It’s a great question, and one every landlord – or at least the ones thinking of selling their let properties – should want the answer to.
Why wouldn’t you want to get the best price possible? After all, you no doubt have a really good reason for selling and a plan for the cash.
I’ve been working for landlords, of all types, for over 15 years. My focus is, and has always been, on helping you (the landlord) achieve real life goals through property.
So, how much WILL you get for your tenanted property? Well, potential sale price varies depending on a number of different factors (you didn’t think it’d be that easy, did you?).
In this short blog, I’ll delve into some factors that affect the sale price. I’ll also give you a vision of what you, the landlord, can expect from a good specialist estate agent who can deliver you a good result.
Which factors affect sale price for a tenanted property?
Selling your property with the tenant still living there means it’s almost certainly going to be purchased by a property investor, who will become the new landlord.
Psst! Property investors are not all ‘sharks’, but it IS a business transaction, and they’ll make their buying decision on numbers. They will have different motivating factors from residential buyers, and it’s the job of a good estate agent to understand what those are.
Here are five important factors that will influence the potential sale price of your property – specifically when selling to a property investor, with a tenant still living in it.
Some locations – like Edinburgh, Dundee or Glasgow – are viewed as low risk by investor buyers because property prices are on the up, and rental demand is strong. Other areas of Scotland, mainly outside the cities, can be seen to be a riskier investment.
To clarify, yield is a percentage measure of how much rental income the property can generate in relation to the price paid. The higher the better! Sometimes 5.5% gross yield is high enough, and in other parts of the country it needs to be 10%+.
They say, “easy to buy, hard to sell”. Property investors consider how easy, or difficult, a property would be to sell in the future. Most investors use a long term strategy, but if your property is in an area where sales are slow, they will definitely factor that into the equation.
The buyer will review ALL the costs involved in the purchase, including things like refurbishment, repairs, fees and the deposit. On this point, I should say that any extra fees and extra costs for the buyer to pay will have a negative effect on your eventual sale price.
Pro tip: The current cleanliness of the flat matters, so your tenant keeping things nice and clean will also help the sale price.
Selling your property off-market by ‘putting the word out’ to certain individuals in the industry leads to a buyer seeing an opportunity and wanting a discount. Selling on the open market will do the opposite and should lead to a higher sale price.
So what does all this mean?
All the factors mentioned will do two things;
- Influence the official value placed on your property by a qualified surveyor, and;
- Influence the amount the buyer will pay in relation to the official value.
For example, we sold a 2 bedroom flat in Oxgangs, Edinburgh. The location is not one of the most fashionable in Edinburgh but it was a solid flat, with all the required letting safety certificates, and of course it had a tenant already in situ. It also had a good yield.
We arranged the home report survey, as part of our proven process, and the official value was £125,000. The buyer we found recognised all the significant positives of buying a tenanted property, and our client (the seller) got a good sale price above home report value.
Any reputable, experienced agent or company who specialises in tenanted property sales should be able to take a look at all of the above factors and give you an idea of roughly how much you can expect to get for your property.
Psst! Just because you’re selling your property with a tenant still living in it doesn’t mean you can’t still get a good price that reflects the market conditions.
Advice from a property pro
In the world of property investment, there are many companies and individuals working in different ways and with different agendas or goals. Do your research and think carefully about whether this is the best option for you.
If you’ve decided to sell your let property with the tenants still living there, then my advice is to find a company you trust to act in your best interests, and who can give you some free, impartial advice.
I’m a landlord myself, as well as a specialist estate agent, and over the years, with the ups and downs of life, I’ve considered selling with the tenant still in place. However, if I did, I know I would want to be sure I’m making the best of the situation.
One client, who needed a relatively quick sale of their let property, wanted to raise money to move home and 100% needed to get the best price possible. Before us, they had spoken to various parties but every time their target amount was deemed unachievable.
I’m just glad we were there to help. In fact, by working on their behalf and marketing their flat on the open market, we surpassed their target sale price by £10,000!
To sum it all up
Thanks for taking the time to read – and I hope I’ve managed to give you at least a rough idea of how much you might get for your tenanted property.
Do your research, speak to some different companies and choose someone who takes the time to understand what you’re trying to achieve by selling your property, asks all the right questions – and answers all of yours. Don’t forget to trust your gut.
TIP: For more advice on selling your tenanted property and all other things landlord-related, check out the Scottish Association of Landlords (SAL).
Good luck! If you need any further help or advice, don’t hesitate to get in touch with me – I’m always here to help!
Written by Chris Wood, MD & Founder of Portolio
Get in touch on 07812 164 842 or email to firstname.lastname@example.org