Home » How to sell your buy to let in 2024

How to sell your buy to let in 2024

For sale and to let boards outside Victorian terrace in Battersear

Many long-standing landlords have been wanting to sell their buy to lets. However, with the challenging market conditions of 2023, have been waiting on the sidelines, until the time feels right.

The RICS UK Residential Market Survey for March 2024 indicated a “steady improvement in overall sales market conditions” and that “near term expectations point to activity gaining further traction over the coming months”. This change in market sentiment may lead some landlords to conclude that 2024 might be a good time to sell.

For those that are wondering how to go about selling a rental property, this blog post discusses the different ways landlords can approach going about it, taking into account the perspectives of renters. It’s a detailed post, but you can see the overview of topics below.

>> Join: The Independent Landlord Community Private Facebook Group (landlords only)

>> Listen: Good Landlording podcast

Why are landlords selling up in 2024?

jenga with mortgage written on a block with a house on top

It may seem difficult to understand why landlords want to sell up when rents and rental demand have never been higher. However, owning rental properties has become less profitable for landlords, particularly if they own their properties in their own names and not through a limited company.

Here are some of the reasons why landlords are selling in 2024:

the reasons range from George Osborne’s restriction on mortgage tax relief in and increasing costs, to concerns about the impending abolition of Section 21.

1. Increased mortgage costs

Following the increases in the base rate, BTL mortgages cost considerably more than investors have been used to. They’re now around 5%, plus an arrangement fee. This is considerably higher than it was in 2022.

Consequently, it’s now harder for landlords to secure a BTL mortgage, without a high rent or opting for a lower loan to value.

2. The on-going impact of Section 24

Whilst the restriction of mortgage interest relief for landlords that was introduce by George Osborne under Section 24 of the Finance (No 2) Act 2015 was immediately unpopular, its effect was fairly limited while interest rates were low. However, with the sharp increase in base rates from 0.1% in December 2021 to 5.2% in July 2023, when unincorporated landlords came to the end of their fixed rate deals, they not only had to cope with higher financing costs, but were unable to set off the full amount against rental income.

The financial impact of Section 24 is therefore one of the biggest reasons why landlords are looking to sell unprofitable buy to lets that.

3. Concerns about the Renters Reform Bill

Although implementation of the Renters Reform Bill stalled in its passage through the House of Commons, it is expected to restart again at the end of April 2024. The prospect of the impending increase in regulation is the final straw for many landlords.

Of particular concern to selling landlords is the proposed abolition of Section 21, which would make it harder for landlords to sell with vacant possession.

>> Related Post: The 10 key changes in the Renters Reform Bill

>> Related Post: Renters Reform Bill: What Happens When

>> Related Post: What abolishing Section 21 means for landlords

What landlords need to know if they’re thinking of selling in 2024

After the difficult market conditions for sellers in 2023, if the RICS March 2024 survey is to be believed, 2024 could be an easier time to sell.

However, landlords who are looking to sell need to be very realistic, and take the following into account:

>> Related Post: What’s new for landlords in 2024?

1. Expectations of higher asking rents

If a landlord is looking to sell to another landlord, in order to get the highest price for the property, the rent should be at or near the market.

However, average asking rents for new tenancies have increased significantly over the last few years, according to Rightmove. For instance, average rent outside of London has increased from £972 in Q4 2020, to £1,280 by Q4 2023.

If the seller hasn’t increased the rent since before the pandemic, there may be a big gap with the market rent. Depending on the situation with the tenant, this may impact the valuation.

2. Expectations of higher average yields

Investors looking to buy rental properties have expectations of higher yields as average yields have increased over the last few years.

For instance, the average across Great Britain (excluding London) increasing from 5% in Q1 2022 to 6.4% by Q4 2023, according to Rightmove.

>> Related Post: Average buy to let yields in England, Scotland and Wales

3. Concerns about the Renters Reform Bill

Although implementation of the Renters Reform Bill stalled in its passage through the House of Commons, it is expected to restart again at the end of April 2024. The prospect of the impending increase in regulation is the final straw for many landlords.

Of particular concern to selling landlords is the proposed abolition of Section 21, which would make it harder for landlords to sell with vacant possession.

