Leasebacks have grown in popularity in the US real estate market over the last 7 years, but while they offer many advantages, newer real estate investors often fail to adequately anticipate the risks.

For those who wholesale homes, one of the biggest challenges in recent years has been sellers who don’t want to leave their homes or just can’t get out fast enough even if they wanted to.

The leaseback has become an attractive solution for both parties. A leaseback agreement can allow investors to contract to buy houses quickly on properties they might not otherwise snag and allow them to get them cheaper before more costs, back interest, attorney fees and other penalties add up to the costs. acquisition costs. Building higher profit margins.

For homeowners, it means being able to come to an agreement to sell quickly without having to move immediately. For struggling homeowners, the advantage is clear. It can help them avoid the worst consequences of an actual foreclosure, limit the damage to their credit, and even get the funds to leave and find another place to live. Some, instead, find it the only solution to be able to stay in their family homes or keep a roof over their heads.

For those homes that do wholesale, there are also many final benefits to these rent return setups. In some cases, a few months’ rent may be included in the agreement at closing. In others, these arrangements can offset any maintenance costs until the property is resold or can even turn a profit while it is being remarketed. In today’s market, wholesalers will also find homes like this that can sell faster as rentals with existing tenants. Additionally, they may prove even more attractive to some end-buyers as turnkey rentals if investors can provide or outsource property management. This not only means speed, but it can also help increase the value of flipping at a premium price. Lastly, it also means that properties are not left as empty targets to be vandalized or occupied by squatters.

However, subsequent leases are also not without their pitfalls and dangers. Savvy and experienced real estate investors know that all too often these sellers never want to leave and may not intend to, despite finding themselves in difficult situations and needing to move.

Think about it. If the banks, with their powerful legal departments and even free passes to get through fraudulent foreclosures, couldn’t get them out and if the seller couldn’t make their mortgage payments sooner or didn’t bother too much, how are you or another buyer? Are you going to wait for payment or get them to leave?

Even if the problem passes, it won’t be a deal to create repeat buyers. If your customers have these issues, even if it’s not directly their fault, it will leave a bad taste in their mouths and lead to bad feelings toward your brand.

So, approach leases carefully and have bulletproof legal agreements.