I was wondering if anyone has ever done any of those lease-back deals where you buy a condo or something and do a lease back deal for the first 5 years. I am a total newbie, but it APPEARS that its just like having gauranteed renters for the first 5 yrs? Is there some sneaky catch?
Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
19y
If you're talking about buying a property from a distressed homeowner and then leasing it back to them, that is a very dangerous strategy. For obvious reasons, the rent will be higher than the mortgage payment was. If the homeowner couldn't afford the mortgage payment, they certainly can't afford the rent. Also, when they stop paying the rent, they sometimes sue you claiming that you tricked them and stole their house - NOT GOOD!
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
19y
Lisa (I think that's right),
I think you're talking about deals where you buy a newly constructed or redeveloped unit and then the developer pays you a fixed amount for some time. Then you can either sell it or rent it yourself.
Is that the kind of deal you're talking about?
I've ran across a few of these, and they don't seem quite right. "Cash flow positive" is taken to mean rent is higher than the payment, and expenses are neglected. I also wonder about the reality of the rent after the guaranteed rental or lease back period ended. The one I looked at closely (a resort conversion project in Orlando) looks like a good chance of ending up stuck with a property that was a money looser and imposible to sell.
I would also be curious to hear other's thoughts on these deals.
Hi Jon,
Yes you have it right, and interestingly enough, I was also looking at one in Orlando Florida. They are sort of fancy hotel condos with a few luxury resort amenities that vacationers and retirees want. They handle all the leasing etc. I have seen other deals where the lease back is 10 years...which seems better ..at least they get 10 years worth of rent equity for you. I hadnt thought that the rent they offer you is a fixed amount..that makes sense.
It seems it might be a good idea if I actually wanted to eventually live in the place later..
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
19y
As I recall, the one I looked at was a company called "Cay Clubs". They have a number of "waterfront equivalent" properties in various locations in FL. But, when I looked at the actual properties, they weren't all on the water. They had several small properties down in the keys that were on the water. The nice ones were near water, but not on it. Orlando's certainly not on the water.
This was a conversion deal. They had an apartment building (I think, not quite sure) they were converting to individually owned units. And creating a resort around it, aimed at soccer players or some such. The leaseback period was the period of conversion. They arranged financing. Once complete, you could move in, sell it, or rent it out as a vacation rental.
I could never convince myself the numbers all made sense for the rental part. Kind of like those Trada deals you were looking at, the price was too high for the rents. This seemed worse, though, since it was more aimed at vacation rentals. While the rates were high, the vacancies seemed like they woudl be high, too. Selling seemed very speculative. Maybe make big bucks, but also maybe take a loss.
These sort of deals just don't quite pass the sniff test, to me. If this is such a great deal, why do they parcel it out to individuals? But, I'll admit I may be missing something. Just have yet to run onto an explanation that really seems to hang together.
well it does seem to me that these things are always at resort type areas...and that seems a little scary regarding being able to consistently rent them with long term leases....and they do seem like convertd apt buildings although some are brand new construction...maybe the "new construction" is the conversion construction.