Guide to selling an investment property

Selling an investment property isn’t quite the same as selling your home. Sure, you still want to get the best price possible, but there are a few extra factors to think about – like taxes, timing the market just right, and making sure the sale lines up with your wider financial goals.

Whether you’re cashing out to reinvest somewhere else or looking to lighten your landlord duties, having a clear plan can save you stress and help you walk away with more in your pocket. In this guide, we’ll break down what you need to know – from managing tenants, to getting your property ready for buyers, and handling the paperwork that comes with closing the deal.

Types of investment properties

An investment property is a piece of real estate which has been purchased for the primary purpose of generating a profit, rather than for use as the residential home of the buyer. There are many different types of investment properties, including:

Buy-to-let – Buy-to-let properties are residential real estate purchased with the intention of renting them out to tenants, providing landlords with both a regular income stream and potential capital growth. These properties can be sold vacant or with a tenant in-situ, depending on the property’s current circumstances, buyer demand and seller preference.

[Guide to selling a buy-to-let property]

Holiday let – Similar to buy-to-lets, holiday lets are rented out by the owner to generate income. However, due to tenancy laws for this property type, rental contracts are much shorter, with guests usually paying premium nightly or weekly rates, especially in popular tourist destinations or coastal and countryside locations. This allows holiday lets to generate higher rental income, even without a 100% occupancy rate.

[Guide to selling a holiday let]

Commercial properties – Commercial properties are real estate assets used for business purposes, such as offices, retail units, warehouses, and industrial spaces. Unlike residential buy-to-let or holiday lets, commercial property investments are typically leased to businesses on longer-term contracts, which can provide investors with more stable and predictable rental income. Some business owners will opt to purchase a commercial property for their own use too, giving them greater security, removing rental fees (even when replaced with financing repayments), and building capital growth.

Development opportunities – Development opportunity properties are sites or buildings purchased with the aim of adding value through renovation, conversion, or new construction. Whether land or a derelict property ideal for revitalisation, developers flock to auctions to find opportunities that could turn a profit, with even those without pre-existing planning permission often performing well under the hammer.

[Guide to selling a development property]

Renovated properties – Renovated properties are homes or buildings that have been upgraded, modernised, or fully refurbished to improve their condition, appeal, and market value. For investors, buying and renovating a property can be a strategic way to increase rental income or achieve a higher resale price.

How to sell an investment property

Selling an investment property is no more complicated than selling a residential property; you still need to ensure all the paperwork is done properly, but the only differences that need to be considered when it comes to an investment property sale relate to whether or not the property is tenanted or vacant.

Both have their pros and cons, and will change the process of selling slightly as well. However, with the wide range of buyers that auctions attract, you can trust that both options will be capable of garnering interest and drawing bids.

In order to help you choose the right one, below we’ve included the differences between selling a vacant and tenanted property and their benefits.

How to sell a vacant investment property

The simplest of the two types, selling a vacant investment property, is no different from selling any other lot, whether by auction or through an estate agent. A vacant investment property is an income-generating property, such as a rental house or commercial building, that is currently empty of tenants or occupants and even personal belongings.

The benefits and disadvantages of selling a vacant property

Vacant properties are often considered even more attractive than traditional residential homes, which the owner occupies as their main residence. This is because viewings are made easier by their vacancy, and sales can be completed faster than the pre-imposed deadlines, as no one is required to exit the property.

A few of the pros of selling a vacant property include:

• Organising viewings is easier.
• Some buyers (investors, flippers, or landlords) prefer vacant properties because they can renovate them to how they like.
• Faster closing deals.

A few of the cons of selling a vacant property include:

• The seller must carry the costs of the property until the sale, such as taxes, mortgages and more.
• No rental income, similar to the above, you won’t be generating income, and therefore, this can lead to a loss in profits if the sale takes too long.
• Increased vulnerability to squatters and break-ins if left vacant for too long before selling.

How to sell a tenanted investment property

While vacant properties can lead to smoother sales, tenanted properties have their own appeal when it comes to attracting the right buyer. Tenanted properties are rental properties, usually a buy-to-let, that is sold with existing tenants already occupying it under a lease agreement. Meaning the new owner will have access to secure funds immediately, which is very appealing to a wide range of buyers.

The benefits and disadvantages of selling a vacant property

The main benefit of selling a property with tenants in situ is that you can avoid timeframes where the property will be empty and avoid a potential loss of income. It can also be seen as less disruptive for tenants and landlords as they won’t have to work around timeframes.

Pros of selling a tenanted property:

• Investors get immediate rental income.
• Helps sellers to continue to generate income until the time of the sale.
• Some buyers specifically look for income-producing properties – you may attract this group more easily.

Cons of selling a tenanted property:

• Your target market will be narrowed down to landlords who are looking for an investment property.
• You will usually have additional admin procedures to deal with, including providing the Right to Rent records and the tenancy agreement, and arranging for the protected tenancy deposit to be transferred into the name of the new landlord.
• Tenants may also need to undergo new reference checks and sign updated documents once the sale has been completed.

If you’d like to learn more tips about selling a tenanted property, then you can read our full blog for tips and advice.

Selling an investment property by auction

As with any property, selling your investment property at auction can be done with speed, ease and certainty. Whether you’re selling a vacant or a tenanted property, selling at auction is fast and faff free.

