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Anyone who owns more than one house or flat that they do not live in but use as buy-to-let homes is considered to have a property portfolio. If you decide to sell your properties, the process can have some extra complications that it’s important to know about. This guide outlines those issues, and gives tips on how to sell your portfolio fast and efficiently.
- What is a property portfolio?
- Pros and cons of trying to sell a property portfolio
- Financial considerations when selling a property portfolio
- Selling a property portfolio with problem homes
- Options to find a buyer for your property portfolio
- Top queries and answers about selling a property portfolio
What is a property portfolio?
Typically, a property portfolio refers to a situation where an individual, group of people, or company owns more than one freehold or leasehold house or flat that they do not live in, and are using to hopefully make money.
Property portfolios therefore consist of at least two investment properties, a general term that in the UK broadly covers two types of homeownership. The first covers houses or flats that someone has bought with no intent to use as their residence, but instead invest time and money in redecorating, extending or otherwise renovating the home before trying to sell it at a higher price later.
The second situation, and the most common when referring to property portfolios in the UK, refers to homes that someone has bought as buy-to-let houses or flats, which they do not live in and instead charge people rent to live in the properties for specified amount of time.
A buy-to-let property investment should ideally generate consistent extra income for the landlord who owns the home, in the form of the monthly or annual rent that the tenants will pay. It can be an enticing market to invest in for many people, because even though landlords are usually responsible for paying the costs of upkeep and repairs at buy-to-let homes, this financial outlay is usually much lower than the amount of money they will bring in annually through rent.
If you own a property portfolio, you will therefore be responsible for managing the homes, ensuring that they are kept in a safe and liveable condition, that you handle any complaints or questions from your renters quickly and fully, and that you respond to emergencies fast.
Pros and cons of trying to sell a property portfolio
The large amount of work involved with maintaining a property portfolio can sometimes prove too stressful for an owner, and they might be interested in selling all the homes at once.
Other reasons also exist for why the owner of a portfolio of buy-to-let houses, guest houses or flats might want to seek a quick and profitable sale of the properties. For example, if you’re approaching retirement, you might not have the time, patience or ability to keep managing a property portfolio, and the profit you could make from selling the homes may provide you with a stable and long retirement.
Whatever the justification for wanting to seek a buyer for your property portfolio, there are certain advantages and disadvantages of the process that should you know about. Review them all to decide whether selling at this time is ultimately the right decision for your situation.
Some of the advantages of trying to sell a property portfolio include:
- The ability to purchase several homes at once can be very enticing to certain buyers, such as property developers or fast house buyers like LDN Properties
- You won’t have to worry about potential buyers having an emotional investment in the home that could complicate the selling process – instead, they will likely see the transaction in entirely financial terms, which can help make it go more smoothly
- Depending on which method you choose for selling the portfolio, you might be able to avoid paying any commission and therefore get to keep all of the sale proceeds
But there are also some possible drawbacks with selling your portfolio of homes:
- If any of your homes are now worth less than the original mortgage, you risk selling at negative equity, which can create future financial problems and stress
- You’ll be selling to a reduced number of buyers, focused mostly on investors or quick home buying companies such as the London-based LDN Properties
- If any of your homes have physical damage or other negative issues, you might have to invest time and money in fixing them before you can viably sell the portfolio at a profit
Financial considerations when selling a property portfolio
Just as the sale of a private residence requires an owner to consider important financial issues like taxes, selling a property portfolio can create some questions about the financial impact.
The two biggest issues to learn about are assessing your potential liability for paying capital gains tax on the profit you might make from the sale of your buy-to-let properties, and deciding what to do in the event you may be selling some of the homes in your portfolio have negative equity – meaning their sale value is less the amount of the mortgage you obtained to buy it.
Assess your capital gains tax liability for your portfolio
The UK government imposes capital gain tax on certain profits that you make when selling an asset, which is a broad term that includes properties. It applies only to the profit that you might have made through the sale, and is not charged on the total value of the overall sale.
