Selling property – tenant still in residence

by Readers Question

13:16 PM, 11th January 2014
About 7 years ago

Selling property – tenant still in residence

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Selling property – tenant still in residence

I am selling one of my properties to release some capital.

The tenant is the daughter of one of my friends and moved in without a deposit and below market rent and has been a good tenant to date. Before I get estate agents involved I am offering the property to the tenant at a discount

I have drafted the following letter and your thoughts would be appreciated on the wording:-

I am writing to let you know that I have decided to sell XXXX and will be putting the property on the market in the very near future. Your tenancy still remains in effect and rent is still due and payable. Selling property - tenant still in residence

Before I place the property on the market I know you have expressed an interest in the past about purchasing the property and I am prepared to offer it to you to purchase for up to £10,000 less than the asking price depending on the Estate Agents valuation. Please let me know before the 28th January 2014 if you are interested in purchasing the property.

I am not asking you to relocate until any possible future sale progresses. It could be I will not sell the property this year or I might be able to sell the property onto another landlord.

Whilst in residence I would appreciate your cooperation with the presentation and access to XXXXX for potential purchasers.

The Estate Agent will not be given keys to your home. The Estate Agents will be asked to liaise with you to arrange times and dates that are convenient for you to allow potential purchasers to view the property. Once I appoint an Estate Agent I would appreciate your co-operation in allowing the selling agent to measure and photograph the property and to show the property to potential purchasers with advanced telephone notice.

If you remain resident and the rent remains up to date until such time you may have to vacate due to an imminent sale I will be able to help towards your moving costs and contribute towards any deposit on a new property as recompense for any inconvenience caused by the viewings and moving. You can discuss this with me or XXXX nearer the time.

If you would like to speak to me about this letter feel free to phone either XXXX or I at any time.

What are your thoughts?

Regards

Ted


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Comments

Mark Alexander

13:21 PM, 11th January 2014
About 7 years ago

Hi Ted

It's a good letter, however, I find that face to face meetings and sharing empathy over a cuppa are far better to resolve issues than writing letters. Therefore, whenever I get a call, text or email from a tenant the first thing I suggest is a meeting. By all means follow that up with a courtious and professional letter outlining discussions.

Having said that, I have never sold a tenanted property and I can see why it could be difficult to call a tenant out of the blue and to request a meeting as their natural curiosity would lead to them asking what the meeting is about and failure to answer that would be awkward.

I will be interested to see what others have to say about this, especially if they've been in this position and are willing to share their experiences.

Good luck anyhow 🙂
.

Jeremy Smith

3:18 AM, 12th January 2014
About 7 years ago

Hi Ted,

I have considered the same in your position. ie selling a property to a tenant.
Your letter/offer to the tenant is VERY generous, in terms of discount and in terms of relocation expenses.
If your tenant were to move out two or three months before you sold it, you would lose, maybe £2k..
But advertising your property on the open market with vacant possession will get alot more interest than an investment property, or even with a tenant in, who may or may not move before completion takes place ( buyers sometimes get nervous of a 'sitting' tenant ), so you may be able to market it at a higher price.

If I were you, I'd split it into two parts:
tell the tenant you have thoughts of selling, and ask if they are interested because you would prefer to sell to them, and if so, should you get a valuation and they'll get a discount.
If they are not interested in purchasing, give them a couple of days, then tell them you are still thinking of selling and will put it on the market, by this time they will be expecting this from you anyway and not be surpirsed or flustered about the news.

Don't forget, if you move into the property before you sell it as your main home, you will get some CGT allowance, as discussed in another thread.
So this could save you more money than having them up to the completion date.

8:35 AM, 13th January 2014
About 7 years ago

There is a third option.

Sell the property for cash to another investor who will simply take over the tenancy.

Clearly, the purchaser will be looking for a discount - typically around 15% - but a tenanted properties is not attractive to the market place.

In my recent experience of trying to sell a tenanted property, the tenant refused to co-operate with any viewings.

They handed in their notice when I mentioned selling the property, and did not allow any viewings. I decided not to sell the property, but they declined to stay on.

I therefore had to wait until they left to start viewings for a new tenant. It was void for two months.

So it cost me to even mention to the tenant that I was thinking of selling.

There is some advice here about selling a tenanted property and the possible benefits of selling to a cash buyer. This is based on my story, which I told to my friend Richard Hill at Dream House Buyer:

http://www.dreamhousebuyer.co.uk/news/Selling-an-investment-property-with-tenants

I hope it helps add perspective to this issue.

Mick Roberts

12:37 PM, 13th January 2014
About 7 years ago

Same as Mark says, go see her, talk to her.

Or as Vanessa says, sell to investor, if u gonna knock 10k off anyway, u may be close to investor price.

I’ve sold a few with tenants in, tenants get scared at first, till (in my case) u reiterate only selling to someone that is going to keep her in.

If she ain’t buying off u, u could save 10k, & offer to pay for her deposit, rent up front, for her next house, she she may help u out like that by keeping house nice etc.

You could offer her a percentage over a certain price, that u know would be rock bottom ie. 70k, but for every thousand over, if it fetches 80k, give her 20% of the excess, so if she plays ball, cleans up, tells purchasers everything's mint, she gets 2k as well. So u get more, she gets more.

And I’ve bought loads with existing tenants in, & existing owners that wished to stay in & rent afterwards, so for 10k less, I’ll buy it if it’s local & good value-Where is it? Can complete in 3 days as well, that’s got to be worth another 5k off ha ha.


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