Should I Sell My Buy to Let Property in Central London?

With a series of landlord tax changes and additional legislation introduced in recent years, some landlords are reflecting on whether it is better to sell or continue renting their property out.

If you are considering selling your buy-to-let property in central London, there are lots of factors to consider before you make your decision. Your personal circumstances and the rental yield you are achieving will be the main factors to consider but before you decide, you should take a look at the other significant factors that will help you to make the best decision for both now and in the future.

Properties in Paddington achieve an average rent of £980 per week, while nearby Notting Hill averages over £850 per week. With high demand for central London properties, there is still a good opportunity for high rental yields. However, tax changes and higher mortgage rates might have taken their toll on your profits.

Read on for a full overview of the pros and cons of selling your buy-to-let property to decide the best route to take.

When To Consider Selling Your Buy-To-Let

The general reason that landlords choose to sell their rental property is if the financial benefits are not sufficient to warrant the additional responsibilities and work that comes with being a landlord. Perhaps recent mortgage rate increases have reduced your rental yield, and you are not generating profits that make it worthwhile.

These are some of the reasons landlords may choose to sell their property – though there are often solutions which will not require this to happen:

The cash is needed elsewhere

Other factors such as whether you own the property outright or you have an interest-only mortgage will be key considerations. If you own it outright, you might want to sell and use the money elsewhere. If you have an interest-only mortgage that is close to the end of the term, you may need to sell to be able to pay the full mortgage amount off.

Trouble with tenants

Another reason you might be considering selling your buy-to-let is if you have experienced issues as a landlord, such as trouble with tenants missing rent payments, void periods or tenants causing damage to your property.

Upcoming renovation costs

There may also be a possibility that you will have to cover the cost of home improvements in the near future, such as a new roof, rewiring the property or upgrades to a bathroom or kitchen, for example.

Property price uncertainty

Property prices have fluctuated more than usual in recent years, and if you are worried that the value of a property might drop in a year or so, this is another reason you might decide to sell before a potential decrease in property price.

Pros And Cons Of Selling Your Buy-To-Let Property

Here are some of the key pros and cons to consider before selling your buy-to-let:

Pros

• Release capital in the property – If you own the property outright or have built up equity, you will be able to release a sum of money to invest in other assets.
• Avoid financial struggles – When your rental income is not covering your costs or you predict that they might not do in future, you can avoid being in a position where you are losing money. If there has been a decline in demand or your mortgage rates have significantly increased, it could be better to sell.
• Free yourself from landlord responsibilities – Being a landlord can be stressful and there are so many different rules and regulations to adhere to. New legislation such as the Renter’s Rights Bill will introduce some additional responsibilities that you might not want to take on.
• Remove the stress of managing tenants – Problematic tenants can make it difficult being a landlord and if you are spending a lot of time dealing with issues, you can leave those worries behind.

Cons

• Capital Gains Tax is payable – Any profits you make on a second home is subject to CGT, with lower rate taxpayers paying 18% and higher rate taxpayers paying 24% on residential property sales.
• Loss of income and property appreciation – You will no longer have an income from your rental property and you could lose out on future property appreciation. Many landlords use rental properties to build a retirement fund and selling could impact your future plans.
• Difficulty of re-entering the market – If you sell now with the idea of re-investing in property in the future, it could be harder to do. Property prices may increase and higher stamp duty charges could mean a much bigger outlay in future compared to when you bought the property.
• Costs of selling the property – When you sell your property, there will be costs such as solicitor’s fees, estate agent fees and there may be mortgage exit fees or early repayment fees.

Selling A Buy-To-Let Property With Tenants

One option you have if you decide to sell your rental property is to sell it with tenants in situ. This means that you won’t have to wait until the property is empty, there will be no void period or lost rental income, and you don’t have to evict your tenants.

You can sell the property to another landlord, but this means there will be a smaller pool of buyers , and you may not achieve as high a value compared to selling to general homebuyers. However, if your property is delivering a good rental yield, this could help to increase the price a landlord is willing to pay. Find out more about selling a tenanted property in our article.

Process For Selling Your Buy-To-Let Home

These are the steps involved in selling your buy-to-let property:

1. Decide whether to sell with or without tenants

If you are selling without tenants, you will need to wait until the property is vacant. This will involve either serving an eviction notice to your tenant or waiting until the end of the tenancy.

For periodic tenancies, you will need to provide the required notice period. If you are selling with tenants, you should contact the tenants to advise them of your decision and inform that you will provide notice of when viewings will take place.

2. Contact an estate agent

Research different estate agents then get a valuation of the property and choose the most suitable agent to sell your property. The alternative is to sell at auction, but this is more complex and doesn’t usually achieve as high an asking price.

3. Prepare the property for sale

Make sure your property is in good condition, is decluttered and looking its best for viewings and marketing photos.

4. Market your property

Your estate agent will market your property and arrange viewings with interested buyers.

5. Accept an offer

Following your viewings, you will hopefully have an offer that you want to accept. Your agent will communicate with the buyers and your solicitor will handle all the legal aspects of selling your home.

6. Exchange of contracts and capital gains tax payment

A date will be agreed to exchange contracts, and you will finalise the sale of the property. You will need to pay any capital gains tax within 60 days of completion.

Tax On Selling Buy-To-Let Property Explained

Buy-to-let properties are subject to capital gains tax (CGT), which is 18% for lower rate taxpayers and 24% for higher rate taxpayers, which must be paid within 60 days of completing the sale. There is a tax free allowance of £3,000 per person on CGT and there are also some deductions that you may be able to claim. These include stamp duty, fees involved in buying and selling and the costs of improvements you have made to the property.

Tips For Selling Your Buy-To-Let In Central London

To help achieve the best price for your buy-to-let in central London, you might want to stage your home to make it as appealing as possible (especially if it is a fully furnished rental property). You can either hire a professional home staging service or you can stage the property yourself. Make sure that any minor issues like broken handles are fixed, consider giving any marked walls a fresh coat of paint and ensure the home is clean and tidy. A deep clean of the property will freshen the property up.

Declutter rooms to make the property feel spacious and maximise natural light by opening curtains and blinds for viewings. Choose an estate agent who is experienced in selling similar properties in the area and who has great marketing strategies (look at how well they advertise properties).

Our team of central London property experts can help you to sell your buy-to-let property in Pimlico, Soho or Victoria. If you would like to discuss your options or have any questions about selling your BTL, please get in touch.