Capital gains tax typically is not charged if you’re a private homeowner who is selling the property in which they have always lived, according to the HomeOwners Alliance, which represents the interests of house and flat owners in the UK.
Property portfolios, consisting solely of buy-to-let homes that you’ve invested in but don’t use as a residence, are however subject to capital gains tax. And if you are contemplating selling your catalogue of properties, you should understand the tax liability that you might face.
The good news is that the government provides an allowance, which is a set amount of profit that you can make from selling an asset that is exempt from capital gains tax.
Selling your property portfolio with negative equity
Before committing to sell your property portfolio, you also need to get an accurate idea of the potential value and sale price of each home. Use these figures to find out whether any of the houses or flats are in negative equity, which means that their likely value now is less than the total amount of the mortgage that you initially paid to buy that specific property.
Many people who purchase a number of homes as buy-to-let properties do so with the goal of two streams of profit; the first being the amount of monthly or annual rent that they will charge the people living in the homes, the second being the potential profit that they might make when they eventually decide to sell the property. Although rental income often takes care of most, or all, of mortgage payments for such homes, if the property doesn’t increase in value over the years that you own it, there’s the risk that you could end up with a home in negative equity.
Selling a property in negative equity means that any profit will first go toward paying down the remaining balance on the mortgage, and you’ll most likely still end up owning the lender a potentially significant amount of money. Although you might be able to work out a repayment plan or take other steps, this can create additional financial pressure and stress for your sale.
Therefore, you should write an honest budget for the sale of your property portfolio that can help to identify whether one or more of the homes has negative equity. This could be enough to make you wait to sell for a few months, perhaps hoping that the property market might have an uptick that would ramp up demand for homes, with the effect of making sale prices rises. Such an outcome could make it more likely that you’ll then be able to sell the property at a profit.
Selling a property portfolio with problem homes
One complicating factor when selling a property portfolio is that one or more of your buy-to-let houses or flats could have a problem that makes it harder to attract buyers.
The list of possible problem properties is lengthy, and can cover many issues such as physical damage, an undesirable location, and many other factors. For example, the quick home buyers at LDN Properties have made fast and fair offers to buy problem properties that includes flood-damaged houses, vandalised properties, flats with noisy neighbours, houses suffering from extensive dry rot, properties with Japanese knotweed infesting their garden, homes close to railway lines, and other situations. Often in Cornwall, selling mundic houses and flats can also be considered problematic.
The reason why having a problem property can complicate the sale of your portfolio is that you’ll have to assess whether you want to fix the issue before trying to find a buyer.
To decide this, you’ll have to draft a budget for both the sale of the portfolio and the work that would be required – such as spending time and money to repair a bad roof. Write down the ideal timeline you have for selling the portfolio, and how much profit you want or need to make, and calculate whether you can spend the resources to fix problems before selling the homes.
It’s perfectly acceptable to sell a property portfolio without making any repairs or other changes to what some buyers might consider to be a problem home. Just beware that these buyers might also offer you below your asking price for the property, because they will be discounting the amount of money they anticipate on spending to address the issue once they own the home.
Knowing this information upfront can help you with deciding how and when to sell your property portfolio. And rest assured that some methods of selling, such as using a rapid home buyer, can still result in a decent sale price offer that generates a good profit, and on a speedy timeline.
Options to find a buyer for your property portfolio
If you are ready to find a buyer for the houses or flats in your property portfolio, the next major decision you need to make is choosing a method for selling the homes.
Typically, most owners will opt between one of four methods – using an auctioneer, using an estate agent, using a fast home buyer, or selling on their own. There are specific benefits to each of the options, but also some possibly significant drawbacks with a few methods. Consult the summary of the various approaches below before making your choice.
Make an informed decision that accounts for all possible factors with your sale, including how quickly you would like to find a buyer, how much you’re willing to spend on any commission or other fees, how much work you want to invest in the process, and other issues. This should help you to find the best match that will hopefully lead to a simple and stress-free sale.
Using a property auctioneer
When you sell your property portfolio at an auction, you may be gambling on the outcome. That’s because some or none of the homes might not receive any bids, which means they will not sell, and you’d have to start again with trying to find a buyer for them. That’s naturally a setback if your priority is securing a sale of the entire portfolio within a short time.
