Landlords face many problems, most relate to property and/or tenants however ongoing economic and legislative changes have added a lot more things for landlords to worry about. Shrinking returns, increased costs, more rules, more penalties and the prospect of fewer options to end tenancies have resulted in more and more landlords selling some or all of their rental properties.
New Rightmove research indicates 24% of landlords are planning to sell at least one property from their current portfolio, 13% will be selling more than one and 11% report they wish to sell their entire portfolio. This is despite rents being at record levels having increased by 2% in the last year.
We take a look at some of the common problems forcing landlords to sell and how we can help landlords wanting to sell up because of them.
Economic Reasons Landlords Want To Sell Up
Section 24 mortgage interest relief restrictions (aka The Landlord’s Tax)
2019 tax year saw the phasing in reach the point where only 25% of mortgage costs are eligible for interest relief and returns on buy to let property can start to enter a loss.
Return on investment (ROI) before tax (8400 – 6300) = £2,100
Tax liability: income (£8400) minus allowable costs (£1500) + tax relief (£1200) = £5,700.
- TAX @20% (if landlord has other income of £11,001 – £43, 000) = £1380. ROI minus tax = £720
- TAX @40% (if landlord has other income of £43K+) = £2760. ROI minus tax = £–600 (LOSS)
Tax bills will rise further in 2010 when the tax relief on mortgage interest will be scrapped altogether.
Where landlords may have previously been happy to endure the risks and work involved in letting property for little to no profit from rental income due to reap the rewards from property values increasing at phenomenal rates during the nineties and noughties; partly as a result of Brexit and partly as a result of the rapid growth in previous years, property price growth has recently slowed dramatically so that any short term increase in the value of property bought since 2016 is more likely to be swallowed by the stamp duty, capital gains tax, legal costs and estate agency fees.
Additionally, landlords can no longer claim a 10% allowance on wear and tear making their ‘allowable costs’ smaller (and as a direct result, their tax bills bigger), estate agents can no longer charge tenants fees for the work they do on behalf of landlords (getting references, administration and credit or immigration checks) which may result in higher commissions and stamp duty paid on buy-to-let properties.
Even many of the landlords who are still making a small profit on occupied buy to let properties are now selling up because added responsibilities*, more legislation* and the threat of fines or even imprisonment for failure to comply.
When an annual rental income is only slightly higher than the sum of the mortgage interest, tax and costs of being a landlord, it is essential to ensure the property is occupied by tenants at all time. Empty periods not only reduce the annual income but can also threaten ownership of the buy to let property if cash flow problems cause landlords to default on the mortgage repayment schemes.
This can present landlords with problems if they decide to sell because most traditional estate agents and auctions demand the property is empty before being advertised for sale and the average time taken from first advertising a property for sale to completing the deal varies (depending on whether a property is leasehold or freehold, whether surveys or searches raise any issues and whether the buyer is in a chain) but it is not uncommon for a relatively simple process to take 20 – 26 weeks. More complicated sales where multiple parties are involved can take significantly longer AND only 75% of property sales complete so the process may need to be repeated.
How National Residential Can Help Landlords Sell Property With Minimum Disruption To Rental Income…
Our business is providing our clients with a FAST, SECURED WAY TO SELL PROPERTY AND COMPLETE THE SALE. Typically, the whole process from start to finish takes between 7 – 87 DAYS… i.e. less than 13 weeks.
What’s more, we also specialise in tenant negotiations and selling tenanted property with vacant possession delivered in time for completion to minimise the period a property is not producing rental income to offset running/purchase costs.
…And Sell Property For The Highest Price
Unfortunately, some landlords are forced to sell due to water, fire or criminal damage caused by tenants, weather or disrepair together with a lack of cash to run empty properties and make essential repairs.
Not only do landlords in these circumstances need to sell quickly to avoid losing money buying/running empty property, they also face the prospect of having to sell for less than they paid for the property if the damage renders the property unmortgagable.
As well as specialising in selling property fast, we specialise in selling for the best price.
We have finances available so that we can fix problems ahead of completions using a cash advance on any profit made by the sale so that bidding is open to mortgage lenders as well as cash buyers and the sale price is pushed higher by competing bids.
Our cash advance option can also be used to stop repossession and property being sold at traditional auctions that typically attract cash only buyers and properties often sell for only 70% of their market value.
We have immediate cash advances to :
- Pay for property repairs to prevent properties being unmortgagable
- Stop debt collection processes that could result in your property being sold for 70% of its market value
- Extend leaseholds to avoid limiting your market to people who can pay cash AND afford to extend the leasehold 2 years after purchase
We have a number of options available to sellers from our 7 day sale where we COMPLETE (pay you the cash value) in as little as 7 days to our 28 day sales with cash advance in 28 days or on completion (typically 56 days).