>> Related Post: The 10 key changes in the Renters Reform Bill

>> Related Post: Renters Reform Bill: What Happens When

>> Related Post: What abolishing Section 21 means for landlords

4. Competition from bank deposits

Rising interest rates also mean that would-be property investors might be better off putting the money in fixed rate bank accounts of well over 5%. This means the yield from high interest bank accounts can rival the net cash flow from property.

Sure, there’s no capital growth in the bank, but we may well be entering a period of stagnant house prices. For instance, the 2023 Joseph Rowntree Foundation report published says “market stagnation is the most likely path for the next few years”.

5. Landlord sellers need to be realistic on price

If you’re determined to sell your rental property, the most important thing is to be realistic on price. This isn’t the market to test the waters with a high price, even if estate agents try to woo you with unrealistically high valuations.

If you price reasonably, you may get several offers. On the other hand, if the price is too high, it’s likely to hang around on the market and have to be reduced in price.

For instance, I viewed a house for sale in Maidstone in 2023 with an EPC D, with renters paying a rent that would return a yield of 3.8% at the asking price.

Even if I were to value the property on the basis of a yield of 6% on a market rent, which would mean a rent increase of 47%, the property would still be 20% over-valued. In any event, the current renters could not afford a 47% rent increase. It was a no from me, as the asking price bears no relation to the rental return. The empty property stayed on the market for 10 months, and went through three estate agents, before it finally sold after a big reduction. I would have probably bought it 10 months earlier at the price it went for.

If you do want to sell your rental property, do not be like this Maidstone landlord. It is 2024 and not 2021, and sellers need to price accordingly.

Should a landlord sell with tenants or vacant possession?

empty bedroom to show selling a rental property with vacant possession

One of the first questions that landlords need to answer when selling up is whether to sell the property with tenants, or with vacant possession.

If the priority is to sell for the highest price, then sadly for the renter, it’s more likely to be achieved with vacant possession.

Why is this? Selling with vacant possession means the property will appeal to the widest amount of sellers. Not just other landlords.

Often buy to lets are the types of properties that attract first-time buyers, who also benefit from lower stamp duty. They might fall in love with a project and aren’t fixated on generating rental income. However, few first-time buyers would contemplate having to evict a tenant on their first property purchase. Therefore, to attract those first-time buyers who can afford higher rates, landlords need to sell with vacant possession.

When I sold my low-yielding rental flat in 2022, the buyer bought it to turn into serviced accommodation, for listing on platforms like Airbnb. This sadly meant that another property left the private rented sector. Click here for an overview of serviced accommodation.

What about selling a tenanted property to another landlord? This could work well if the renters are paying near market rent. However, if they’re not, the value to the investor will reflect this, as the Maidstone example above shows. Valuations are invariably higher if the property is sold untenanted, instead of with tenants in situ on a low rent. This in turn is fuelling the increase in Section 21 evictions.

Please do bear in mind, however, that if the landlord didn’t comply with their legal obligations at the start of the tenancy, they might not be able to use Section 21. For instance, if the deposit protection rules were not followed, the property is unlicensed (depending on the location) or if no EPC or Gas Safety certificate was issued. If you’re in this position, you should get specialist legal advice as to your options before putting the property on the market.

>> Related Post: The Pros and Cons of Serviced Accommodation / Short-term Lets

The practicalities of selling a buy to let with tenants

Difference between estate agents particulars for sale of a house with tenants and a house with vacant possession
The same room with tenants, and vacant (after a refurb)

There are some benefits when a landlord sells a buy to let property with tenants.

First and foremost, the renters keep their home, and the sale is not adding to the rental housing crisis. The seller won’t need to evict the tenants from their home, which is particularly difficult with good long-term renters. The seller also receives rent until the sale completes, and won’t have the worry of an empty property. The buyer knows exactly what the income will be, and that they’ll be responsible for future rent increases if it’s fallen behind the going rate.

Also, unless the buyer is a first time landlord, they’re likely to have a good understanding of conveyancing and the legal responsibilities of landlords. This is more likely to result in a smooth conveyancing process.

