According to the Financial Times, there’s a growing number of companies offering to buy your home off you and let you rent it back from them if you are in financial difficulties.
The companies target those who need to raise cash quickly, such as those who are about to be repossessed, yet wish to remain in the same house, paying less per month as they were for thier mortgage.
These companies agree to buy homes for 70 to 80 per cent of their market value and pay all relevant fees and costs. In return, sellers get the chance to rent back their homes at a rate less than their previous monthly mortgage payments.
Whilst this might seem like a good option for those in such difficulties, as with most industries, it pays to be wary – in some cases, the companies have bought the houses and subsequently evicted the “tenant” when they’ve found a buyer. Obviously, I’m not saying that all of these companies are capable of doing this, but as they are unregulated, it pays to be a little cautious. Some of the firms only guarantee tenancy for 6 to 12 months, whilst others may guarantee tenancy indefinitely.
Whilst the majority of us would probably not wish to be in such a situation, for others it may just be a way to release equity in their house quickly.
How do these companies make profit? Simply by buying below market value? That sounds very dubious to me…
Yep, sell for 70 – 80% of the market value, rent it out for a period of time and then sell it for a juicy profit. Of course it could be dubious, and hopefully it’s not a situation many of us are likely to get into.
If you think about it, this is a very good idea for people that are in financial difficulty. However, It must be very difficult for someone to sell their house and rent it back as it means the property isn’t theirs anymore. Also finding this property was difficult. For exmaple, its quite difficult to buy a house in Brighton