Selling a property with tenants in situ can feel a bit like trying to change a tyre on your car while you’re still driving – you want to keep everything moving and that much-needed rental income coming in without any breaks as possible, but you also need to progress the sale as quickly as you can.
To help the process run as smoothly as possible, we’ve put together a step by step guide for you to work through.
Step one: Review the lease
Before putting your property on the market, you’ll need to review the tenancy agreement carefully so you’re clear exactly what your responsibilites are as a landlord. Are your tenants on a fixed-term assured shorthold tenancy (AST), or are they rolling over month-to-month (known as a periodic tenancy)?
In England, if tenants have a fixed-term agreement, the buyer will inherit them as part of the sale. Section 8 and Section 21 notices apply depending on whether you need possession, but crucially, you cannot simply evict tenants without proper notice. New rules in 2024 solidified tenants’ rights in the first two years, so make sure you know where you stand.
Step two: Decide on your selling strategy
There are essentially two different pathways when selling a house with tenants.
Option one – negotiate vacant possession
This means issuing a Section 21 notice and waiting out the notice period, or coming to an agreement with tenants to leave earlier, in order to be able to sell the property empty. If your aim is to keep cashflow going for as long as possible then this option may not be your best choice as it will inevitably mean a period where you’re trying to sell and no cash is coming in. You may also need to offer your tenants a financial incentive to leave early.
The only reason that this would be a good idea is if you’re looking to sell the property as a home rather than an investment.
Option two – sell to another landlord
The second option is to sell with your tenants in situ, and to sell as an investment to another landlord. This makes much more sense if cashflow is your priority as you can keep getting rental payments right up until the point that you get the cash from the sale.
Most landlords will prefer to buy a tenanted property as long as the yields are good and the current tenants are reliable as it means instant cashflow for them too.
Step three: market the investment potential
The key to a quick and smooth sale is to market your property effectively as an income-producing asset. Gather as much information as possible for potential buyers to demonstrate track record and profits, including:
- Copies of tenancy agreements
- Current rent and yield
- Payment and tenant histories
- Maintenance records
- Low vacancy rates (hopefully!)
The aim is to show that your property represents a profitable and hassle-free investment.
With a good understanding of your landlords rights and responsibilities, a clear strategy and a comprehensive marketing plan, you should be able to find a buyer you will take your property with tenants and keep your cash flowing.
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