Buy-to-let property can be an excellent investment.
However, selling it can be challenging.
Selling to a family member is one option.
But is this difficult to do? And what are its benefits and drawbacks?
Read on to find out.
Who is a buy-to-let usually sold to?
Buy-to-let properties are usually sold to investors who will replace you as the landlord.
Other times, they are sold on the open market once tenants have been evicted with a Section 21 Notice.
Or the landlord switches to a residential mortgage and moves in themselves.
In some circumstances, the tenants have a right of first refusal (ROFR). It means they must be offered to buy the property before others.
Can I sell a buy-to-let property to a family member?
Yes, you can sell your buy-to-let property to a family member.
The sale will largely proceed in the typical way, except you won’t need to use an estate agent or market the property.
If you sell it for less than market value, the difference is considered a gift and has tax implications.
Can I gift a buy-to-let property to a family member?
Yes, you’re allowed to do this. However, the legal and tax implications can be complex, so you should hire a qualified solicitor to help.
Once you gift it to them, you typically need to be alive for another 7 years for it to be considered ‘out of your estate’.
However, remember that 7 years is a long time in politics – a lot can change.
Do I need to tell my tenants that the new owner is related to me?
You should give your previous tenants details about the new landlord. This typically includes:
- Name
- Address
- Contact details.
However, there’s no law stating that you’re required to confirm that you’re related.
Advantages of selling buy-to-let to a family member
Reduce your costs
Selling to a family member is a form of selling privately, which reduces the fees involved in selling.
This can save you thousands of pounds in most cases.
Trust
Sellers often trust their family members to maintain the property well and treat tenants respectfully.
This might include adhering to covenants and ensuring neighbours are not disturbed in any way (i.e. by a new landlord who does not adhere to the same standards or property maintenance or tenant vetting, etc.).
Save time
By going straight to a family member, you can avoid the long, tiresome process of searching for a suitable buyer.
This can be especially difficult with a buy-to-let because most ‘typical’ buyers on the open market aren’t interested.
Tax advantages
There can be inheritance tax advantages to selling to a family member now, rather than passing it on in a Will. These will vary on a case-by-case basis, depending on the value of the property and the laws in place at the time.
Disadvantages of selling buy-to-let to a family member
Disagreements
Mixing finances and family can be challenging. You and your loved one may disagree over the selling price.
Or you could have different philosophies about how much rent can be charged.
Extra fees
There can be fees involved with selling your buy-to-let, regardless of who buys it.
Stamp duty thresholds have recently moved in the UK, so more payments will be due. And early redemption fees are often applicable to the lender, as well.
Tax implications
If you agree on a sale price that’s below its typical market value, the difference is considered a gift.
And this comes with its tax implications. You’ll usually need to bring in an advisor to guide you on this.
Can I sell a buy-to-let property to a friend?
Yes. You can sell your buy to let property to whoever you like, including selling to a friend.
Can I sell my buy-to-let property for below the market value?
Yes, you can. But if you do this to a family member, then the difference will be considered a gift.
Tax will thus be due on this. Speak to a qualified adviser for more guidance.
