Selling a buy-to-let property in 2023

Considering selling a buy-to-let property in 2023? According to recent research, you’re not alone. We’re seeing an increasing number of landlords selling up, with many of them saying they feel an increase in regulation and taxation has left them with little option.

Of course, that’s not the only reason you might want to sell a rental property. Maybe you’ve decided you no longer want the additional responsibility that being a landlord brings? Perhaps you want to access the cash tied up in a rental property? Maybe you’re having a difficult time with problem tenants?

Whatever your motivation, if you’re a landlord who’s considering selling a buy-to-let property, this guide is for you.

How to sell a rental property

Why are landlords selling up?

With strong demand for rental properties and rental prices at an all-time high, you might think buy-to-let property should be an attractive investment opportunity. For some landlords it still is. However, changes over the last few years have left many investors keen to offload to sell either some or all of their buy-to-let properties.

So, what’s changed?

Higher buy-to-let mortgage interest rates

A big factor impacting the number of landlords thinking about selling a buy-to-let property in 2023 is interest rates. Buy-to-let mortgage interest rates are now significantly higher than they have been for many years. In January 2022, average buy-to-let mortgage interest rates were 3.23% for individuals and 3.58% for limited companies. By January 2023, those averages had risen to 6.24% and 6.56%, adding hundreds of pounds to mortgage repayments every month.

Loss of buy-to-let tax relief

Until April 2017, landlords were able to claim tax relief on the mortgage interest they paid on their properties.  Basic rate taxpayers were eligible for 20 per cent tax relief, and those in the higher tax brackets could claim 40-45 per cent tax relief. The loss of tax relief has had an impact on the financial viability of many buy-to-let properties.

Stricter lending criteria

In September 2017, a new financial ruling demanded that lenders consider a landlord’s full portfolio of properties when assessing lending suitability.  The ruling applied to any landlord with four or more properties. The suggestion is that mortgage arrears are higher when landlords own more properties, and therefore lending is more risky.  Landlords deemed ‘higher risk’ are only offered higher interest buy-to-let mortgage products.

Stamp duty changes

In April 2016, the government introduced changes that meant buy-to-let investors, and anyone else with more than one property, were required to pay an additional three per cent stamp duty.

The changes had an immediate impact on buy-to-let affordability. According to the Office of National Statistics (ONS), the number of property sales that completed in April 2016 was 19.6 per cent lower than the five-year average for the month. Buy-to-let mortgages also plummeted from 30 per cent of all mortgage completions to just eight per cent. To see the current Stamp duty rates cost be sure to read our guide on Landlord tax explained

Other common pitfalls for landlords

Other reasons a landlord may consider selling include:

  • Bad tenants: Even with background checks and references, finding good tenants can be difficult.  Having tenants who don’t look after the property or who aren’t dependable in terms of rent payment can be incredibly stressful, and the process of getting a bad tenant out of your property can be challenging and time-consuming. 
  • Difficulty re-mortgaging: New rules in buy-to-let mortgage finance have resulted in some buy-to-let landlords struggling to secure a competitive mortgage deal when their initial fixed period comes to an end. With changes to tax relief and stamp duty adding greater financial pressure, difficulty in securing an attractive mortgage product can mean that for some landlords the margins just aren’t big enough to make it a viable investment any longer.
  • Expensive vacant periods: One of the keys to a profitable rental property is wide appeal. If you’re finding that your property is not the right fit for rental demand in the area, you may find yourself facing expensive vacant periods.
  • Increased legislation and a ban on admin fees: Increased legislation has created greater administrative responsibilities, but landlords have been banned from charging administration fees. For many landlords, especially those who manage a buy-to-let property as an addition to their main career, this increased time demand has made the prospect of rental property significantly less attractive.

Selling a property portfolio

If you have more than one property to sell, it is possible to sell multiple buy-to-lets as a property portfolio.

Whilst you may achieve a higher price by splitting the properties and selling them individually, the speed and convenience of selling a property portfolio as a whole is an appealing option for many investors.

Can I sell my rental property if I have tenants?

Selling a rental property with tenants is possible, but it can be complicated. You are likely to limit the sale by only appealing to other investors. Any restriction on potential buyers is likely to have an impact on both the price you achieve and how long it takes to sell.  

Although it would be more advisable to sell your property vacant, your options will largely depend on the tenancy agreement in place for the property.

Different types of tenancy:

  • Assured shorthold tenancy
    This is the most common type of tenancy and applies to most private rental properties. If the tenant has been in the property for at least 6 months and they have a periodic tenancy or a fixed-term tenancy and you are not asking them to leave before the end of the fixed term, you can ask them to vacate the property using Section 21. A Section 21 notice does not require you to give any reason for the eviction, as long as the fixed term has ended.