However, as I’ve seen myself when looking to add buy to lets to my portfolio, it’s not easy for landlords to sell with tenants. Access to the property for viewings can be difficult to arrange and the seller won’t be able to stage the property for sale.

The images above from my last project prove this point. The top photo of the sitting room was in the estate agent’s listing for the sale of a property I bought last year. The tenants’ oversized furniture meant it was very difficult to see the potential of the room, not least because the fireplace was behind the sofa. I took the bottom photo after the refurb from a different angle, when I listed it for letting on OpenRent. The refurbished room is clean and airy, and the lovely fireplace is the focal point, instead of the wrap-around sofa.

The seller did agree to sell the house with vacant possession, but it delayed the sale, as he needed to serve a Section 21 notice. I wan’t prepared to take the risk of buying a tenanted property, without a substantial reduction in the sale price, as it was only yielding 3.8%. To achieve a yield of over 6%, I needed to be able to refurbish the property to a high standard, which couldn’t be done with anyone living in the property.

The seller wasn’t prepared to drop the sale price to an amount that would enable me to keep the existing tenants, so he agreed to a sale with vacant possession. We exchanged and completed three days after the tenants moved out.

Although it’s hard for renters, it’s a question of economics for sellers. Selling with vacant possession reduces the buyer’s risk and helps the seller achieve the best price in a difficult market.

Tips for selling a buy to let with tenants in situ

renter opens the door to landlord

The best possible outcome from a wider societal perspective is to sell the property with tenants in situ.

Here are some practical tips for landlords who are considering selling a tenanted property and want to achieve a good price:

1. Increase rent towards the market rate

I’ll be easier to achieve a fair price with tenants in situ, if the rent isn’t far behind the market. This doesn’t mean increasing the rent all in one go, just before listing it for sale, as that may put your renters in financial difficulty.

It means increasing your rent at least in line with wage inflation each year, otherwise you are effectively reducing your rent.

>> Related Post: How to increase rents

2. Keep your tenants in the loop

It’s not compulsory to advise the tenants in advance of the sale. However, it’s best practice and it’s respectful to the renters. They’re also more likely to be cooperative if they feel they’re being treated fairly in the circumstances.

3. Be considerate when arranging viewings

It can feel very invasive to renters when potential buyers come to view the property. Estate agents should be considerate when arranging viewings, and try to group them into slots.

Legally, the renters’ right to quiet enjoyment continues, even when a property is on the market. The estate agent should give at least 24 hours’ notice of a viewing, and be at a reasonable time.

4. The buyer will inherit the tenancy agreement

Unless the tenant leaves the property before completion, any sale of the property will be subject to the existing tenancy and the new landlord won’t be able to use a section 21 notice until any fixed term period ends.

However, it’s common for a new landlord to enter into a new tenancy agreement with the renters. They’ll need to ensure the renters have an up to date documentation. (This means the How to Rent checklist, EPC, EICR and Gas Safety Certificate).

The rent will also be apportioned if the sale completes on a date that is not a rent day.

5. What happens to the tenant’s deposit when a landlord sells up?

The contract of sale of the property should explicitly state that the deposit will be transferred to the buyer. The new landlord will responsible for ensuring the deposit is protected, and serving the prescribed information within 30 days.

6. Serve correct notices to the tenants

Although it’s not compulsory to give advance notice of the sale to the tenants, the new landlord must provide notice of the sale within two months. The notice must include their name, address, and contact details. See Section 3 Landlord and Tenant Act 1985 for full details.

The new owner and landlord must also send a Section 48 notice to the tenants.

From a practical perspective, the new landlord will also need to do this to start receiving the rent, and advise the renters who is managing the property.

>> Related Post: What is a Section 48 notice?

The new landlord is responsible for complying with landlord obligations, including any licensing requirements, from completion. The buyer should check the smoke and carbon monoxide alarms, and do a fire risk assessment. The seller should obtain an up to date gas safety certificate and EICR to provide the buyer, if they don’t already have one.

>> Related Post: Fire safety rules for private landlords

How to get vacant possession when selling a rental property

Photo of Section 21 Form 6A notice to terminate assured shorthold tenancy

Often the best option for the seller is a sale with vacant possession. Unless the sale coincides with the renters themselves deciding to leave, selling with vacant possession involves evicting renters.

