Advice re selling rental property

[Freckletoes]

I'm not sure if this is the best place to post this really but....

We have a small rental property. Background as follows:

After the death of my MIL we ended up involved in an expensive legal wrangle with her boyfriend-he wasn't a full time DP but ended up spending most of his time there when she was ill. To cut a very long story short, although the estate was left in its entirety to DH, we had to provide a home for for the boyfriend as his money grabbing family had taken over his. Once we had paid inheritance tax and interest that had acrued while legalities were thrashed out, found a suitable home and covered legal costs, the new property was mainly owned by the bank as the value of the original property (which he did not want to live in) had fallen (finally sold original property a long time after buying new property). Under the terms agreed we received no rent etc and just had to wait it out.

He eventually moved into a home at which point the property we ownedreverted to us. It was in a complete state and had to be renovated (we hadn't had access in all the time he was in it) which was funded by borrowing against the house. By the time it was completed the market had continued to fall and we would have been left with almost nothing if we sold the house so we rented it out, through an agency.

We have had a few tenants but the current one has been in for around 3 years. We have now reached a situation where we wish to sell the house. It doesn't bring in any money-there is a deficit between rental money in and mortgage money out after agency fees plus all the extra costs for repairs, inspections, safety certs, insurance. We are not experiencing a massive rise in house prices as appears to be happening in other areas of the country.

The agents we deal with are a bit . Should we go directly to the tenant and discuss what we want to do? I am not sure if she is in a position to buy but that would be our first question to her-renting our place she is a few doors down from her mum who helps with childcare etc so it works well for her to be near family. We are quite happy to sell with her in as a tenant if that is something she would want us to do. Obviously then there is the issue of access for marketing etc-whether she would allow it.

So I would welcome views from tenants and LL about the best way to approach this. Do we leave it to the agents? Or go direct and discuss with our tenant. We do not want to force the tenant out but equally we can't continuing renting a place that is costing us money!

All background info is to satisfy the "anti-amateur landlord brigade" and explain how some people end up renting when they don't necessarily choose too!

Well unless you wait til the end of her tenancy to sell, you don't have a lot of choice but to sell it with her in it, if you see what I mean. I believe you are entitled to access for marketing.

Sounds like she's the obvious person to ask first, although going direct may look as if you're trying to cut the agency out (I'm assuming they'd get a fee if you sell to a tenant they've found for you). I would ask them to approach her in the first instance - would they refuse to?

I take it the DP had a life interest in your MIL's property or something .. that situation sounds very stressful.

I am a tenant, and think my LL is going to sell, as we are being chucked out. This came in a very casual way from the agent, though, which was pretty rubbish.
Definitively speak to the tenant directly. Also, if she is not in a position to buy, do consider selling with tenant included, to someone who wants a btl.
Once the one year assured shorthold tenancy has expired, and your tenant in on a rolling contract, she has no actual legal rights to stay, so a prospective buyer should not necessarily be too put off by having a tenant in (assuming they are btl, not buying to owner occupy)
The days of sitting tenants are long gone.
RE agency fees etc-have you thought about just renting direct to the tenant? If you already know her, why pay £££ to agents? She will be paying fees, for example to re-sign the contract every year, as well. Agents are such a rip off on both sides.

No tribpot, it was just a horrible messy situation compounded by a lot of lies on his and his families part that allowed the will to be re-written after her death! Something we didn't know was possible! We could have come off worse and had to give him a property outright and pay him maintenance (he alleged she supported him which was BS as he worked cash in hand!). Very stressful at the time and very expensive.

She is on a rolling tenancy-has been for 2 1/2 yrs. We have never met her. The property isn't that close to us and with DH job it is often not possible to drop everything and leave here to attend to a problem-hence leaving it to an agent! We would quite happily try and sell with the tenant in place although that would restrict our market considerably as it's not a typically a rental area (though obviously property does rent there as this is!). She is a good tenant though-apart from a few repairs to carry out over the years we have had nothing but a straight forward tenancy. Which obviously would be attractive to a potential investor.

Sorry you are being chucked out IfNot

An investor is going to be looking at the yield on the property though, i.e. how much rent vs how much cost. As a rule of thumb you should expect them to be willing to pay c. 200 times the monthly rent (i.e. the rent should be about 5% of the property's value). You already know this place isn't profitable, although a cash buyer would have a different take on it.

I'd probably start by trying to sell it to an investor, the agent may have someone they could recommend.

I'd definitely speak to the tenant and offer them first refusal. I'm in kind of a similar situation - accidental landlord and have brilliant tenants who look after the flat. I'm not interested in selling at the moment but if I did, I'd certainly speak to them before instructing an agent.

I think you will also be liable for capital gains tax which I believe is 40% of any profit. I would call HMRC and ask their advice.

Also you might want to get this moved into property, as you'll get more advice from people involved in BTL.

Yes, liable for cap gains although it doesn't sound like the OP will make any/much profit on the sale? It's not a straight 40%, but certainly OP should plan on giving a share of the profit to HMRC.

Sorry, rule of thumb figure should be annual rent 20, not monthly 200.

I think every person has a 16k capital gains tax allowance. So if the house is in two names that's 32k of any profit that they won't have to pay capital gains tax on.

A tenant doesn't have to give access for marketing, viewings, estate agents, measuring rooms, photos, etc. so there's a chance they could refuse, notn likely if they're on a rolling contract I guess.

I'd write to her personally, or go and see her.