Selling an investment property can be a complex process, but with the right strategy and knowledge, it can also be a rewarding one. Unlike selling a residential home, where emotional value may come into play, investment properties are valued based on their income-generating potential.
Let’s take a look at your options when selling an investment property, the unique considerations that you need to make, and how to prepare it for the market.
Looking to sell for a profit? Contact your local Parkers branch today.
Assess the market
Market trends and conditions
Firstly, it’s critical to assess your local market’s conditions with the help of a trusted estate agent who can research levels of supply and demand, as well as average sale prices. This information can help you decide whether it’s best to sell your property now or wait for more favourable conditions.
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Financial considerations
You should also make financial considerations when making your decision, such as calculating your potential profit or loss from the sale while factoring in any outstanding mortgages or loans on the property.
Related: Financial planning for landlords: budgeting and beyond
Decide how you want to sell
Selling with tenants in situ
If you have tenants living in your property and you decide to sell without evicting them, they will become tenants in situ. You must inform the tenants in writing about the sale and provide them with relevant details about the new owner and their contact information.
As tenants remaining in the property guarantees immediate rental income for the new owner, the property’s value could be increased. However, if an interested buyer doesn’t like the tenancy agreement in place, it could put them off making an offer.
Related: Why landlords are considering switching to a managed let
Selling as a vacant possession
If you wish to sell the property as a vacant possession, there must be no existing tenancy agreement in place at the time of the sale. This means evicting the tenants via a Section 21 notice with a minimum notice period of two months. Note, this is likely to change once the new Rental Rights Bill becomes law.
Selling as a vacant possession may attract buyers who are looking to buy the property as their primary residence or renovate it without tenants present. However, landlords who wish to avoid vacancy periods might think twice before making an offer due to the increased financial risk.
Get a property valuation
When getting a property valuation for an investment property, the main things that will be considered are potential rental income, predicted occupancy rates, and local market trends.
A thorough valuation not only helps set a competitive and realistic asking price but also provides a solid foundation for negotiations with potential buyers, so understanding your property’s value is crucial for maximising profit.
Book a free property valuation now
Prepare your property for market
Investment properties often require different maintenance and upgrades compared to personal residences. You should prioritise repairs and improvements that will enhance the property’s appeal to other landlords, such as updating kitchens and bathrooms, replacing flooring, and improving kerb appeal.
Selling an investment property does not allow you to showcase your personal style and preferences to the same extent as you can with your own home. You need to identify your target market and consider what they would look for in a property.
Tax implications
It’s important to take Capital Gains Tax into consideration when selling an investment property. Currently, if you earn more than £6,000 in profit from the sale, you will have to pay a minimum of 18% tax on your gains.
However, the amount you paid in Stamp Duty tax when purchasing the property will be deducted from what is considered to be profit, reducing the amount of tax you owe.
Choose the right estate agent
An experienced estate agent brings extensive market knowledge, negotiation skills, and a network of potential buyers, which can help secure the best possible price for your property.
Here at Parkers, we have a proven track record of selling investment properties for a profit, as we have a thorough understanding of local market dynamics and buyer preferences.
Contact your local Parkers agent for expert lettings advice and guidance.