What can a landlord do to help renters in this difficult situation? In a word, transparency.

Landlords should let the renters know informally that they’re thinking of selling well before serving the Section 21 notice. This is being fair to them, and will help them plan ahead, especially in taking on financial commitments.

It’s best to explain the reasons why, and reassure them that you’ll provide a good reference (if they merit it!) They might want to buy the property themselves.

Little things like being flexible on when the renters move out can make a real difference. For instance, if they find something earlier when they’re still in a fixed term period, be generous, and release them. If they want to stay a few weeks after the notice expires to time coincide with their move to another property, be flexible.

In terms of legalities, landlords should serve a Form 6A notice under Section 21, with at least two months’ notice. However, this notice must not expire during a fixed term tenancy, unless there is a break clause. For more tips on serving the Section 21 notice, click on my advice here. The Form 6A notice itself is available on the government website.

However, remember that landlords can’t use always use Section 21 to evict tenants. For instance, they must have followed the tenancy deposit protection rules, provided the renters with a valid EPC and How to Rent checklist. The property must also have had the correct licenses, where relevant. Although some of these issues can be corrected, the landlord (or buyer) may need to rely on Section 8.

>> Related Post: How to terminate a tenancy using Section 21

>> Related Post: How to seek possession under Section 8

How to get ready for conveyancing

speed up conveyancing shown by a turtle on a skate board

One of the most frustrating things about buying or selling property is the speed of the conveyancing.

However, there’s a lot you can do to get ready for the inevitable questions and requests for documents.

Here are some practical tips so you can get organised and hit the road running on the sale of your buy to let:

  • Ask your solicitor to send you the property information form, so you can have it ready to go.
  • For leasehold property, ask your managing agent for the management pack. This should include the lease, any amendments and the last three years of service charge accounts. If it’s on a development, dig out the Certificate of Completion from Building Control.
  • If you’re selling the property with tenants in situ, be sure to have everything up to date. This includes the Gas Safety Certificate, EPC, EICR, and the deposit registration information. Do also provide a copy of the latest tenancy agreement with any letters changing the rent. (If your paperwork is not in order, this may limit your options, and you should get advice from a specialist solicitor.)
  • If you’ve done any work on the property over the years, eg installing a new boiler or windows, retrieve the Building Control documentation.
  • Find any guarantees for the property or the appliances.

>> Related Post: How to speed up conveyancing

Final thoughts

Buying and selling property is stressful at the best of times, even in a booming market. However, it’s even worse in a stagnant market.

Even though the market is more buoyant in 2024 than in 2023, landlords looking to sell in 2024 need to have realistic expectations.

Of course it’s very stressful for renters when their landlord puts up their home for sale. Landlords should be sensitive to this, and be open, transparent and flexible with them, before and during the sale process. They should also try to sell the property with the existing tenants if at all possible.

Selling to another landlord with vacant possession at least means the property won’t be leaving the private rented sector. Otherwise, it’s one more Section 21 notice, one more set of renters looking for somewhere to live, and one less property available for renters.

Related content

How landlords can sell a buy to let rental property in a difficult market

4 thoughts on “How to sell your buy to let in 2024”

  1. I found your articles very interesting and somewhat worrying for me not realising the amount of bureaucracy that has come about since I first became a landlord.
    I am now 94 and the time has come for me to call it a day, my tenant is a single parent with three children and on benefits,we have a very good relationship and she fully understands, she is now four months into the section 21 notice and all the advice I get is I have 6 months in which to take her to court, what is the position after the 6 months, has the world gone crazy?

  2. hi Suzanne, is there a growing trend to sell the property with a share of the freehold? If so is it recommended to form a LTD company or just have it in their personal names?

    1. Yes, lots of owners of leasehold flats own a share of the freehold. That was the case with my flat. We had a company limited by guarantee for our block, and all the flat owners lent money to the company to buy out the freehold. When we sold the flat, we sold our shareholding in the company at the same time. The shareholders normally contribute a small sum to the running costs of the company eg for an accountant and the returns.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top