5) This in-depth report will teach you all you need to know about selling a buy to let property portfolio via an "Estate Agent" - - - - -
sell a tenanted property portfolio
One tried and trusted method to sell your SINGLE TENANTED PROPERTY is to sell via an estate agent – so you may be wondering if it’s also possible to sell your ENTIRE TENANTED PROPERTY PORTFOLIO via an estate agent?
We'll examine this question in depth in the detailed report below - where you'll also learn:
5 minute read
can an estate agent sell a tenanted property portfolio?
You probably spent a good deal of time with estate agents when you first put your portfolio together. And possibly you're still on good terms with one or two of them?
So it may be worth visiting a few agents (including your favourites). And asking whether they'll be able to handle the sale of your entire portfolio.
Please do bear in mind that it will be quite expensive to sell an entire portfolio via an estate agent - with all those commissions to pay on multiple properties.
However you might be able to negotiate some sort of discount on the fees? Due to the large number of properties you'll be selling in one go.
How to select your Estate Agent
One thing that you should definitely do when you sell a tenanted property portfolio is to visit a number of estate agents and tell them what you're planning.
Selling your portfolio via an estate agent is probably only going to work:
- where your portfolio is on the smaller side AND
- Where your properties in the portfolio are located in the same geographical area as where the agent is based.
Their eyes will probably light up when you mention the number of properties you want them to sell for you.
However once the elation has worn off from being asked to sell all those properties - it will soon dawn on them the enormity of the task at hand. You're not just asking them to sell one property for you - but maybe 5 or 7.
And to be brutally honest most estate agents won't be suited to selling multiple properties in one sitting for one client.
But that's not to say there aren't estate agents out there who can't sell your portfolio - so it's worth asking a few agents and seeing what they have to say.
Asking the right questions
Here's some questions you can ask prospective estate agents to see if they can handle the sale of your portfolio:
- Have they sold a property portfolio for anyone else in the recent past? If YES - can they give you details about how the sale went. If NO then I'd probably advise you leave. As they'd be guessing on how to advise you.
- Do they have any potential portfolio buyers already on their books who will be interested?
- Do they have a mechanism for selling your portfolio over a number of years (to reduce your Capital Gains Tax)? And can they manage this without you being heavily involved?
- How would they market your portfolio? Online property selling websites such as Rightmove, Zoopla and OnTheMarket etc aren't ideally set up for selling portfolios. So does the agent have any other marketing routes they can demonstrate will work?
- Give them your property details and ask for ballpark valuations. Do their valuations seem credible? Are they in line with your own research and other agents valuations?
- Ask for their thoughts on selling a tenanted portfolio? Versus selling with vacant possession? How does this affect the prices? And the number of potential buyers?
- Ask them about their fees and whether they do any sort of discount for selling bulk properties?
Advantages / disadvantages of selling a portfolio via an estate agent
- Estate agents understand about selling property because that's what they do - day in, day out.
- And they know lots of property people. So they might be able to find you a buyer quickly.
- Estate agents may be part of a bigger chain and have in-house expertise of selling property portfolios.
- And they may be able to sell your portfolio to multiple buyers ie split your portfolio to match different buyer needs.
- Estate agents are primarily focused on selling individual properties, not portfolios of multiple properties.
- They typically advertise their "for sale and "for rent" properties on online portals such as Rightmove, Zoopla, OnTheMarket that don't have "search capability" for finding multi-property portfolios.
- Their sales of properties attracts commission. So they're going to charge you a substantial fee to sell.
- Estate agents are unlikely to consider (or care) about your Capital Gains Tax liability (see next section) if selling multiple properties at once.
- They're unlikely to have a solution if your properties are in negative equity.
- Estate agents may not know what to do if part of your portfolio contains a commercial element eg a shop.
- And they're probably unfamiliar with valuing any of your HMO's (houses of multiple occupation) or any serviced accommodation units.
- Selling your portfolio via an estate agent will be very "visible" with all those "for sale" boards and viewings. Which might spook your tenants. who'll be actively googling "tenants rights when property is for sale".
- Estate agents are unlikely to have any creative strategies to sell your portfolio. Apart from finding a buyer and selling via traditional mortgage or for cash.
Negative equity Property
You'll need to be careful if you have any negative equity in your portfolio. Because you'll end up owing the banks (lenders) more to pay off your mortgages than your sales will bring you.
So you'll end up making up the shortfall between the price your properties sell for - and the outstanding mortgages.
Negative equity example - buy to let mortgage
- Example: property purchased in 2007 for £100K.
- Purchased with 85% loan to value buy to let mortgage - so £85K borrowed with a £15K deposit.
- Upon any sale the owner will always owe their lender £85K. This is because the monthly interest payments aren't reducing the £85K capital element.
- Property sells today for £80K. As a condition of the sale, the lender needs to be repaid their £85K funds now to release the property title deeds to the new owner.
- So in a nutshell - the seller needs to add their own £5K to the £80K raised from the sale to make £85K in total. To be used to pay back the lender.
How to avoid capital gains tax on buy to let property sales
You'll also need to consider your Capital Gains Tax position very carefully if you're going to be selling multiple properties in one sitting.
You can avoid a high Capital Gains Tax bill by liaising with your accountant and / or Independent Financial Adviser (IFA) long before you begin selling. And then following their advice on a strategy that utilises your allowances and minimises your tax.
This will probably involve selling your portfolio over a period of time. For example by selling 2 properties this year - then 2 next year - and so on.
So the question you need answering is: "can your estate agent structure the sales in such a way to reduce your Capital Gains Tax bill?"
Conclusion - sell a tenanted property portfolio
You should definitely explore every possible option when you sell your tenanted property portfolio. Because that way you can weigh up all the pros and cons of each of the options. To see which selling route might work best for you.
Selling via an estate agent is one such option that could work well - if they have experience already of selling portfolios.
However they'd probably be better at selling smaller portfolios that aren't too large. And portfolios that have properties located in the same geographical area, local to the agent.
Phil Calladine - portfolio consultant