MINT HILL, NC – As a buyer, you have several options, especially when you want to invest in real estate. One of those options is known as a leaseback. This type of transaction offers both pros and cons you want to consider.
What is a Leaseback?
When you buy one of the homes for sale in Mint Hill and lease it back to the seller of the property, it’s known as a leaseback. This type of transaction usually includes an investor buying the property and the seller looking to stay within the home.
It can be used in both residential and commercial real estate and has advantages and disadvantages for both parties.
Pros and Cons for the Buyer
If you’re the buyer in a leaseback transaction, you can improve cash flow by getting paid rent without doing much work. You may also be able to take a tax deduction on the property for the interest paid on a mortgage used to buy the property.
As an investor, you also gain the advantage of already having tenants in your new investment property. This allows you to avoid having to find someone to rent the property from you.
However, if the seller you purchased the property from doesn’t pay rent on time, it can cause unwanted expenses and you may have to evict the seller. A buyer could also end up in a bad situation if the seller initiated the leaseback transaction due to bankruptcy or an issue with the IRS. The property could be seized in this type of situation.
Pros and Cons for the Seller
As a seller of a leaseback property, you can gain a lump sum of money when you sell the property. This can help to pay off the mortgage if you’re behind and other debts. If you need cash quickly, you can get it through this type of transaction.
It can also ensure you don’t have to move right away after selling your home and, if desired, you can even include a provision to repurchase the home after a certain amount of time.
The biggest con of being a seller in a long-term leaseback transaction is a simple fact that you will lose an asset. This can make it harder to get loans or credit lines in the future and you will lose the ability to deduct real estate taxes and mortgage interest.
It’s important to consider all your options before entering into a leaseback transaction as a buyer or a seller. Make sure it’s a good decision for you and makes sense in your current situation.
I would love to be part of your journey when the time is right for you. If you ever have a real estate question or need, or know someone who does, trust that you can turn to me. I will help you make the right move! Anna Granger (704) 650-5707 | firstname.lastname@example.org | www.1stchoicepropertiesinc.com