The Investors Hottest Acquisition Structuring Tool
Find It, Fix It, Flip It
January 3, 2022
FRANK. | Co-Founder
The current real estate market has developed a need for all things creative, and born from that are many alternative acquisition strategies. One of these strategies is the sale-leaseback, which has proven to be a win-win for both the investor home buyer and the homeowner.
Many homeowners are struggling in today’s environment with the tight lending restrictions and hiccups in life, yet they have an urgent need to tap into the equity of their home. When they run into issues with traditional refinancing, that leaves them with two options. One is to do nothing, and the other is to sell and move. But where would they go?
Selling gets the homeowner access to their equity, but then a considerable amount of those proceeds will end up going to moving costs and a down payment on their next residence. Avoiding a disruption in their life and holding onto the equity funds is crucial. Residential sale-leasebacks are a savvy way to resolve those concerns. Sell the house now. Move later.
For the rental investor, this is a great opportunity to buy an asset that has been well taken care of with good tenants in place. Remember these homeowners saved their hard-earned money to buy this house, and have lived in it with love. They don’t want to leave their home, but their need to access their equity leaves them with little choice.
The benefit to the investor is substantial. The quality of the home is key as there is typically less deferred maintenance, the tenants have a tendency to stay longer, meaning lower vacancy rates. This decreases the expense for the investor when it comes to turning the property, and property management becomes less of an issue. All of these combine for higher returns on investment.
Creative financing has always been available to those in the know, but now the average homeowner is seeing more and more of the sale-leaseback through many brokerages offering the homeowners who need shorter-term lease back in order to find their next home. Bottom line is, now rental investors should be savvy and leverage what was once a relatively unknown way of doing deals and start looking at every acquisition as an opportunity to pitch the sale-leaseback.
If you are interested in learning more about the residential sale-leaseback and how it works, we love talking real estate at FRANK. and would like to hear from you.
FRANK. | Co-Founder