Buy/Leaseback= Instant Tenant

[John Thedford]

I just closed on #13. Seller was in a bad position and needed to sell fast. He agreed to sell well below market and didn't want to move. So, my concession was to lease back for a year. I am giving up some FMV rent, but the discount far outweighs the concession. This also was attractive to the seller because of their situation. I have found purchase/leaseback to be a great way to get sellers to consider an offer.

I did another one last year that was in foreclosure. Seller is a friend and agent. The house was in bad shape. At the time, I really didn't want to have to throw a ton of money into rehab so we agreed to a leaseback. I didn't put more than a couple hundred dollars into needed repairs for the first year of ownership. Yes, deferred CapEx--but worked well as far as timing was concerned and I didn't have to go tenant shopping as well.

No doubt all purchase/leasebacks may not work well because you are still dealing with tenants! They got into a financial bind for some reason, and you are taking them on hoping they keep their end of the bargain. If they fail you could very well end up having to evict them. Is purchase/leaseback viable? In some cases.