The real estate market crash today does left almost everybody in panic state.

Repossessions are lurking, while refinancing is more and more difficult due to the more cautious lenders.

Coupled with the real estate properties crash in value, with a predicted trend that will last over the next few years, home owners start seeking alternatives to avoid losing their home, or at least the value of their home.

What is sell and rent back?

Definitely in trend in United Kingdom, and a common practice for real estate investors throughout the world, sell and rent back – or buy and rent out on business owner side, is a solution for home owners and a lucrative business venture for real estate investors and business owners alike.

Sell and rent back – a niche market in real estate marketplace – means selling your home and rent it back at an affordable rate.

The reasons home owners sell and rent back, aside of today’s credit crunch and repossession possibilities, can be anything: simply to raise cash, illness, divorce, retirement, clear debts, and other personal reasons.

How sell and rent back works

For the home owners selling and renting their property back, the main idea is to cash out immediately and, in turn, rent their own home to avoid moving out, and in hope of a share in rising real estate value when the time comes.

For the sell and rent back business owners, the main idea is to help home owners to stay in their own home, while settling their personal business, such as clearing out debt and cashing out their property.

The purchase value made by the business owner can be anywhere from 50 per cent to 90 per cent of property market value.

The home owner then given the chance to rent their own property and usually offered an agreement that, should the property rise in value over the next few years, the home owner share the value rise. That is usually offered after home owners rent their own property for 5 to 10 years, depending on the agreement.

A lucrative business?

In my opinion, sell and rent back is a lucrative business with, basically, a good deed in mind – helping home owners stay in their home and, to some extent, still owning a partial value of their home.

However, due to some sell and rent back business unethical business practice, running business with same concept will put you under a spotlight and tight supervision by the real estate or watchdog organisations. This way, you somewhat share negative reputation the sell and rent back business has.

What kind of unethical business practice? Some unethical business practice can be in the form of hidden fees, unreasonably high rent (to ‘kick’ tenant out naturally), and misleading promises (such as ‘we buy at 100% home market value’ statement).

My suggestion is to promote your ‘clean’ business practice as well as your guarantee that you will not ‘leave’ the previous home owners.

Ivan Widjaya
Sell and rent back.