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Introduction:
There’s no denying it’s been a very strange and unpredictable 18 months, and the same is true for the property sector.
Deciding when might be a good time to sell a rental property can be difficult at the best of times, but throw in a global pandemic, bans on evictions, changes in legislation and a property boom and it would be completely understandable if it’s all left you wondering what to do.
Some landlords are selling due to changes in regulations, such as the Tenant Fees Act and changes in mortgage interest tax relief. Others however have been taking advantage of the Stamp Duty discounts to expand their portfolios.
So, should you sell your rental property in Leicester?
Ultimately, it will come down to your personal situation and the factors that motivated you to become a landlord in the first place. In this article, we’ll discuss some of the key considerations that might help you decide.
In a hurry? Here’s a quick summary
There are many reasons why you might consider selling your rental property:
- You need the financial capital
- Property values have risen and it’s time to cash out
- Regulations are getting too onerous
- You’re struggling to find tenants
- Your personal situation has changed.
Equally, there are many reasons why you might decide to keep your rental property:
- The rental income is still good
- The location is increasingly popular
- The rental market is busy
- Your investment is increasing in value over the long term
- You want to expand your portfolio
Why you might consider selling your rental property
There are many reasons why you might consider selling a rental property, which could be financial, maybe depending on current market conditions, or personal. Let’s have a look at some of the possible motivating factors.
You’re in a Position Where You Need the Financial Capital
One reason to sell is if you need to raise some capital. For example, you might want to cash in on your rental property to put towards a bigger personal home, or indeed a larger investment property. If this is something you’re interested in, it may be worth having a look at the current properties for sale in Leicestershire so you can get a feel for what’s available.
Property Values are Rising in Your Location
Making the most out of your investment often comes down to timing. If your aim is to sell a property for a lot more than you bought it for, then you’ll want to do this when house prices are as high as possible. Latest Land Registry figures show prices have risen 10% year on year on average, and this has been mirrored by house price rises in Leicester.
Average house prices in Leicester have risen 10.2% in the last 12 months to £257,473 in August 2021. For the three months from May 2021, the rise was 1.37%. It now remains to be seen what will happen post September when Stamp Duty thresholds return to pre-pandemic levels.
Your Circumstances Have Changed (e.g. Location, Job)
It could be that you need to sell your rental property due to a change in your personal circumstances. Perhaps you need to release any equity you have in the property for financial reasons, or you’re moving and want to get something closer to your new home. Or perhaps you’ve simply moved on from being a landlord and want to explore your options.
You Struggle to Find Tenants
Letting property can be a very successful investment route, but that of course depends largely on finding decent tenants willing to pay what you’re asking. If those suitable tenants aren’t out there, you might decide that you want to sell up. However, as a busy city and university town, you shouldn’t struggle to find tenants in Leicester if you have the right property and the right agent on your side. We can help find tenants as part of our lettings packages.
You’ve Found a Better Investment Opportunity
Many landlords get into the property business as a way to make money. With savings rates as low as they are, rental yields often offer an attractive return on investment, together with the possibility of selling a property for a profit in the future.
However, a reason to sell might be because you’ve spotted another investment opportunity, whether that’s another rental property, a house to renovate and sell, or something else. If you’re unsure, or need any help at all, then give us a call and our expert team can help you weigh up the pros and cons.
Regulations are Becoming an Issue
There is a current drive by the Government to improve standards in the private rental sector and this has led to the introduction of various new rules and regulations in recent years. For some landlords, it might be that the various regulations are eating into profit margins too much, or perhaps it’s just additional red tape that makes property letting feel like too much hard work. If regulations are concerning you, don’t worry as this is something we can advise you on.
To summarise
These are just some of the factors that might cause you to consider selling your rental property. Making the decision to sell is just the first step and brings with it a variety of new considerations. Read on to find out more.
What to consider if you decide to sell your rental property
If You Need To Evict Your Tenants
If you have tenants then you’ll obviously need to factor in the eviction process and you might have a while to wait until the end of the tenancy agreement, depending on the terms of the lease. It is possible to sell a property with tenants, but this will narrow your market of buyers to other landlords or investors only. We can help advise on any tenant issues as part of our letting packages.
