Avoid these 10 Mistakes When Selling Tenanted Property

If you’ve made the decision to sell your property with your tenants in situ, it’s just as important that you, as the seller, avoid common mistakes to make the process as painless as possible, as it is when buying a tenanted property.

Indeed some of the issues are very similar, which should come as no surprise given that they are two sides of the same coin.

As property professionals with years of experience, and given that this is exactly what we do, we are well placed to advise you how to make the experience as easy as possible for you and your tenants.

So, what are these mistakes we’re talking about, and how do you avoid them?

1. Not communicating with your tenants

Misconception: Not communicating with your tenants will save you time and effort. It’s your property after all, they just rent it don’t they? It’s not as if your life would be easier if they were onside and understood what was going on with their home!

Upset and stubborn tenants are such fun after all!

No. No, they’re not and from a practical perspective antagonising your tenants when trying to sell a property is about the worst thing you can do.

Solution

Opening and maintaining communication with your tenants is one of the most important steps you can take; not doing so is a huge mistake. Stubborn tenants can cause problems for you, problems which are completely avoidable.

Your tenants are a vital part of the sales process, as your agent will require their permission to access the property to prepare home reports, photograph the property and oversee viewings.

There’s no excuse for overlooking them. After all, assuming all goes well, they will transfer smoothly from one landlord to another without let or hindrance and everyone will be happy.

You know that, we know that but do they know that? They’ll likely have questions and worries and discussing that with them will make everything easier.

2. Failing to ensure that your agent shares your approach and values

Misconception: You should choose an agent to manage the sale who is solely focussed on selling the property as quickly as possible, and who will maximise your return. Don’t let pesky tenants’ needs or feelings get in the way of that single, important goal.

What could possibly go wrong?!

Honestly? Quite a lot frankly. If your agents aren’t willing to treat your tenants sympathetically, you could be unleashing a world of uncooperative behaviour which will slow the sale and may put potential buyers off altogether.

Solution

It should be a given that the agents you employ to sell your property will treat your tenants with consideration and courtesy, as you would, but don’t assume this to be the case.

Make it one of your priorities to define how your current tenants will be treated and communicated with at the outset, otherwise you could find yourself constantly firefighting and soothing ruffled feathers.

“Do as you would be done by” has become an overused cliche, but setting expectations and boundaries at the outset could make all the difference.

3. Choosing an agent without a record of selling tenanted property

Misconception: Most estate agents will offer to sell your property for you, after all, it’s what they do. Surely they don’t need any specialist experience and knowledge which will help avoid mistakes when selling tenanted property?

You could take this approach but there are plenty of examples of agents who claim to specialise but who, in reality, don’t. And that matters.

After all, if your agents deliver nothing but empty promises and your property remains parked on a website that no one sees for months, does that really matter?

Solution

Make it your responsibility to check that any agents you speak to can demonstrate a proven record of selling tenanted property, and that they understand the very important differences between tenanted and vacant sales.

If you have sold properties from your portfolio before, you most likely have a preferred agent already. If this is your first time, make the time to have initial conversations with several agents and don’t settle for the first one.

4. Failing to understand the process for selling a tenanted property

Misconception: A sale’s a sale, isn’t it? You’re a landlord, not an estate agent – why should you trouble yourself with how the sale is achieved?

After all, that’s exactly what you’re paying your agent for isn’t it? How they achieve the sale is frankly none of your concern.

Really?

Solution

We doubt that this is how you do business, so find out how an agent approaches the sale of a tenanted property. If you are determined to sell with your tenants in situ, you are immediately faced with a much smaller market.

Your agents must have a strategy to maximise your return despite this and they should be able to explain how they’re going to do this. Most likely they will be specialists and will be able to show you how they have succeeded previously.

If they can’t, or you feel that they’re obfuscating, thank them for their time and keep looking. You’re going to be paying for their services and the last thing you should have to do is constantly check on their work on your behalf.

