Disadvantages about the sell and rent back scheme

There are disadvantages for homeowners selling their property, through a sale and rent back company, the 1st being selling their property at a discounted price.

The sell-and-rent-back solution is normally, only a good advantage for people that haven’t got enough money coming in to cover their outgoings, but if you chose the right company it can place you back on the right track and help you repair your financial position. Remember that property has always been seen as a good asset.

You need to ask yourself a question. Are you already at a disadvantage? Because you need to settle debts quickly, need to relocate at some point in the near future, have a difficult property to sell or don’t have the necessary funds to refurbish the property to make it saleable. If you are, then the sell-and-rent-back solution would/could not be a disadvantage especially when you can find a company that will be prepared to carry out necessary repairs that the property may require.

If you are not careful in the selection of the sale-and-rent-back company, the worst possible scenario for you, as the previous owner, is you could find yourself in a position of being evicted from your property at the end of the initial contract (tenancy agreement). So it is important to check and ensure you are able to live in the property for as long as you wish.

Some sale-and-rent-back companies do not guarantee you a long term rental period, simply because they know that a lot of tenants don’t always pay their rent and this has always been a concern for any investment company, but if you pay your rent there should be no reason for them ever asking you to leave. Always make sure you agree in advance the amount of local market rent which you will be charged for the initial term of the contract and make sure that you will only have to pay market rent and no more.

You should also ask about rent guarantee. There are not a lot of companies that can and will be prepared to do this, it’s a good thing to try achieve, giving you more security. Another good tip is ask the company if they can give you a rent free period, you might only get a month or two but its better that nothing?

It is also important to realise that there are some small organisations that simply try to introduce you to other investors whom you may never meet and these small companies don’t tell you this is the case until the last minute. Be warned this does happen!