Auctions have a wide range of potential buyers, so while both vacant and tenanted come with their own pros, cons, and target audiences, you can trust that both occupancy types will be capable of garnering interest and drawing bids.

If you’d like to learn more about the steps of selling property at auction in general, then our comprehensive guide to selling property by auction takes you through everything you need to know from getting an initial free, no-obligation valuation of your investment property, all the way through to completing the sale and accessing your profits.

The process of selling an investment property

How you sell your investment property will change depending on the route you take and your circumstances but, to give an understanding of what the general process should look like, we’ve made a step-by-step guide to follow

1. Decide on your sale strategy – Think about whether you’re selling the property vacant or with tenants in situ. Decide when the best time to sell is (looking through the leases to make sure you won’t break them), and plan what time of year will be best to sell for you. If you’re planning to sell vacant, consider the correct process for eviction of the current tenant (if required). You should also decide on a sales route, such as an estate agent or selling by auction.
2. Get a valuation and tax planning – Estimate what you’re likely to get for the type of property you have and what area it’s in, taking into account market value and buyer interest. You should also consider likely sale costs (including agency or auction fees, legal fees, mortgage redemption fees) and capital gains tax implications to help you work out estimated overall profits.
3. Prepare to put your property on the market – Assemble a Legal pack, or ‘legal’ pack if selling by auction. This should include title/deeds, floor plans, certificates (safety/compliance, warranties, planning/building approvals). If tenanted, this will also need to include tenancy agreement(s), rent roll, payment history, arrears position, deposit details, inventories/check-ins, licenses, compliance records, service contracts, and any notices served. During the preparation, you can also consider what work needs to be done to the property to boost the value, such as fresh paint or deep cleaning if you’re going down the estate agent route, otherwise, selling at auction means you can sell your property regardless of its current state.
4. List your property on the market – Make sure you get some good photographs of the property and offer viewings to help you find the right buyer. This will be handled by the auctioneer if you’re planning to go down that route.
5. Accept an offer and exchange contracts – Once the sale has come to a close and you’ve found the highest bidder, it’ll be time to exchange contracts. Your solicitors will also have to sort out all the legal paperwork and contacts (especially if you’re selling with tenants), and this should be coordinated with the auctioneer.
6. Deal with the post-sale administration tasks – Work through the capital gains tax and mortgage implications of the sale. Cancel or transfer insurance and service contracts, close landlord accounts, and file tax returns. You should also keep final statements and completion documents for your records.

Tips for selling your investment property

Properties that aren’t in the best condition can still sell; many investors love a fixer-upper. These properties are very popular at auction, and if you’re deciding to go down the auction route, then these steps are only optional and not necessary, as you can sell at auction regardless of condition.

However, if you’re going the estate agent route, then the state of the property will have a bearing on its marketability and buyer interest levels. If you’d like to fix up your property before you put it on the market, then here are a few tips for making sure your property gets the value you want from it.

• Improve the kerb appeal – This includes cleaning up the garden and refreshing exteriors to make a great first impression.
• Cleaning up the property – This means getting rid of any issues such as mould or fixing wonky door handles and ensuring everything is in top condition. We would recommend hiring a professional cleaner to ensure it’s in tip-top shape for any viewings.
• Refreshing the decor – Adding a fresh lick of paint, modern lighting, and new flooring can really add appeal to your property.
• Tackle maintenance issues – If there are any leaking taps or outdated wiring and plumbing, fixing these issues can really drive the price of a property if you’re looking for the best possible outcome.
• Update safety and compliance – Ensure smoke alarms, gas safety certificates, and electrical checks are up to date to make the property “investment ready.”
• Maximise energy efficiency – Upgrading insulation, windows, or boilers can improve the EPC rating, which is increasingly important to both buyers and tenants.

If you’d like to learn more about how properties are valued for auction then you can read our full guide.

Capital gains tax when selling an investment property

Capital gains tax is the tax on the profit when you sell an asset (in this case, a property that isn’t your main home) that’s increased in value. This means that landlords, developers and holiday letters are liable for Capital Gains Tax when they sell their property.

Capital gains tax is only charged on the profit made after deductions. and not the total value of the sale. To calculate your taxable profits, you can deduct the initial price of the property, any taxes paid during the purchase, and any money spent on capital investments (defined as changes made to the property that improve its value, such as extensions, not costs of upkeep and redecorations).

If you’d like to learn more about this, then you can read more in our guide to capital gains and how they can affect you.

Sell your investment property with SDL Property Auctions

Selling an investment property can be a rewarding step, whether you’re cashing in on capital growth, reshaping your portfolio, or simply moving on to your next opportunity. The key to a successful sale lies in preparation – understanding your target buyers, ensuring the property is compliant, and highlighting its potential.

Whether you’re selling a buy-to-let, a holiday let, a commercial property, or a development opportunity, taking the time to plan your exit strategy will help you maximise value and achieve a smoother transaction.

If you’re ready to take the next step and sell your investment property, then check out our auctions and find the perfect buyer for your property, or read up more on how to sell your property at auction to get yourself ready for a great sale.

Once you’re ready, we’ll help you get things into place by providing you with a free, no-obligation property valuation. Just reach out below to start the process.

[Free sales valuation]