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Who Benefits From A Leaseback Agreement?

By
Real Estate Agent with RE/MAX Alliance

A leaseback in real estate is exactly what it sounds like: an owner sells their home and then remains in it while renting it back from the new homeowner. This has been prevalent in Europe for a long time, and due to current financial problems in the United States, it is becoming more popular here also. It is similar to taking out a loan where the rent functions as loan payments.

This process can reward both the investor and the seller in the agreement. The party purchasing in the leaseback takes on all the risk, however, and must do their homework before agreeing to such a contract. If the seller files for bankruptcy or gets audited by the IRS subsequently to contracting into a leaseback, the buyer can lose their investment and have no recourse to any financial remuneration.

A seller could be in need of some immediate cash to pay back debts, and in such a case a leaseback would be beneficial. Not only will he get a large influx of accessible money, but he will also get to remain in his house. A lot of homeowners are not ready to lose their house at the end of the leaseback agreement, and can often include the option to buy back the residence. This process is only beneficial to the seller if she hasn't got a second home loan on the property. The homeowner seldom has much cash left from a leaseback sale after paying off a double mortgage.

A leaseback agreement is one way to invest in real estate. The buyer is probably going to be able to acquire the property below market value, while profiting from the tax advantages and rental agreement. A normal leaseback lasts for 12-18 months, and then the buyer has the option to sell the home for a modest financial gain, or resume renting the home at a higher monthly rent.

As illustrated here, both the seller and investor can profit from a leaseback. Immediate access to money is a obvious benefit to sellers who need money fast. As the investor is the party with the most to lose in this type of arrangement, she has to make certain that she knows who she is getting involved.

Looking for your dream home in Colorado, but can't decide if you want to buy Denver CO real estate or purchase Westminster CO real estate? You may consider letting a real estate agent help you in your search. They can provide valuable information about the areas you are looking in, including complete MLS data for any property you may find.

Posted by

Greg Smith

www.boulderhomesource.com

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