The importance of an exit strategy

One of my landlords who has property in a number of UK towns came to the office for a coffee the other day and we got on to the subject of exit strategies. The three properties he has in Ramsgate, he told me, will be sold in 2019 and 2020. This was interesting, because the guy had genuinely planned to the last detail how he was going to exit the investment property market. How many other landlords could honestly say they had thought this far ahead?

Probably most haven’t, but they should. I asked a couple of other people I happened to speak to in the next 48 hours when they would exit the rental market, and got the sort of answers I expected – “in a few years when prices are higher” or “never, I want the income instead of a pension”. Some will get lucky and earn a few pounds in the process, while others will make less than they should have. The ones that make the most when they sell, will be the ones that have done proper research, made proper plans, and tied their property portfolio in with the rest of their financial affairs. Things they will look at include:

· What will it cost me to sell my portfolio?

· Will I incur loss of rent during the sale process?

· What are the mortgage implications (redemption penalties etc)?

· Are there leasehold implications (will I need to renew the lease before I sell)?

· What are the capital gains tax implications?

· Could there be an inheritance tax issue?

· What will happen to the proceeds of sale?

· Is it beneficial to move the house into joint names prior to the sale?

· How does this fit with other financial issues such as maturing investments, pensions, etc.

These are probably areas in which it’s not good to dabble! When you buy an investment property, you talk to ‘experts’ regarding what is or isn’t worth considering. When you sell a property it should be no different - If you exit the market in a planned manner, you’re likely to be far more successful than if you exit quickly because ‘something has come up and I need the cash’! Belvoir works with Franklyn Financial Management, a partner of St James Place Wealth Management, in these areas if you don’t know people yourself. It’s another area that will separate the professional landlord from the novice.