Are your buy-to-let properties worth selling?

One of the significant reasons for investing in buy-to-let mortgages is they are assumed to be tax efficient, but unfortunately, you cannot benefit from it the way you used to until Brexit. It is assumed that these properties are tax-efficient, but the fact is that they are much less tax efficient than assumed.

To most the people, buy-to-let mortgages seem to be a money-making opportunity. Investing in property could allow you to make some money in the form of rent, but when you calculate the overall cost, including the letting agent commission and tax you paid, you find that you are left with very little income.

It is likely that you may decide to sell your buy-to-let property and use the money to buy another house for your residential purpose. However, it is not as easy as it seems. There are many things you should consider before deciding if it is worth selling buy-to-let properties.

Should you sell the buy-to-let property as tenanted or vacant?

Once you have decided to sell your property, you should inform your tenant because you never know if they might be interested in buying your property. If so, you really do not need to ask the agent to look for a buyer for you, and you can easily save your money on those formalities.

If it is not on your cards, you need to decide if you should sell it as tenanted property or a vacant home. Both have their advantages and drawbacks. Carefully peruse it, so you do not regret it later. If you tend to sell the tenanted buy-to-let property, you will have limited market options to sell.

Most of the buyers and investors are generally interested in buying vacant property. Further, if anybody gets ready to buy your property, you will not be able to sell it at market price. It will likely be a loss deal. If you have decided to sell your house to a sitting tenant, make sure that you have explained to your tenant what the sale could mean to them.

Frequent sale agent visits will be there, so they should always be ready to get through such hassles until it is sold. Try to explain to them its benefits so they could be helpful when property agents come to take photographs or view the house. Their cooperation is required to make it much easier.

You need to check your tenancy agreements, however. The agreement may give them certain rights, for instance, quite an enjoyment, which means you cannot force them to allow people in to take the view of the house or take photographs. If there is any kind of such clauses, you will have to wait until the termination of the letting contract. If you have a good relationship with your tenant, they may be lenient and avoid being stuck to the clause given in the agreement.

Here are the advantages of selling the property with a tenant:

• You will keep earning a rental income until the sale is complete. You will be able to earn money as rent until the sale is made, so cash is coming in throughout the period.

• The buyer will have the advantage of getting rent from day one.

• If the sale falls through, you still have a chance to prevent the loss of rental income.

If you sell a vacant property, you will likely be put on the open market because now, people other than investment buyers may also be interested in buying buy-to-let properties. Further, you may be able to sell at a higher price.

However, the drawback is that you will have to wait until the tenancy period expires. Further, you will have to do it up so you can sell it up at good prices.

5 Factors to think about initially

You must have decided whether you want to sell your buy-to-let property with a sitting tenant or vacate, but before you get into action, you will have to look at the following factors:

• Mortgage implications

You do not have to worry about anything if you have already settled a mortgage, but if it is yet to be settled, you will have to consider its implications on your sale process. The ideal time for selling your buy-to-let property is when your fixed-rate interest period is going to expire.

This is the period when you are charged fixed interest rates for two, three or five years and afterwards you are put on a standard variable interest rate. You will end up with hefty interest if a longer fixed rate interest period is left.

However, not all lenders charge very high early repayment fees. Make sure you should consider the best buy-to-let mortgage. This will likely help get money at affordable interest rates.

• When to sell

The next thing you need to look at before selling your buy-to-let properties is the right time to sell them. Although the housing market performs well throughout the year in the UK, it is always recommended that you should do some research to know the condition of the local market.

Sometimes the market moves sluggishly due to economic factors. With the help of research, you will be able to know the market selling price. You will get an idea if it is actually worth selling it.

• Should you refurbish?

This is another thing you need to consider before deciding on selling buy-to-let property. Doing up your house can help improve the chances of getting good prices but ensure you get a return on the cost you are investing. Refurbishment does not always help get higher prices.

• Vacant possession

You cannot just throw them out if you already have a tenant. You will have to wait until the tenancy period expires. You will have to follow the strict legal process. However, if the agreement has the clause that you can ask them to leave any moment before the tenancy period expires by giving a notice period in advance, you can go ahead then.

• Take the help of an advisor

Even though you know the entire procedure and you have decided to sell buy-to-let mortgages, you should consider an independent mortgage advisor in Edinburgh. They can help better guide you on what you can do about it.

The final word

Well, if your purpose is just to make your property tax efficient, it is recommended that you sell it, as this property is not as tax efficient as it seems, especially for those who are high taxpayers. However, it does not mean that you just have to take into account this factor only. There are a lot of other things you need to look at, for instance, whether you should sell the vacated property or with a sitting tenant.

Both have their own advantages and disadvantages. You will have to look at them carefully, so you choose a better option. Apart from it, other factors include mortgage implications, when to sell, whether you need to do it up, vacant possession, and taking the help of an advisor.