introduction of Section 24, which phased out mortgage interest tax relief, landlords have started leaving the sector. Additionally, a tax change still to come is the Capital Gains Tax threshold being halved from April and halved again the following year.

On top of that, the scrapping of Section 21 evictions and fixed-term tenancies, which could be written into law through the Renters Reform Bill, is causing questions and concern for some landlords. There are additional legislative changes that could be on the way as well.

Many landlords with properties below the EPC rating of C are worried they may need to make energy efficient improvements to their properties by as early as 2025, and that can be really expensive for older properties. All of these potential changes are also causing a lot of confusion and uncertainty across the sector.

At the same time, there are rising costs due to the cost-of-living crisis and high inflation. This is adding pressure on landlords and squeezing their profits. With all of this at play, it’s easy to see why there are a growing number of landlords that are selling up. And auctions can allow landlords to sell more quickly, so they can get out of the industry when they wish to.

The ins and outs of selling with tenants in situ

So, if a landlord has decided to sell, now the question is whether they should sell it with or without tenants in situ. It’s most common to sell properties vacant, but there are landlords who are interested in buying single-let properties and HMOs with good tenants already in place.

If your tenants are interested in staying in the property, it may make more sense for you to sell with your property still tenanted. Selling in this way would provide you the benefit of receiving income right up to completion, and it means the new buyer can start earning rental income from day one.

Additionally, if you’re looking for a relatively fast disposal, selling your property or full portfolio at auction with sitting tenants may be the way to go. There could be an increase in this happening as we approach dates of new legislation and tax changes coming into effect, such as the looming Capital Gains Tax deadline.

The process of selling a tenanted property can be more complex. If you do choose to sell in this way, the buyer will want to see a copy of the tenancy agreement, rent schedules, and payment history, in addition to compliance with relevant legislation.

Considering selling after tenants vacate

If your tenants are happy to leave or have already found another place, it may be best to sell the property vacant. Or, maybe you’ll plan to sell the property the moment the tenants leave.

If you have the time and don’t mind not selling right away, you may be able to sell to a wider pool of auction buyers, and this could mean that you can secure a better price. But factor in the losses you’ll incur while the property sits empty without any tenants. So, you’ll need to weigh up this with how much more you could make from selling the property vacant.

You could also consider undertaking a refurbishment before the property goes under the hammer to create extra value and allow yourself to potentially earn even more when selling your property.

In conclusion

Selling at auction can help landlords secure a buyer quicker and can even allow you to dispose of your assets quicky. This may be particularly important moving forward with the additional legislation and tax changes on the way, in addition to the current housing market and economic situation.

When deciding whether you should sell your property with tenants in situ or vacant, it really depends on your circumstances, plans and goals. It’s important to properly assess this before making a decision to ensure you find the option that’s best for you!