Capital Gains Tax Implications
There will very likely be tax implications when selling a property that isn’t your home. Capital Gains Tax is payable on any gain above the tax allowance for that year. The amount due also depends on whether you’re a basic or higher rate taxpayer. However, you can deduct costs of buying, selling or improving a property, including solicitors and estate agent fees, so it’s worth getting specialist advice on this before pursuing a sale.
Loss on Rental Income Whilst Selling the Property
If you’re selling your property without tenants, then don’t forget to factor the loss of rental income into your costs for the time between tenants leaving and the property being sold. We can help put a plan in place to mitigate this as much as possible though, and so do get in touch if this is something you’d like us to help with.
Structural or Cosmetic Fixes that Should Be Made to the Property
Is your property in a fit state to sell? It could be that some improvements are needed before you can put it on the market. We’re accredited surveyors and can confirm what will need doing to your property before you sell it if you’d like us to.
Mortgage Implications
Depending on your situation, selling your rental property could have implications on your mortgage. For example, if you’re on a long-term fixed rate deal, there might be an early repayment charge if you exit the mortgage before the end of the term.
Why you might consider keeping your rental property
Still not sure what to do? Let’s look at some of the reasons why you might decide to keep hold of your rental property.
You’re Making Monthly Income
If one of the reasons you decided to invest in a rental property in the first place was the passive rental income, then you might want to keep taking advantage of that. How long has it been since you reviewed your rental price? You might be able to increase your monthly income by reviewing the property’s rental value.
Recent figures from the ONS show that the median rental income recorded between April 2020 and March 2021 was the highest ever recorded at £730. In Leicester, rental income varies from an average £525 (one beds) to £1000 (four+ beds) per month. Please contact our lettings experts if you’d like a rental evaluation.
Your Property is Still in Good Shape
If your property is still in good shape and easily lettable, you might want to carry on as you are. Not sure? We’re accredited surveyors and will be happy to carry out a survey for you.
The Location is Popular
Location is key to a successful rental, so if your location remains popular and in demand from renters, then you might want to keep your property for now. Sale and rental prices have been rising in Leicester recently, which are both positive signs about the local market.
You Can Easily Find Good Tenants
Leicester has a wide and diverse population coupled with a wide and diverse housing stock, so finding good quality tenants shouldn’t be an issue! However, do bear in mind that location and standard of finish in the property will have a big impact on the type of tenant that you attract. Therefore, if you’re not sure, please call one of our Lettings experts on 0116 2227575, who will be delighted to point you in the right direction!
Your Property Has Increased In Value
House prices have risen more than 10% in the last 12 months in Leicester, so depending on when you bought your property, you will hopefully make money on your investment. The question is whether to sell on that basis, or to keep it and see what happens. If it’s been a while since your property was valued, we can sort out a valuation for you.
You Want to Expand Your Portfolio and Be Your Own Boss
In addition to keeping any existing rental property, you might be looking to expand your portfolio. The more properties you have, the more income you can generate. If you are looking to become your own boss and need some help along the way, we offer a range of lettings packages, providing as much or as little support as you need in managing your portfolio.
To summarise
If you’ve read the above and decided to keep your rental property, then hopefully we’ve given you some food for thought around potentially maximising your income and making your money work as hard for you as possible.
What you should consider if you decide to keep your rental property
What It Takes To Be A Landlord
If you’ve decided to remain a landlord, it’s always worth reviewing everything you need to be doing in order to stay abreast of the law, to keep your tenants happy and ultimately, to protect your investment.
Find out everything you need to know with our Landlord Health Check.
To conclude
Deciding when to sell a rental property is a difficult decision, and especially in such uncertain times. We appreciate just how hard it can be to work out when the time is right to cash out. We’ve been working with landlords for more than 80 years and have an excellent understanding of the many considerations involved. If you’d like someone to talk it through with, the Readings team will be happy to help.
