Equity is a business asset — Use it like one

Every business uses its assets to generate better results.

•  Manufacturers buy machinery to increase productivity.
• Retailers buy stock before they can make a sale.
• Developers invest in infrastructure before they build.

Landlords shouldn’t be any different.

The equity tied up in a property isn’t simply something to collect when the sale completes. It’s part of the business and, when the time comes to sell, it can be used just as effectively as any other business asset.

That’s why we don’t see equity as something that should be preserved at all costs.

We see it as a resource that can be deployed to remove obstacles, reduce risk and improve the overall outcome.

Selling Property Has Costs – However You Do It

Every route to selling property comes at a price.

Estate agents charge fees and/or commission after the sale, but if it is a second property being sold empty, the biggest costs often come during the sale, paying for a property with no benefit while waiting for a buyer and for the sale to complete – mortgage payments, insurances, utilities, council tax, maintenance and legal costs.

And that’s before you factor in gaining vacant possession, the loss of rent and replacing worn fixtures and fittings, redecorating.

Anywhere from 6 – 18 months of additional spending at the same time your income is reduced. It is easy to see why sellers feel trapped between a rock and a hard place. Unable to stay in the PRS, unable to leave.

Selling with tenants in place avoids months of costs and risks but auction houses charge entry fees, listing costs, seller’s fees and the cost of a much smaller buyer pool is typically in the region of 30% below vacant possession value.

Not all property buying companies buy with tenants in place and those that do normally make low offers and/or have hefty fees.

Landlord Sales Agency does things differently.

By using equity to save costs further down the line instead of fees commission, sellers receive rent for longer and Landlord Sales Agency closes the gap between what is left in the bank selling property with tenants in situ and selling it with vacant possession.

Equity Creates Options

We use the wealth tied into the property we’re selling to keep all options open.

Rather than sellers having to find cash before, during and after the sale for estate agency fees, court processes, legal costs, tenant incentives, refurbishment, mortgage payments, insurance, council tax and other holding costs; we use a small proportion of the equity tied up in the property to minimise these costs and fund the sale itself.

In most cases, it’s a far more efficient use of capital than paying costs upfront to arrange vacant possession, redecorate a property, replacing worn fixtures and fittings, marketing it, finding a buyer and waiting for the sale to complete to recoup costs.

Keeping every option open also allows us to take a genuinely multi-pronged approach.

A Successful Outcome Even Though Some Properties Did Not Sell

A landlord came to us with a seven-property portfolio in the North East. Rather than treating every property the same, we developed a different strategy for each one.

We marketed every property to both investors and owner-occupiers, creating far more competition than simply advertising to landlords.

Four of the seven properties were sold to a mixture of investors, first-time buyers and one of the existing tenants.

Each completed sale followed its own route.

• One property transferred seamlessly to another landlord with the tenant remaining in place.
• Another was sold directly to the existing tenant.
• Two required vacant possession, so we worked with the tenants individually and by helping them with the costs of moving, we avoided the costs and delays of going through courts.

Behind the scenes, our in-house conveyancing team kept everything moving.

We completed protocol forms, obtained replacement certificates, answered enquiries promptly and covered agreed costs, including tenant incentives and the seller’s legal fees with our panel solicitor.

As with every sale, all buyers were chain free and committed with a non-refundable reservation deposit from the outset, helping ensure every transaction progressed quickly and with certainty.

Three of the properties did not sell.

The seller decided to keep hold of three of the properties because, despite being competitively priced, there was not enough interest to meet the reserve.

While some companies may see that as a failure, we see it as confirmation our pricing is as high as possible whilst still being realistic. If we sold every property we market, it would indicate prices are set too low.

However, by using a small amount of the equity she had accrued in the properties we sold together with our ‘no sale, no fee’ model, and a much smaller portfolio to contend with, she had the funds available and it was more do-able to take longer to wait for her buyers to leave of their own accord and wait a buyer prepared to offer her asking price.

And, because she didn’t evict tenants she was not left with unsold empty property so collected rent throughout the process.

While it wasn’t the complete solution we hoped for, it was a significant step in the right direction and made other options possible.

Whether you want to sell some or all of your properties, contact Landlord Sales Agency now and use the equity tied into your properties to take a positive step in the right direction.