    If you have grounds for the eviction, such as antisocial behaviour or because the tenant is in rent arrears, you can evict them using Section 8.  The notice period for a Section 8 eviction will range from 2 weeks to 2 months, depending on the grounds for the eviction.
  • Excluded tenancy or licence
    Excluded tenancies or licences are common for lodgers who share some facilities with their landlords, e.g. kitchen and bathroom. If you have a tenant on an excluded tenancy, you are only required to give them ‘reasonable notice’. Reasonable notice for an excluded tenancy is usually considered to be one payment period, i.e. if they pay rent weekly, reasonable notice would be one week; if they pay rent monthly, reasonable notice would be one month. You do not have to give notice in writing for an excluded tenancy.
  • Assured tenancy
    Many tenancies that began between 1989 and 1997 are assured tenancies. It is significantly more challenging to evict a tenant from an assured tenancy as they have long-term tenant rights. You will need to check the individual terms of the tenancy agreement but, if an assured tenancy is in place, it may be that your only option is to sell the property with a sitting tenant.
  • Regulated tenancy
    Regulated tenancies also have very strict terms that are likely to make it more challenging to evict your tenant. You can only evict a regulated tenant if the fixed-term period of their tenancy has ended. After the fixed-term period has ended you will need to check their tenancy agreement to identify the individual stipulations and assess whether an eviction would be possible.

What are my tenant’s rights if I choose to sell?

If you choose to sell a buy-to-let property, your tenant’s rights will depend on what type of tenancy they have. You cannot change the terms of their tenancy and evict them simply because you want to sell, so you’ll need to check the details of the tenancy agreement.

Will I have to pay Capital Gains Tax when I sell?

Yes, you may be required to pay some Capital Gains Tax, but it will only be payable if you make a profit when you sell. How much you pay will depend on the level of Income Tax you usually pay, but it will be between 18 per cent and 28 per cent. Everyone has an annual Capital Gains tax-free allowance and will only be required to pay Capital Gains Tax on any profit above that level. The allowance is currently £12,300, but will be reduced to £6,000 in April 2023. Selling a rental property at a loss will mean you have no capital gains tax to pay.

You can use the government Capital Gains Tax calculator to find out how much you would need to pay.

Are there any deductions you can make to your Capital Gains Tax liability when selling a rental property?

You may be able to deduct capital expenses (the cost of carrying out significant improvements to the property) from your profit when calculating tax liability. If you sell multiple properties in a tax year you can also offset any losses you make against your capital gains liability.

What are my options when selling my rental property?

Once you’ve made the decision to sell your rental property, it is important to consider which method of sale will best suit your circumstances.

Property Auction:

Selling property at auction may offer a quicker alternative.  Property auctions do tend to attract investors, so may be a better option if you’re looking for a rental house sale with a tenant in situ.

The biggest downside of selling a rented property at auction is that there’s no guarantee your property will sell. In fact, it’s estimated that 28% of properties that go to auction fail to sell. You’ll want to set a low guide price in order to attract interest from potential buyers, but if you fail to sell at auction that low guide price may affect your ability to sell on the open market afterwards.

Estate Agent:

An estate agent will advertise your property to the open market. This is the most common method of sale. It offers the best chance of reaching the biggest audience and therefore achieving the highest sale price.

When selling a buy-to-let property, an estate agent may not be the most convenient choice. It offers little guarantee for timescale or certainty. On average, it takes four months to sell a property on the open market. That’s a long time if you’ve made a commercial decision to sell.

Professional property buyer:

Selling to a professional property buyer is a great way to sell you buy-to-let property quickly and easily.  A genuine company should be able to buy your property with their own cash funds on a date of your choice. A sale can often be completed in as little as seven days, which means no costly vacant period while your property sits on the market.

Any genuine property cash buyer who has the funds to guarantee the sale and buy direct will buy at a discount. You can expect to receive around 80-85 per cent of market value in exchange for a quick and guaranteed sale. If you’d like to find out how much a professional home buying company could pay for your property, call Quick Move Now’s friendly team today on 0800 068 3366 or fill in our online enquiry form for a free, no-obligation cash offer.

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Danny Luke

Danny Luke

As Managing Director, Danny is responsible for the overall performance of Quick Move Now and provides strategic guidance and direction to all its employees. Danny is committed to making Quick Move Now the leading and most trusted home buying company in the UK.
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