QandAs: Home

What is a Leaseback?

Answer:
A leaseback may refer to a real estate transaction

in which an individual purchases a property, and then leases the property back to the original owner or seller. There are many reasons why a buyer and seller consent to a leaseback agreement. The original owner is generally motivated and sells the property at a "below cost" price.

This maneuver attracts potential buyers and assures a quick sale. On the other hand, some buyers frequently view leasebacks as a great investment tool that can bring in a sizeable return. Monthly rent or lease payments are normally enough to pay the entire mortgage expense, and in some instances, new owners collect a steady flow of passive income from a leaseback.

Leasebacks are advantageous to the seller because they can continue to occupy a property, and profit from the sale of such property. In other words, a leaseback frees up their capital or allows them access the property's equity minus a second mortgage . Leaseback arrangements vary. Many buyers do not plan to occupy the property, and a leaseback is merely an investment strategy. In this situation, the buyer may give the original owner the option to buy back the property at a later date.


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