Apparently money is a key attribute for everyone and obtaining it has turned into an essential goal. Many families struggle with paying bills, taxes and debts. Owning a home is fantastic but unfortunately it is an asset which doesn’t provide you with cash regularly and instead it consumes it. Selling is obviously not an option most of the time as people rarely have a second home. So what can be done when you want to tap into the value of your home and monetise it? Applying for a reverse mortgage is one option but unfortunately this product is only for senior citizens. Young families cannot qualify for a reverse mortgage which would give them a lump sum in exchange for some equity.
What if you could sell your home and become a tenant in it? This is absolutely plausible and all you have to do is reach a contract to sell your house then rent it back. Taking part in such operation can be extremely beneficial to you and your family. Thanks to it you receive a price equal to the market value of your property and get to living there as long as you pay a monthly rent. Some might say that this is not a great idea because now you essentially have monthly instalments similar to a mortgage. This is somewhat true but at the same time it isn’t. After all, let us not forget that you will receive thousands and thousands of dollars when you sell your house then rent it back. This money ought to be more than enough to cover all of your monthly expenses for a long period.
By the time your capital gained from the sale of your home diminishes, money will be devalued and you will have likely gained even more through investments and other income. In short, if you wish to sell your house then rent it back, then you gain a big sum right away and only pay a small amount monthly in order to remain at your very home. The bottom line is that you will also save plenty of time and hassle too. You should try and calculate how much money you save by not having to move, relocate your family, make new plans on how to get to work or look for a new school for your children. Time is money and if you sell your house then rent it back, then you definitely gain some money.
Now let us look at some legal matters and what sort of rights and obligations occur when you wish to sell your house then rent it back. First of all do not worry about not being able to rent your home back after you sell it. This is built in the contract and as the other side signs it, they agree to the rental clause as well. However, ownership of the property is transferred and you are no longer the owner of your house. Now you (the seller) becomes a tenant and new obligations and right arise from this. The same happens with your buyer who in this case also becomes your landlord.
In order for the first part (the sale) to happen you need to make sure that everything on your side is perfectly flawless. There shouldn’t be a conflict with your heirs, the estate must not be co-owned and if it is, you will need the explicit written consent of your co-owners that they agree to the deal. Additionally the more payments you have made against your mortgage, the more equity you will have. A mortgage is not going to be such a big deal after all as it will be fully repaid with the money of your buyer during the sale. All property taxes must be paid prior to the deal and you are to make sure there are no existing liens over your asset.
Now is the time to start negotiating the conditions, surrounding the rental deal with your new landlord. The best part is that you do not need to worry about paying property related taxes anymore. The only bills related to the property you will need to cover are your monthly rent and utilities. Of course, you are also obligated to not damage anything and to report if any accidents happen. In fact, you have no reason to hide anything because the landlord is the one obligated to ensure the property is in order. This is one of the greater advantages for a tenant that the rent has over a lease. You see, if you lease a property you commit to a long-term contract in which you are to maintain the estate in excellent condition. The lessee in this case acts as if they owned the property while the real owner only collects periodic payment.
One of the drawbacks when you decide to sell your house then rent it back concerns the fact the rental deal can be changed only at the prescribed stages. This would have been agreed to as part of the sell and stay arrangement to enable you to sell your house then rent it back.
If you are looking for a longer term deal then you might want to make a lease agreement and not a rental contract. Instead of you having to sell your house then rent it back, you basically conduct a sale leaseback. The two terms are similar but their nature is somewhat different. The financial part can be tricky as a lease is a long-term agreement. If things change and you want to terminate it, this might turn out to be quite the challenging endeavour.