When to Sell Investment Property in North London

If you’re a north London landlord with one or more properties for rent, should I sell my investment property might be a question you’ve been asking yourself recently.

According to the National Residential Landlords Association, up to a third of buy-to-let landlords are currently considering selling up – a huge number at a time when homes for rent are in high demand and attracting premium rents.

The Renters’ Rights Bill, which is currently going through parliament – and would change the rules around no-fault evictions – is seen as one reason why landlords are exiting the market. It follows a range of moves by successive governments including changes to mortgage interest tax relief and stamp duty.

If you’re thinking of selling, remember that there are still plenty of reasons why property is a good investment – a regular monthly income and the capital appreciation of your property being just two. If you’re a north London landlord with property in areas including Kilburn, Queens Park, West Hampstead or Cricklewood, we look at the pros and cons of selling your investment property in the current climate.

Why sell your investment property?

There could be many reasons for deciding to sell your investment property. Changes to the rules around letting out property such as the Renters’ Rights Bill and the requirement to improve your rental’s energy efficiency by 2030 might make being a landlord feel like it’s not worth the bother.

You may have a particular property that isn’t turning a large enough profit. Or you might have personal factors influencing your wish to sell – illness, job loss a new baby or some other reason to release the capital.

Want to be a more informed landlord? Before deciding, consider whether persistent issues with how to deal with late rent payment are linked to wider shifts under the Renters’ Rights Bill impact on landlords.

Should I sell my investment property – what to consider

Think about why you’re selling and whether it’s the right thing for you but also about the implications of the sale.

If you have tenants in the property, consider whether you want to market the property with tenants in situ or whether you need to ask them to leave.

If you have had the home for some time, you will need to pay capital gains tax on the rise in value above your £3,000 personal allowance. Do the sums to see if this has an impact on your decision.

You should also think about the implications of selling now against the long-term benefits of holding onto the property. Most homes do rise in value substantially if you keep them for long enough. Think about the area where the property is based and any changes to transport or amenities that could lead to a big price rise over time. At the same time, you may be paying council tax on empty rental property, which can be a long term drain on your finances.

The pros and cons of selling an investment property

The pros of selling your buy-to-let investment

• You’ll release capital if you need it – maybe to spend on a larger home of your own or to pay off a mortgage.
• If this is your only rental, you’ll no longer have the responsibility of letting to tenants.

The cons of selling your buy-to-let investment

• You won’t benefit from capital appreciation from the property over time.
• If you decide to re-enter the rental market, you will be buying at a point in the future when prices are likely to have risen. You will also need to pay the stamp duty additional property surcharge.
• You will be liable for capital gains tax when you sell.
• You will need to factor in the other costs of selling such as estate agent and conveyancing fees.

It’s also worth weighing up practical day-to-day matters like pets in rental properties before making your decision.

Key questions about selling an investment property

1. When should you NOT sell investment property?

It’s important to sell your investment property at the time that is right for you. That said, think really carefully about selling an investment property too soon after buying it – before it has had a chance to increase in value.

Avoid trying to sell an investment property in a slow market or where prices are falling. You could find yourself paying the buy-to-let mortgage while you wait for a sale without any rent coming in.

2. How to sell an investment property?

You can sell your property in the same way as any other, however, if has a tenant in situ, or you are looking to sell it as buy-to-let investment, look for a local agent with experience in this area.

3. When should you sell an investment property?

Consider selling if the property has issues that make it difficult to let – if it’s a distance from transport links for example – and you’re struggling to make a good return on your investment.

4. How do you avoid capital gains tax when selling an investment property?

Capital gains tax must be paid at 24% on the rise in value of the property while you have owned it. Each person has a tax-free allowance of £3,000 for capital gains tax on property.

You may be able to reduce your tax bill by deducting losses, claiming reliefs or gifting the property to a spouse. Get advice from an accountant or tax advisor.

5. Can I sell my investment property with tenants?

Yes, this is known as selling with tenants in situ. It may make it more difficult to find a buyer as you will be selling to another landlord. However, some landlords welcome the chance to buy a property which already has a reliable tenant in place.

Alternatives to selling investment property

If the responsibility of being a landlord is weighing on you heavily, but you don’t wish to sell right now, think about offloading some of the tasks to a managing agent.

If your rental property is in north London, we’d love to talk to you about our services for landlords that could make the role much easier. Contact us today.