The Right Way To Use A Sold Home As Rental Property
Around 2006, a scheme known officially as the "sell and rent back" was created due to the large number of homeowners going into foreclosure
. The concept is that the home is used to protect the homeowner. For someone having a financial problem and at risk for losing the home could work with a property investor that would buy the home and then allow the homeowner to remain living in the property by renting the property back.Then in 2007, the concept of the sell and rent back chanced, making it more advantageous to the homeowner. Because of significant equity in the home, homeowners do not want to lose all that money, which lead to a modification of this scheme. With this, the investor would still purchase the home and rent it back to the original homeowner but once the finances are caught up, he or she could buy the home back from the investor, retaining most of the equity.
It is important to know that if a homeowner decides to use the sell and rent back option, some issues could arise. The following provides information on preventing these problems.
Paying Fees
Fees associated with this type of scheme are typically the responsibility of the buyer, which would include things such as inspection, solicitor, survey, and other costs. Any of these or any fees being put on the homeowner need to be identified and understood. If the sale was to fall through and the homeowner paid fees, the money would not be recouped.
Rent Increases
Just as with a mortgage or renter contract, a tenancy agreement for the sell and rent back scheme needs to be read and understood before being signed. Within the agreement needs to be information addressing any rent increases, the maximum of the increases, and how often rent could be increased. Unfortunately, some dishonest companies that buy homes in trouble will offer the original homeowner a low rental price for six months but once the agreement renews, the rent would be jacked up dramatically to the point of forcing the people out.
Property Resale
After an investor purchases the property, the property can be resold anytime and with only a two-month notice to the tenants. However, if the investor worked a sell and rent back scheme as a part of the purchase, restrictions would apply, which protect the renter. In this case, the new owner would be prevented from selling the property unless the tenant provided written consent.
This does not mean challenges would never arise but with so many benefits of this scheme, it works well for most people. Because the home is now owned by someone new and the initial owner is the renter, the home would not go into foreclosure. Even if something was to happen and the home was put up for sale on the open market, the sale could easily take one year or longer. Before being involved with the sell and rent back scheme, you should look closely at your finances to see if it is realistic.
The original homeowner would also pay for nothing and considering finances are the issue, this helps. Best of all, since the owner who becomes a renter never moves out, family members, friends, and even neighbors would never know about the situation, making it private.
Sadly, the number of homes being foreclosed on continues to rise and in fact, the numbers are the highest they have been in a very long time. To avoid losing your home to foreclosure and wanting to maintain your property, the sell and rent back scheme might be the answer you have been looking for but you need to act now.
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