The world that we knew just a few months ago, changed radically because of Covid-19. This change has affected the great majority of people worldwide. Our daily lives have drastically changed or been altered by this health crisis. Both companies and individuals in one way or another have faced the cessation of activities and are concerned about their lack of liquidity. The leaseback model during this financial crisis could be a useful tool to continue with the fulfillment of financial obligations without leaving the property where they live or work.
A leaseback is a financial operation that consists of a contract between two parties, in which the owner of a real estate property sells the property to the other party, this second party grants him the right to live or continue his economic activity under a lease model. A Residential Leaseback allows you to sell your house and stay as a renter. The owner of a house sells his property and negotiate with the buyer (often a corporate investor) the right to stay as a renter under some specific terms. Leaseback Explained
A leaseback has many advantages for the former owner. For instance, it allows them to release the burden of fixed assets (in this case their home) to obtain immediate liquidity. In addition, by not having to leave their home, they do not face additional dilemmas such as changing schools or having a drastic change in their lifestyles. Another advantage of a residential leaseback is that as a tenant, they are relieved of all the burden of repairs on a property since these are usually the landlord’s responsibility. Some examples are leaks, damage to structures, paint, pipes, among others. Financial Example of a Leaseback
A leaseback is also an excellent option during divorce proceedings, as it allows affected parties to make immediate use of their equity without facing long court proceedings and legal battles. Most importantly they release the drama for the family members and allow them to avoid drastic changes to their lifestyles by not having to move away. Leaseback & Divorce Explained
Although the real estate market today is much more stable than during the last recession in 2007 and policies have been redirected to greater forbearance in debt repayment. However, during a crisis mortgage arrears and other debts can still accumulate, homeowners can find in the leaseback an alternative that can help them pay off those debts by cashing out on their equity and continue living in the property. As someone once said, “The true value of property to an occupier lies in using it, not owning it”. That is why residential leasebacks are becoming an increasingly popular form of financing (Jaffe and Sirmans, 1986).
This health crisis should not get the best of us. If we need liquidity quickly and do not want to leave our homes, nor we want to spend a lot of time in bureaucratic procedures a leaseback is the best solution to our problems.
Article Obtained from Sell2Rent.Com