A sale and leaseback is a way to sell your property without moving, but it can be a complicated process.
A sale and leaseback is a type of real estate deal in which an owner sells a property to a buyer, for the express purpose of renting or leasing the property after the sale. Typically, this type of arrangement requires negotiating the terms of the lease or lease in advance, allowing the two parties to come up with a plan of action that is seen as mutually beneficial. While a property sale and lease deal can work very well, the strategy carries a certain degree of risk.
Selling and releasing requires negotiating the terms of a rental agreement in advance.
As part of the sale and leaseback approach, the new owner agrees to rent or lease the property from the previous owner for a specified period of time. In some cases, this arrangement makes it possible for the previous owner to remain in the property for several years as a tenant. Other times, the purpose of this type of contract is to give a previous owner an extended period of time to arrange a move to a new location. For example, someone who plans to move across the country in a few months may arrange to sell her house now, on the condition that the new owner allows the seller to rent the property in the interim. In this period, the seller finds a new home and begins to send his belongings to the new location, without having to deal with a move that must be done in a few days.
The sale and return of rent agreement can also be useful when the owner can no longer afford to maintain the property or manage the property taxes associated with the property. Here, the new owner assumes these responsibilities, relieving the stress of the old owner. At the same time, the new owner immediately receives some income from the property, since the previous owner is renting or leasing for a certain period of time.
While a sale and lease back can work very well, there are some potential risks to consider. If the new owner chooses to sell the property during the old owner’s lease period, the agreement may be declared null and void, requiring the negotiation of a new lease that may or may not include favorable terms. If the new owner defaults on the mortgage used to secure the property, there’s a good chance the bank or finance company holding the debt will foreclose and offer the property for sale, a set of circumstances that could also mean the the tenant would have to move quickly. Consideration of these types of concerns is important when investigating the feasibility of a sale and subsequent rental,