It’s the ultimate way for home owners to unravel themselves from tough situations.
You know, old adages like “will I regret selling our home” or “What will we do after we sell?”
The answer is one word: leasebacks. (have a look at my video above or here)
It’s nothing new to the real estate industry, but it might be for you.
According to Investopedia, “A leaseback is an arrangement in which the company that sells an asset can lease back that same asset from the purchaser. With a leaseback—also called a sale-leaseback—the details of the arrangement, such as the lease payments and lease duration, are made immediately after the sale of the asset.
But leasebacks are not just for companies… you can do it with ease, too. As the definition says, you identify the arrangements with a buyer immediately.
Structuring Leasebacks With Ease
Let’s say you decide to sell your home as the market is near its peak and you have a lot of pent-up equity. But like most folks, you’ve yet to consider where you would move. It’s a daunting situation for many.
To ease that strain, you find a willing and able buyer for your home. And here’s the “catch”: you don’t want to leave your home for 6 months, for example (it could be for however long you and the buyer agree).
Both of you agree you can sell and remain in the home for 9 months. After that the buyers takes possession.
Upon closing, you create a lease (the essence of leasebacks) whereby you (seller) now becomes the lessee and the buyer (new owner) is the lessor. At closing, you get all the sale proceeds. You’ve now unlocked all that money that was stuck in your home. And you get the benefit of staying in the home for nine more months thus reducing the stress associated with finding your next home.
The new owner may be an investor or folks who needed to identify a home in the up-leg of a 1031 exchange – who knows. Regardless, they can now own the home while you pay rent (their mortgage).
Leasebacks Are The Ultimate Win-Win
As you can see, sellers and buyers have stress points to overcome. For a lot of sellers, they fear not being able to find their next home in time due to certain real estate market conditions. Similar to what happened in 2021 and 2022 across the US. Sellers may also be sitting on a lot of equity they want to unlock, yet don’t want a home equity loan. Leasebacks can be the answer to these seller pain points.
As for buyers, they may be looking for a certain neighborhood, but may also be constrained by when the right property comes available. And when one does, leasebacks would allow them to jump on the opportunity immediately, which allows them time to sell their home. It also provides the buyer with immediate cash flow. The buyer may be an investor seeking long-term or AirBnB options for this property. The immediate cash flow would offset any loss of buying without tenants.
At the end both sellers and buyers benefit from leasebacks as it provides both with a way to combat time issues both may be experiencing.
Seek a realtor who knows the nuances of leasebacks. It’s also good to speak with an attorney to ensure both parties are protected from these agreements. At the end of the day, leasebacks are a simply, yet overlooked option for sellers in any real estate market.
Keep this option in your mental storage at all time.