5. Aiming at the wrong market

Misconception: Let’s be honest here, you could probably just print up a sign, stick it up outside your property and you would be fighting off potential buyers – they’re everywhere!

And that’s before you go to the effort of a Facebook Marketplace entry – that’ll get them flooding in!

If this is your thinking, you may be in for a slightly rude awakening. The market can be challenging and is constantly changing. It may not react to your fabulous offering as you expect.

Solution

When consulting an agent, ask just how they’ll go about finding buyers for your property. It’s a simple question, but the answer could tell you much about them.

If this is your first time, it may come as a surprise to learn that your tenanted property should be marketed through the usual open-market channels. This is to ensure that your property reaches the largest number of potential buyers.

However, don’t confuse your investment property with properties being marketed to homeowners. Investors don’t have the emotional investment that someone buying their ‘forever home’ does.

You won’t catch a landlord viewing your property and getting all moist-eyed over the thought of the huge bath or stroking their cat in that nice spot by the window. There are no romantic goggles being worn here.

If you want to sell your property, with the tenants in situ, you are aiming for a quite specific market, and you will benefit from agents who work in that market and understand it in a way more general agents wont.

If you don’t have extensive experience with the property investment market, and you’re not quite sure how it differs from the open market for those seeking a home, make sure that your agent does.

However, specialists in this field, like Portolio, also have a considerable database of potential buyers. This means that you might go from ‘please help me sell my property’ to ‘Sold!’ much quicker than you anticipated.

6. Not worrying about the condition of your property

Misconception: Everyone knows that property investment is a business, and that business owners don’t let emotions get in the way of a good decision. So buyers won’t care about the state of your property, will they?

They won’t draw any inferences about you as a seller, or think less of you as a landlord. No! Hard business decisions for the win.

Really? It’s important to have a solid business-based approach to property investment, but the approach highlighted above will do you no favours at all.

Solution

When selling tenanted properties, major upgrades shouldn’t be necessary if your tenants have shown respect to the property (it is their home after all) and you have upheld your obligations as a landlord.

It’s also worth remembering that, unlike vacant properties, it is more convoluted to get the necessary access if you do want to do any work, as you need your tenants’ cooperation.

7. Ignoring all those rules and regulations

Misconception: Aren’t you just sick to the back teeth with all the hoops landlords have to leap through these days? ‘Do this, fix that, get this certificate’ – where will it end?

All the other landlords you talk to feel just that same, so no doubt they also “forget” to renew the occasional requirement as well. You all understand the pressures, and it’s not like anyone really checks, is it?

Oh boy – where to start?!

We can’t think of a quicker way to insert a spanner into a smooth-running sale than a lack of necessary documentation, and that’s not even taking the potential illegality into account.

Solution

As a landlord, we would expect you to be fully up-to-date with all relevant regulations and safety requirements, however we’ll go over them with you before going to market.

Investors and landlords will assume that currently let properties are fully compliant, and any failures or oversights here will likely put off potential buyers, or negatively affect their offer.

Tip:  It’s vital that all certificates are maintained right up to the sale so that the property remains fully compliant throughout the process.

8. Not having a backup plan

Misconception: You’ve decided to sell with your current tenants in situ, so that is exactly what’s going to happen. You’re confident that the market will bend to your will, that the perfect buyer is just sitting there waiting for you to fire the starting pistol.

This thing is sooo going to happen!

But…

What if it doesn’t? What if the market around you isn’t really looking for what you’re offering? What happens if the price you’re asking is just too high for current conditions?

What happens if you get no interest whatsoever, despite the very best efforts of your agents on your behalf?

Solution

Hopefully it won’t be necessary, but if you cannot find a buyer interested in your property with the tenants currently in place, you should at least be clear about what your next steps will be.

Do you wait or do you consider selling your property as a vacant possession, making it more attractive to the broader, open market?

Have you considered offering the tenants first refusal? If they’re settled and invested in the area they may be only too happy to buy the property assuming that they can afford it.