Ideally, several people will want to buy your homes, and they will try to outbid other buyers with increasing bids, hopefully resulting in a decent final net sale profit. But understand that you might only get a single bid at the reserve price – this is the lowest value at which you’re willing to sell the homes in your portfolio.
A winning bid on a property at an auction is a legally binding agreement between the seller and buyer, and the buyer can sue to enforce the sale if you then try to walk away from it. One of the advantages of using an auction is that, compared to using an estate agent, it provides a little more certainty about selling in the event that people place bids on your properties.
Auctioneers usually charge commission based on a property’s final sale price, although you should ask individual companies for their rates because they might vary, and it’s possible that you could also negotiate a lower fee, or make the buyer be responsible for some of the fees. The commission will be subtracted from the final sale proceeds on your portfolio, and depending on the rate of the fees, this could reduce your net profit from the sale by quite a large amount.
Selling this way can take at least a few months, because there’ll be an extended waiting time between when you first list your home for sale and when the auction occurs. And if you succeed in selling the entire property portfolio at the auction, the buyer then will have an average of 28 days to complete all of their required tasks, such as signing various legal documents. Again, ask specific auctioneers about their sale policies, because some might set longer or shorter deadlines, or they might be willing to arrange a tighter deadline if you ask for one.
Using an estate agent
Like auctioneers, estate agents will also do most of the work of finding a buyer for your property portfolio. They’ll prepare and market the listing, schedule and lead viewings, and also field offers from potential buyers, hopefully seeing serious offers through to completion. This can be ideal if you want to do as little work as possible in trying to find a buyer for the portfolio of homes.
Yet estate agents will charge commission for their work if they sell your portfolio. These charges will be taken out of the property sale proceeds, which will reduce the net profit that you’ll get to keep. This can be a setback if your top aim when selling is maximising your potential profit.
Be aware that some estate agents could quote a very enticing high price for selling your property portfolio, yet secretly they know it will only sell at a lower value. The reason they do this is to convince you to use their services, so that they can charge you fees when they sell.
To avoid falling for this move, spend some time browsing home sales websites like Rightmove and Zoopla and writing down the current and past prices of properties in your area that are similar to the buy-to-let houses or flats in your portfolio. Next, ask several estate agents for free sale price quotes for your portfolio. Then calculate the medium amount of all those prices for a more accurate estimate of your portfolio’s value.
One notable drawback of selling this way is that it might take many months, or maybe even more than an entire year, before you get a serious offer for the entire portfolio. Such a long timeline might not be a good match if your aim is to find a buyer within a handful of weeks.
Using a fast home buyer
Fast home buyers, like the London-based LDN Properties, provide owners with a no-stress, straightforward and hassle-free way to receive competitive and swift offers for selling. These companies can buy private residences and also make offers on property portfolios.
As this guide explained earlier, some private investors might be turned off from wanting to buy your property portfolio if one of more of the homes has a feature that they consider a deal breaking problem, which could be a physical issue like subsidence. Or the investor might still be interested in the portfolio, but is now only willing to offer you a lower price for the problem home or homes because of the money they’ll have to spend to repair it as an owner.
But you won’t have to settle for either outcome if you use a quick property buyer, because they make competitive and speedy offers to buy homes regardless of their age, condition, shape, size or type, and no matter whether they are freehold or leasehold or anything else.
Just look at some of the many different and diverse offers that LDN Properties has made since launching 15+ years ago, as the list includes flats without EWS1, properties with solar panels, houses that are damaged from severe storms, flats situated on noisy city centre streets, properties where the owner has misplaced the title deeds, and many other situations.
And one of the biggest advantages of using a fast buyer is how quickly the sale will proceed. These companies have the financial resources to immediately purchase your property portfolio, so there’s no waiting for many weeks or months until they can get authorised for a mortgage to complete the purchase. This means the average timeline for selling this way will usually be just a few short weeks, rather than the often much slower alternative methods of finding a buyer.
