Can Boomers & Seniors Sell Their Home and Lease it Back?

 

Can Boomers & Seniors Sell Their Home and Lease it Back?

 

Well according to one Realtor who specializes in the mature adult segment of the real estate market, the answer is YES. 

 

Some people are just not ready to leave their family home, are still in relatively good health, and want to age in place comfortably. Simply put they are just not ready to move.  If this sounds like you, then the sale-leaseback might be a good option to consider.

 

Sale-leasebacks while not uncommon, have actually been around for many years.  Although primarily utilized in commercial real estate, and businesses as an alternative to conventional financing.  Just maybe it’s time to take a second look at sale-leasebacks in the residential markets.  Adam Linden a local Realtor in Toronto, views the residential sale-leaseback transaction as win-win for homeowners and investors, especially given the sheer numbers of mature homeowners who are currently in a state of flux when deciding on their next move.  A potential solution for many of these homeowners may be a residential sale-leaseback arrangement, where the homeowner cashes out the equity in their home, by selling to an investor, then turns around and leases the home back for a fixed period of time.

 

The sale-leaseback is a type of real estate transaction where the seller transfers the title to the buyer upon purchase, but then rents the property from the new owner. This might be for a short term while their new home, condo or retirement residence is being prepared for them, or it might be for a longer term of 5 -10 years more or less. The rental amount and all other terms of this new tenancy agreement will need to be negotiated between the new landlord and tenant, prior to the sale taking place.  This option, allows people the freedom to continue to live in the comfort of their home by making monthly lease payments.

 

Could this be the solution many adults have been looking for?  A way to pay down household and credit card debt, having cash at their disposal  for investment purposes or to upgrade their lifestyle, without the burden of taking on additional loans, lines of credit or a reverse mortgage should they be strapped for cash?  What about the investor looking for investment income, who now has the benefit of a long term lease executed the same day the property is purchased. Keep in mind, there is a better chance the tenant who has lived in the home for many years, will keep the home clean as they still may feel some emotional attachment to the property.  All while not having the added expense of maintaining the property should something fail like the roof, pluming or furnace according to Adam.

 

The process is fairly straight-forward. The home is sold in the same manner as any other residential home sale, the difference is that on closing the new buyer is not getting vacant possession of the property.  At closing, concurrent with the sale of the home, a previously negotiated residential Lease is entered into by both parties.  The terms and conditions are often incorporated into the Purchase Agreement as a pre-condition to closing. The attractiveness to the investor, is being able to acquire a well-cared for property, not having to renovate in order to lease it, and not having to risk that the property sit empty for a period of time while waiting for someone to lease it, as often is the case.

 

As a caution you should always deal with Realtor's and legal professionals who are familiar with these type of transactions, as landlord and tenant regulations vary from city to city or province to province.  Things to consider would be types of lawful deposits and interest on these deposits if applicable, renewals, terminations,  rent increase guidelines, insurance and the amount and types of coverage needed such as for personal items, if pets are allowed in the tenanted property, who pays for which utilities and insurance coverage for the property as lenders will demand that the property be insured prior to lending.  Always make sure you execute a formal occupancy agreement, one that spells out the terms and conditions of the seller's occupancy and protect the buyer/investor as well.

 

This might not be a solution for all mature homeowners, but for some, it might just give them the comfort, security, financial freedom and lifestyle they have been looking for.