Alternatively, you may find that facing a new landlord, even though the terms of the lease may be the same, your tenants decide that they want to end the tenancy and move on.

If they’re not interested in buying, and don’t want to move, speak to your agents about how you go about terminating the current tenancy sympathetically, legally and professionally.

This may well be the last thing you want to do, but you have to fully understand what is required should that become an eventuality.

9. Setting the wrong price

Misconception: You know what you’ve got, so you’ll not be taken in by a smooth buyer who pitches some low-ball offering!

The market has been tough recently, so you’re going to play hardball and make sure you get the price you deserve. It just takes strong nerves and character!

Maybe it does, or maybe the market is a complex and changeable beast and isn’t much concerned with how steady your nerves are or how shiny your character.

If that turns out to be the case, you could be waiting a long time to find a buyer, or even interest in your property.

Solution

Your agents will be able to indicate a likely price for your property with tenants. It’s their job to understand the market, both locally and beyond. They’ll likely know who’s buying, what they’re buying and how much they are willing to pay.

You’ll probably get slightly less than you would if selling your property when it’s empty. This is due to the fact that selling an empty property means access to a much bigger market, and the more emotional purchases that come from private owners.

Price matters to investors, but so does yield, the age of the boiler and when it was last serviced. Reliable tenants are a positive for other landlords who might be interested. Price matters, but it’s not the be-all and end-all.

Character is a worthy attribute, but when selling a property it’s a poor alternative to experience and knowledge. Setting realistic goals (and a realistic price) is going to deliver for you far more quickly.

10. Choosing the wrong solicitor

Misconception: I’ve used my lawyer, Old Seth, boy and man, for decades and I’ll be damned if I abandon him for some slick suit from a city firm, who’ll likely just rip me off. It’s just a house sale after all.

We understand the importance of long-term business relationships; we actively seek to develop them with our own clients, but this approach may not be in your best interests.

Is Old Seth wholly up to date with all the laws and regulations affecting landlords and rented properties? If not, you’re going to be paying for him to do a lot of reading – and that’s the best option you can hope for.

The worst is endless delays and potentially serious problems in completing your sale.

Solution

Just as not all estate agents specialise in tenanted property, not all solicitors do. Your agents will probably be able to recommend a firm or individual with the right experience and skills, but if they can’t, make sure you do your homework.

In specialised sectors, specialists are your friend.

Advice from the property pros

Selling your property with tenants in situ isn’t difficult per se, but proper preparation and the right agents on your side will make the experience infinitely more pleasant and profitable.

One of the big advantages of doing so is the fact that you’ll receive rental income right up to the point of sale – conversely the buyer receives income as soon as the sale is agreed, so you all stand to benefit.

Selling any investment property must be regarded as a business endeavour, and doing so will put you in exactly the right frame of mind to make good decisions and to avoid unnecessary mistakes.

Landlords, especially if they only own a single property, are not always aware that they can sell without evicting their current tenants, and that other investors will be interested because of those very tenants.

In summary…

Let’s be honest, there are pitfalls when selling a tenanted property, and obviously we’ve rather laid it on with a trowel here, but it helps to highlight the important points.

Your approach to a sale, and the planning and preparation beforehand can make all the difference between achieving what you want with minimum fuss and finding yourself in a minor circle of administrative hell, wondering what went wrong.

Each landlord is different, and what is right for one may not work for another. Working with a specialised estate agency which has extensive experience and contacts will help you find the right buyer for your property.

If you’re thinking of thinning down your portfolio, or want to exit the sector for pastures new, we’re always available to offer guidance and good advice. Just get in touch and let’s see how we can help maximise your return.

As ever, thank you for reading this far, hopefully you’ve found this both interesting and helpful. Our experience will ensure you avoid mistakes when selling tenanted property.

Written by Ross MacDonald, Director of Sales & Cofounder of Portolio

Get in touch on 07388 361 564 or email to [email protected]