Remember also that estate agents and auctioneers will charge commission that will be taken out of the sale proceeds, and with a property portfolio that can be quite a lot of money. But the trustworthy fast buyers will never charge any fees, so you’ll get to keep all of the profit. That can make this method a much financially wiser way to sell compared to the other choices.
Trustworthy fast home buyers also make sure to register with The Property Ombudsman (TPO), which is a third party organisation that publishes policies which have the goal of preventing fraud in the speedy property buying sector. All genuine TPO members, like LDN Properties, must commit to following those rules, which should give sellers extra peace of mind.
Checking the membership status of a quick property buyer is fast, free and easy, just visit TPO’s website and on the left side of the welcome page click on the “Find a Member” tab, then type in the name of a specific company. If they are genuinely registered with TPO then you’ll be able to see their membership details on the website, but if they are not, you’ll get no results.
Be incredibly wary about selling your property portfolio to a company that either claims to be a member of TPO but cannot prove its registration status, or that tells you it refuses to join the organisation and follow its rules.
Selling on your own
One option that is perhaps less used than the three choices above is selling on your own, which means that you will handle every step of trying to find a buyer for the property portfolio.
This is an intense amount of work, as you’ll be responsible for everything such as preparing and advertising the listing, organising viewings, fielding offers, and completing any serious offer. Even for highly skilled professionals this can be a very time-consuming process, so you need to be willing to commit to investing a lot of energy, money and time in selling the portfolio.
It’s only suitable if you have any prior knowledge of selling homes, or you have a family member or friend who is willing to assist you with finding a buyer without charging you any fees.
The only obvious benefit that you’d get in exchange for all that stressful effort is knowing that you won’t have to pay an estate agent or other third party any commission. However, you can achieve the exact same no-fee sale by using a quick property buying company like LDN Properties, and it won’t require any hard work or stress when you opt for that method.
Top queries and answers about selling a property portfolio
Property owners thinking of selling their houses or flats quickly typically have a few questions for us, ranging from the how much work or renovations they should do before selling through to selling a home with tenants. Here are some of the top questions we’re asked about selling a property portfolio:
Your top questions when selling a property portfolio
Property portfolios generally refer to situations where a person, people or company owns more than one home that they will not use as a residence, and instead see as an investment property. These are most typically buy-to-let properties that people pay you rent to live in. If you are the owner of several of these flats or houses, then you currently have a property portfolio.
Yes, buy-to-let homes do not enjoy the same capital gains tax exemption as properties used as a private residence. Although the exact amount will depend on the sale price that you achieve for each home in the portfolio – be sure to consult your tax advisor.
LDN Properties has bought property portfolios since launching our quick home buying company in 2003, and we’ve heard many varied reasons for why someone wanted to sell. For example, the cost, time and stress involved with managing the homes might be too much. Or the owner might need to sell the homes in order to obtain funds for their retirement.
Your best option is to get in touch with a fast home buyer such as LDN Properties, because we can usually complete every step of the purchasing process – including paying you the sale proceeds and exchanging contract on the homes – within a handful of weeks. This is often much swifter than using alternative methods, for example with an auction or estate agent.
If the quick property buyer is legitimate and not a fraudulent business, you should not be required to pay any fees when selling your portfolio of buy-to-let homes. This means you are assured of receiving the entire proceeds from the final sale prices you get for the properties. By contrast, you’ll have to pay fees when selling via an estate agent or auctioneer.
You can trust fast home buyers that are registered with The Property Ombudsman (TPO), as this independent entity writes rules to shield owners from fraud in the speedy buying industry, and all TPO members must commit to following those regulations. You can check if a fast buyer is registered by visiting TPO’s website, and be wary of selling to a non-TPO member.
Only if you have in-depth experience of selling homes, and are prepared to commit the time, money and energy necessary to find a buyer for a portfolio of properties. This is an incredibly stressful amount of work even for experts, with the only clear benefit of paying no fees – but you can get the same outcome, with zero stress, by selling your portfolio to a quick buyer.
