This is the question that I get asked the most when discussing my business and what I do and it’s a very valid enquiry to make. Why should I sell my property portfolio off-market? Whilst there are several reasons, for me, there are three that stand out; Speed, Efficiency and Cost.
Everyone has a grand perception of the open market and we constantly hear the success stories about how much over Home Report properties achieved and how quickly they managed to sell with a closing date involving multiple buyers. Unfortunately from an investment perspective, this is most often a single property that was a family home and in very good condition that has been priced well and advertised effectively by a very competent agent. The reality is that current or recently tenanted properties do not have the same impact and produce the same results.
So, what are your options if you own multiple tenanted properties that you have decided to sell?
Option 1: Open Market Individual Property Sale
This is arguable the best way to achieve the maximum sales price, however, doing this comes at a cost.
The first problem is removing your tenants to have a vacant property, this can be problematic if there are issues with the eviction and also it can be a lengthy process. Now, multiply that time by the number of properties you are selling if they are in close proximity as you don’t want to have them on the open market at the same time. This could turn into several years for a larger portfolio.
The second problem is the condition of the property, to achieve the maximum sales price, the property needs to be in great condition so factor in the costs of refurbishment for each property and the length of time this will take. You will be amazed at how much work needs to be carried out once the tenant’s belongings and furniture are removed!
The third issue to address is the costs involved. To get the best sales price, you will need the best agent which will likely come with a higher Agency Fee. Add to this the costs of the Home Report, additional marketing, professional photography, property staging and your Solicitor’s fees. Again, multiply this by the number of properties in the portfolio and it quickly adds up to be a substantial amount.
Finally, consider the burdens that come with having a vacant property on the market and going through the sales process. It would be safe to say that by the time you factor in the refurbishment, listing preparation, viewings, negotiations, and conveyancing process, you are looking at potentially 5-6 months with no rental income. Whilst this is happening you still have your mortgage, insurance, factor fees, utilities and potentially council tax to account for. The fantastic yield you were achieving when the property was tenanted is quickly disappearing once you calculate this substantial loss of income over multiple properties!
To summarise, whilst an open market sale of your portfolio may provide you with the best individual sales price, it could take several years to achieve with substantial costs, planning, loss of income and problems throughout the process.
Option 2: Off-Market Portfolio Sale
When selling multiple properties off-market in a single bulk transaction you will first of all need to accept that a discount from market value will be required. This isn’t only the case for property sales but in all aspects of retail from cars to toilet rolls! If you go to your local newsagent and pick up a carton of orange juice you expect to pay much more per carton than you would if you were purchasing a crate from a Corporate Wholesaler.
So What are the advantages of this method of sale, how do they counter the discount and why should I sell my property portfolio off-market?
Firstly, the length of time it would take to sell the properties is massively reduced. There is no need to evict tenants and no need to stagger the sales. An experienced and proactive buyer will be able to make a quick decision and have everything in place to complete the full purchase much quicker and more efficiently than most standard open-market transactions that you would do via property portals such as Rightmove. Find out more about ‘Who Will Buy My Property Portfolio? by reading this blog.
Secondly, The costs involved are vastly reduced. An Off-Market Broker would charge a single fee on completion of the sale in the region of 1%-2% of the purchase price. There will be no Home Reports, no professional photography, no staging and very importantly, no loss of income as you will still receive your rental income right up until the day the sale completes and your solicitor might even offer a discount compared to multiple single-unit transactions!.
Thirdly, it’s a win-win scenario with much less hassle. Your Tenants are not evicted, this provides peace of mind for them and also eradicates any issues that could potentially arise with the eviction process. There are no decisions to be made with regard to refurbishment such as where to buy a new kitchen, who to hire to paint the bedrooms, what type of flooring to replace the damaged laminate in the hallway or deciding between grass or gravel in the overgrown garden. It’s a package deal that is sold as seen, as long as all documentation required is up to date and in good order then there are no changes or additions required.
So, Why Sell My Property Portfolio Off-Market?
To summarise, a portfolio sale comes with a potential deficit on the individual property sales prices however is at a lower cost, much quicker and a considerably more efficient process. Find out more about how to sell off-market here.
The best way of making this decision is to speak to both Estate Agents and Off-Market Sourcing Agents or Brokers. Calculate the costs involved in both options and weigh this up against the expected sales prices along with the length of time it will take to sell your portfolio.
Consider the potential hurdles you will have and what you are looking for in the sale, taking into account what contingencies you have in place. It’s easy to have the blinkers on and only focus on the sales that you see and hear about from local agents without taking serious consideration of what would be involved to achieve that with your portfolio and how realistic it is for that to happen.
If you have a Portfolio that you are considering selling and want to talk through your options then please get in touch to see what I can do to assist. Book a call here and we can have a chat.
