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Compare Sell and Rent Back:
What deals are available?
1. Standard Sell and Rent back offerings
The majority of companies offer a standard sell and rent back offering which basically means that the customer can expect to simply receive the best cash offer the company can afford to pay. This is very much dependent upon the market conditions such as mortgage rates and property prices and rental values.
Each purchase offer is calculated independently; however it is usually a maximum of 80% of the property value, often as low as 50%. Some of these companies state that you can remain as tenants for as long as you wish.
2. Standard Sell and Rent back with no long-term security
There are several companies which do not guarantee a long-term tenancy - in other words, they can ask you to vacate the property so that they can re-sell to make a profit. One company's website stated the following:
"we don't provide lifetime guaranteed rent back periods. The length of time you can rent back the property for should be discussed and agreed on with your consultant. We are wholly in the business of renting properties for the long term but due to factors outside our control we can not usually provide a legal guarantee to reflect this intention"
Obviously, these companies must be avoided as it is very likely that you will not be a tenant at the property for very long.
3. We'll Pay 100% Full Market Valuation
One quite large sell and rent back company claims to offer 100% full market valuation - but this is not really the case. They pay 70% on completion and the remaining 30% in 10 years time, when you will have to vacate the property. If you want to stay longer than 10 years, the 30% payment is deferred even longer (20 years). It is also worth noting that these offerings are also often accompanied with high, inflated rental charges and surprisingly 'low' valuations!
Also, the final 30% payment does not take into account that the property has increased in value or include any inflation or added interest accrued over time. The customer is simply having to wait for a payment for ten years time so that the company can earn from the property's rise in value, the interest and extra rent being charged.
4. Sell and Rent back with Rent Rebate
This type of offering is very similar to the standard sell and rent back deal, however, it also offers the customer a 50% rent rebate after 3 years. So, if you have paid all your rent on time and been good tenants, the company will award you by paying 50% of your rent back.
Sounds good, however, these companies did not make it clear how much they would initially pay for a property and how they would calculate the rental payments. It may be less attractive if the rent is higher than the market rate and the purchase price is lower than the real property value.
5. Sell and Rent back with Profit Share
The Home Alliance have just launched a brand new sell and rent back offering which includes a 'profit share' in the property. This basically means that you will be offered an initial purchase price plus an additional profit share of any future growth in the property. The split between the purchase price (amount of equity released on completion) and the profit share (amount kept in the property as an investment) is totally up to you!
This new offering recognises the fact that people want to break free from high mortgage payments and loans, they want to release some cash now but also want to hold onto to their long-term property investment. Property prices always recover and go up and it is imperative to continue having a long-term investment in property - over the last 30 years they have doubled every ten years (on average). The Home Alliance releases cash to those who need it but also enables them to keep some of their equity in the property whilst they reduce their costs as a tenant.
Sell and rent back with profit share is by far the most inventive and promising offering to date. It provides customers with an offering tailored to their individual needs, and one which will keep them on the property ladder by providing them with a future investment in their own 'tenanted' home.
