3) This report teaches you all about selling your portfolio via a "Business Broker" and how business brokers can advertise residential property portfolios for sale - - - - -
sell your portfolio
via a business broker
all the pros and cons below
residential property portfolios for sale
can a business broker sell your entire property portfolio?
10 minute read
You may be thinking that business brokers only sell commercial assets such as office blocks, factories, warehouses, shops etc.
So you may be wondering whether it’s possible to also sell your ENTIRE property portfolio via a business broker?
Well the answer is yes it's normal for business brokers to advertise residential property portfolios for sale. That's because a portfolio of houses is a commercial business in its own right - with the ability to generate income - just like any other commercial business.
And it probably won't be so easy for you to sell your portfolio as individual houses to owner occupiers. Not without a lot of hard work splitting the portfolio up and selling each property individually.
There are many business broker companies who sell established property businesses including property portfolios. And they can all be found online via their websites.
Sell your property portfolio
- No Fees
- Less Tax
the role of a business broker
Business brokers are skilled professionals who are there to help people buy and sell businesses.
Because your property portfolio generates an income from rent - you can think of it as a "business" and not just a collection of houses anymore.
You've possibly worked with local estate agents in the past when buying or selling a residential property. So you can think of a business broker as an "estate agent for businesses" rather than for homes.
Selling a property portfolio business is a far more complicated transaction than selling a single residential property - because money is the key driver rather than emotion.
Potential buyers will almost certainly buy a business based on Return On Investment (ROI). Ie how much interest do I get for my money?
And potential buyers will also be looking at Capital Appreciation ie what's the likelihood of property prices increasing over the period of time they own the investment?
property portfolio investment decisions
Here's a couple of examples now to help illustrate the differing property portfolio investment decisions:
- return on investment
- capital appreciation
Return on investment (ROI) example
Say you buy a property portfolio for £1 million. And say that portfolio pays you £50K a year profit a year before any taxes. That represents a 5% return on investment because £50K is 5% of £1 million.
To think of it another way. If you put £1 Million into the bank and the interest rate was 5% - then you'd get £50K a year interest.
Capital appreciation example
Capital appreciation of your property business is another factor that any potential buyer will look at. You can think of capital appreciation as simply how much property prices increase over time.
So say you had a portfolio that cost £1 Million to buy. Then 10 years later you sold it for £1.5 Million - you'd have made an £500K profit before any taxes.
Portfolio 1 // Durham
- Portfolio contains lots of cheaper houses, but with a great rental demand.
- For sale at £2 Million and it makes £100K profit from rent after all costs. That represents a 5% return on investment per annum before tax.
- It isn't expected that this portfolio will have much capital appreciation over the next 10 years or so. So it could be resold for the same figure of £2 Million.
- PROFIT = £1 Million over 10 years (10 x £100K)
Portfolio 2 // London
The 2 portfolio examples above are rather simplistic and are merely meant to illustrate the differences between Return On Investment and Capital Appreciation.
The perfect scenario is a strong combination of both.
Any potential buyer will be looking at the potential for Return On Investment Income and Capital Appreciation Income in order to evaluate whether your portfolio represents a good investment opportunity for them - or not.
And the results will be bench-marked against other property portfolios and indeed any other type of investment - to help the buyer decide whether to purchase or not.
how much is my property portfolio worth
Business brokers will estimate the value of your property portfolio as a "business" and look for buyers on your behalf.
This will involve advertising your portfolio on their company website which will already have a great deal of traffic - so lots of potential buyers.
And they'll probably have routes to selling that you haven't even thought of - such as pension providers and other big property buying companies.
Once potential buyers come forward, they will sound out these potential buyers to ensure proper due diligence on their ability to purchase - be that cash in the bank or routes to finance.
And then they'll conduct viewings on your behalf with potential buyers.
You'll need the best finance professionals, accountants, solicitors etc. So your broker will be able to put you in front of all the contacts you'll need.
And whilst your business broker is doing all of the above activities to sell your property portfolio business - that leaves you free to do other things. And leave the selling part to the experts.
costs of selling via a business broker
We've looked at what exactly a business broker does and how they can facilitate the sale of your property business. So we should now take a look at how much all of that service is likely to cost you.
It's impossible to give an accurate figure here as it will be on a case-by-case basis.
However as a ball park figure you'll be looking at around 10% of the actual sale price as the business broker's commission.
Which is a lot of money when you consider that the average property portfolio will have financing (mortgages) to pay off. So not all the proceeds of the sale price are profit - as lenders are paid back their money.
And you'll have to pay for all of the business professionals such as solicitors, accountants etc.
And the tax man will also take their share of any profits in Capital Gains Tax.
how to select your business broker
As with everything else in life, you'll need to do some research to select which business broker you want to work with.
You'll be looking for a broker who has successfully advertised residential property portfolios for sale for other people and can demonstrate (and prove) success.
And like any profession, there are good brokers and "not so good" brokers. So here's some guidelines to follow:
Talk to at least 3 brokers and ask each of them the same 6 questions below about selling your property portfolio:
- Portfolio Sales Experience - Have you had any residential property portfolios for sale for other clients recently?
- Past Clients - Am I able to speak to any of your past clients about their experiences?
- Marketing - What marketing will you do for me?
- Sales Progression - Which details of the sale will you handle?
- Selling Fees - How much will you charge me for selling?
- Contract Terms - If it doesn't sell then what happens?
pros and cons of selling via a business broker
- High selling fees
- Buyers Demanding discounts
- High Capital Gains Tax to pay
- No negative equity purchases
- No marginal profit portfolios
- one of many clients
residential property portfolios for sale - conclusions
You should take a look at business brokers when you decide to sell your buy to let property portfolio. Business brokers should already have experience at placing residential property portfolios for sale.
However do your due diligence and talk to several brokers. And don't just go with the first one you talk to. They'll all tell you how wonderful they are! So ask them to prove this by showing you evidence of past sales.
Selling via a business broker WON'T BE CHEAP. Their service will come at a premium price and based on a % of sale price. We'd suggest around 10% of sale price, but please do your own research.
So this won't be feasible for all but very profitable portfolios that aren't heavily financed. Because this finance has to be repaid as part of any sale.
And any portfolios in negative equity won't qualify - as there just won't be the profit to pay their fees.
Sell your property portfolio
- No Fees
- Less Tax
Property Portfolio Sales - Getting in touch
Thanks for reading our website.
If you'd like to learn more about selling your property portfolio to Property Portfolio Sales - then please get in touch for an informal chat.
You can tell us about your portfolio - and then together we can look at ideas on possible ways for you to sell.
Phil Calladine - proprietor & consultant