Selling a rented property

Perhaps you have a rented property that you are considering selling. When it comes to selling a rented property, not every option is suitable, and you need to target the right audience. The property can be sold with the tenant in place to another investor. Tenants in the Netherlands are well-protected, which means they can continue to live in the property even after the sale. The buyer takes over the existing lease agreement upon sale.

There are several reasons why you might want to sell a rented property:

• Different investment strategy
  Over time, you may decide to adjust your investment strategy, which may involve selling certain properties from your portfolio. By freeing up capital, you can finance properties that align with your current requirements.

• Due to changing laws and regulations
  Many investors choose to sell their properties in light of changing laws and regulations. In some cases, selling the property may even be more profitable than continuing to rent it out. Real estate investors are facing increasing challenges in achieving returns.

• Capital needed for a new project
  Perhaps you have a new project in mind that requires capital. By selling an investment property, you can generate the necessary funds to finance the new project. The new project may offer more potential or a better return on investment. Selling an investment property is a sound decision in this scenario.

• Retirement
  It may be desirable to free up capital upon retirement. The funds obtained from the sale can be used for other purposes, such as purchasing a single-story home for personal use or a camper. Alternatively, you may simply want to enjoy a stress-free retirement.

A rented property has a different value compared to a property that is vacant. In most cases, the value in a rented state differs from the market value. The value in a rented state is based on the rental income generated by the property. When determining the value in a rented state, market conditions are also taken into account, but the focus is primarily on the rental income. Most investors nowadays calculate the value in a rented state at around 10 to 15 times the annual rent or a gross yield of 7 to 10 percent per year.

The value in a rented state can be calculated using a factor or based on the annual gross yield.

• Factor:
  One method to calculate the value in a rented state is by using a factor. Generally, investors use a factor of 10 to 15 times the annual rent. This calculation provides a possible value in a rented state. The actual value also depends on the location and condition of the property.

• Gross Yield:
  The value in a rented state can also be calculated based on the annual gross yield. Investors typically use a gross yield of 7% to 10% per year. The actual value also depends on the location and condition of the property.

In this example, let's consider a property rented for €2,500 per month. As discussed earlier, the value in a rented state can be calculated in two different ways:

• Factor:
  The annual rent is €30,000 (€2,500 x 12 months). Based on the factor method, the possible value falls within the following price range:
  Factor 10 x €30,000 = €300,000,-
  Factor 15 x €30,000 = €450,000,-

• Gross Initial Yield (GIY):
  The annual rent is €30,000 (€2,500 x 12 months). Based on the GIY method, the possible value falls within the following price range:
  €30,000 / 7% GIY = €428,571,-
  €30,000 / 10% GIY = €300,000,-

When selling a rented property, it is crucial to target the right audience. Investors rarely search for investment properties on public platforms like Funda. Therefore, it is not advisable to list the property on Funda. Fortunately, there is a whole world beyond Funda where investors actively search for properties. By using a mediator, you can reach the right audience. It is important for the mediator to have a large network. As an investor, you may also have your own network through which you can effectively sell the property.

It is possible to buy out the tenant, but it can only be done through mutual agreement. There is nothing wrong with buying out a tenant, as it can be a good solution for both parties. The tenant will have capital to potentially purchase their own home or rent another property elsewhere, while the owner can sell the property free of tenancy at a higher price. The termination of the lease agreement can only be done if the tenant agrees to it. Fortunately, tenants in the Netherlands are well-protected and cannot be simply evicted from the property. However, it may be beneficial for both parties to have a discussion about this.

At HuisHunters, we are happy to assist you with the sale of a rented property. Over the years, we have built a substantial network of real estate investors. We provide fast, efficient, and free services for property sales. Feel free to submit the property details through our website, and we will contact you as soon as possible.