Selling a tenanted property?
Sometimes it can be easier to sell a tenanted property as is, without serving notice on the tenant to vacate. And there are plenty of property investors looking for “already tenanted” properties at auctions throughout the UK.
Public auction can be an ideal way to sell a tenanted property. Although you might not achieve full market value* for a tenanted property versus selling vacant, there is a strong demand for tenanted properties at auction.
*Tenanted properties generally sell for less than vacant properties because the audience of buyers is restricted to investors only, whereas with a vacant property the audience is opened up to the whole market, including owner occupiers.
Last updated by Mark Grantham on 22nd January 2017
Why sell a tenanted property at auction?
However, the issue some sellers encounter when they sell a tenanted property though an estate agent (or direct) is that the sale is at risk of falling through (or the price being reduced) because the contract of sale has only been sent to one buyer. A sale fall through or price reduction could be for any reason, including the possibility of the investor having found a better purchase elsewhere!
When selling a tenanted property, public auction offers a very good alternative to a (private treaty) sale through an estate agent, not least because the fate of the sale is not at the mercy of the one, individual buyer. Auction offers the ideal way for property owners to sell at a fair price, in the quickest possible time.
Will your tenanted property sell at auction?
– Rental income is obviously very important to an investor. The investor will take into account the cost of finance (buy-to-let mortgage) and other outgoings when calculating their return on investment. If you’re selling a property with a yield in excess of 5% in London or in excess of 9% anywhere else in the UK then that will be considered a good return.
– Covenant strength of tenant – if you’re selling a property where the tenant has always paid their rent on time and there has been no history of problems, then that will look good to any prospective investor buyers.
– Property type – some investors stay clear of certain types property, regardless of the rental yield. For example, some high-rise ex-local authority properties can be difficult to re-finance so won’t be as attractive from an investment standpoint.
– Capital appreciation – for some investors this is the most important factor. Many overseas buyers invest in vacant London property (without any rental income) because they know it represents a secure investment.
Selling a (problem) tenanted property at auction
Although there are property investors that specialise in dealing with problem tenants, the price they offer will be below market value. Selling a tenanted property at auction can be a quick and straightforward way to off-load a problem, but it’s always worth looking at your options before selling at a discount; negotiating with the tenant or threatening/taking legal action against the tenant are always worth exploring first.
It’s worth noting that selling by auction is by no means restricted to problem situations. There are many perfectly good tenanted properties sold at auction, for the reasons stated in the first paragraph.