More BTL properties sold with sitting tenants - new figures

But you don't know what kind of tenant you are getting , I've come unstuck here in the past with a bad tenant

Andrew - we take a risk with every tenant. References aren't always honest, employment may or may not continue. When buying a tenanted property it's perfect reasonable to ask to see bank statements proving rent payment history. You can meet the tenant in their home environment, you can see the cleanliness or otherwise of the property, you can see if the place is stuffed full of electronics and designer labels and you can draw whatever conclusion you want from the visual evidence. You can ask why the current landlord is selling and draw your own conclusions. One thing that is fairly certain is that the location and size of property suits the tenant.

I did say the numbers don't stack in the South. Yields are much higher in the NE.
I bought a tenanted one back in 2015 and it was great. Income from day one and virtually nothing to do to the property for the first two years other than the gas safety checks. I even had the added bonus of paying a lower price as I bought it direct from the owner so no estate agent fees to factor in, no pre sale facelift costs and no void.
It only happened because I already owned the house next door and the tenants were randomly chatting to eachother. The previous landlord had served a Section 21 as he wanted to sell. The tenants couldn't find anywhere to move to in the school catchment area. My tenants knew I usually bought something most years so it was worth asking. It wasn't what I was especially looking for at the time but has worked out really well for all concerned.

About 15 years ago I tried to sell a property whilst the tenants were still there.

Feedback from prospective buyers was very negative and offers ludicrously low.

Once I got the tenants out and spent a week with cleaning products and emulsion paint I got a realistic price.

It seems most potential buyers can't see beyond the untidyness or surface grubbiness.

A few years earlier it worked in my favour in a house which had had a DSS tenant with several cats. It was filthy and stank. A few weeks after my cheeky offer was rejected the vendor came back to ask if I was still interested. I was tempted to lower my offer but felt a bit sorry for him and we did a deal based on him removing all the stinking carpets and curtains whilst the legal processes were under way.

Many people think if you're selling a property with a tenant in place then it's a distress sale and you can't even afford to lose the monthly rent for long enough to get the property sold.

I certainly would never again try to sell a property before the tenants moved out as I know that I could sort any perceived issues for much less than a buyer would assume or want to deduct from the sale price.

Potential owner occupiers often buy on sentiment and will usually outbid another landlord for a property which is ideal for owner occupiers and won't offer at all if it's overwhelmingly better suited for PRS tenants.

Have you looked at extending the lease? I've extended two that had both dropped to about 67 years. One as a negotiated extension and one as a statutory extension. Short leases really are a problem for sale values. I bought one of mine as a repossession after a £40K reduction as it simply wouldn't sell even at a relatively low price for the space. I know we have all been hoping the leasehold reform proposals were going to improve things but it all seems to be taking a very long time with no sign of how it's going to work. All the while the leases are shortening and potentially becoming more and more expensive to extend.

Robert - you're right to an extent. I guess I've come at it from the opposite end. I've actually bought two properties where tenants have been served Section 21s as the landlord wants to sell. One was as I've already described and worked well for all concerned.
The other was next door to another property I already own and was a property I especially wanted due to the garage situation. I knew the tenants and told them I was interested in buying with them in situ. Whether they mentioned it to the landlord I don't know. Next thing was they moved out and the property was put on the market. I offered well below asking price which was initially rejected. A couple of weeks later the offer was accepted and it took a further six months to complete. So the previous owner got the price I had always intended to pay but had no rent for over 6 months and had to pay gas, electric, water and Council Tax bills.

Jo - I have looked at extending the lease. The problem is I can't find out how much it will cost unless I make a formal application through a lawyer.

John - there are various things to consider. If there is more than 80 years left on the lease it shouldn't cost much to extend. Marriage value kicks in at less than 80 years and premiums can ramp up rapidly. Both of mine had dropped to 67 years when I extended them.
The procedure depends on if you are doing negotiated or statutory. That's largely down to the attitude of your freeholder. One of mine was a totally reasonable human being, the other was as difficult as they come.
For the negotiated one I asked how much they wanted, thought the price sounded OK and paid it. Legal fees were fairly reasonable.
At that point I was totally clueless and was incredibly lucky the freeholder was very fair about things.
The second one was statutory and a very steep learning curve. The Leasehold Advice Centre in Guildford were very helpful. There are online calculators that will tell you roughly how much the extension will cost. Then you pay a valuer and submit your offer. The freeholder will then instruct a valuer (which you also have to pay for). They make a counter offer. Then your solicitor and their solicitor haggle. Once a price has been agreed their solicitor will probably try to "modernise" some of the wording of the lease. Your solicitor will argue about it a bit and they'll reach an agreement.
A statutory extension gives you an extra 90 years on top of what you already have left and extinguishes all future ground rent.
You will pay the lease extension premium, your valuer, their valuer, your solicitor and their solicitor.

A negotiated extension is whatever you negotiate. I was lucky mine offered 90 years and kept the ground rent at £30 a year for the entire term. Other leaseholders in the other building did negotiated leases purely so they could sell their flats and have totally stitched up the new owners.
For the statutory extension I paid £12050 premium plus about £5000 in fees. Other people in the building who did the negotiated route paid around £14000 including fees for an extra 30 years and ground rent of £300 a year.

Use a solicitor who specialises in leasehold if you're going the statutory route as the time limits are very prescribed.