Sell and Rent Back: What you need to know

Sell and Rent Back: What you need to know

The market in “sell and rent back” has boomed incredibly over the past couple of years.

Originally there were just a handful of established companies in this market – but the tail-end of the property boom has brought in a massive influx of property speculators who have entered this market as an alternative to buy-to-let.

The result is that now consumers are faced with the very real danger of signing over their property to cowboys that could leave them out of pocket and out of home.

What is Sell and Rent Back?

Simply put, when your finances are bad and mortgage payments are too much, at best you can either move into a smaller property, or at worst, face eviction.

The third option else sell your property to a company that will let you rent it back from them, hence the term sell and rent back.

The result is breathing space to re-manage finances, get back on your feet – and even buy your home back afterwards.

The catch is simple – you’ll sell your property at a lower than market price, on the basis that the agreement and sale can move through quickly.

It’s an arrangement of convenience, and infinitely better for some people than facing bailiffs and being thrown out of your own home.

Why it makes sense to sell property for cash, and at a lower price

Selling a property on the open market means an inevitable wait. Depending on the property type and area, and especially demand, in less than optimum conditions you could be waiting months for a sale to be agreed – and then another 2-3 months for the sale to conclude.

If you’re looking to sell quickly for whatever reason, this process is anything but welcome.

Therefore basic principles applied across any business come into effect – if you want to sell something faster, you offer a discount.

Supermarkets do it all the time – discounts offered such as “20% off” and “Buy 1 get 1 free” are used solely to help sell stock quickly.

Personal experience of selling for less

Of course, property values are generally much higher than a packet of biscuits, so the potential personal loss of wealth and equity from selling fast and for less only make sense under certain conditions.

I can speak from experience here from a few years ago.

The very first property I owned was in awful condition. While I had planned to do the place up beautifully, I found that I had neither the time nor funds to do so.

Our decision was simple – keep bringing up young children in a rough inner city, developing the property for a year, and then put it onto the market – probably for around £56,000.

Or else just cash-in, move to Scotland, and use the £45,000 from the discount sale as a deposit on a nicer home.

I chose the second option because it always made sense, and I’ve never looked back.

Choosing a company carefully

While I’m sold on the concept working – that you can sometimes need to sell at a discount to sell fast – the emergence of so many cowboys on the market now means you should be very careful who you enter into a quick property sale with.

There are three particularly established companies in the UK for the sell and rent back market:

All have been operating for a number of years, and work to generally strong code of practice.

So while each will be keen to buy your property at a discount, you shouldn’t have to worry about the problems cowboys can bring to the situation.

You should also absolutely avoid any company which does not have a company number on its own website.

There are a load of websites masquerading as sell and rent back companies, but in reality, are just lead generating sites.

Simply put, you contact the website owner, and they simply resell your lead to the highest bidder. Which means there’s no quality control whatsoever, and your interests are being sold on a platter.

Overall

The sell and rent back market is opportunist – there’s no getting away from that – but there is a very real niche in the property market where these companies serve a useful purpose.

However, property speculation, inexperienced property investors, and simply greedy individuals, have since entered this market in droves, driven by the scent of easy money.

The National Landlords Association has set out a set of guiding principles for sell and rent back companies to adhere to, but it remains for consumers to stay on their guard.

After all, a property is probably the most valuable asset anyone can invest in – if you have to cash out of this, you obviously need to ensure you have a company on board that can make the process as simple and painless for you as possible.


Comments (2)

Trackback URL | Comments RSS Feed

  1. James says:

    Well explained!! We were looking for some wonderful post about the sell and rent back Thanks mate!!

  2. Regulating this market is something which we in the industry have been looking forward to for a number of years. I only hope that the FSA has the resources and the will to weed out the more unsavoury businesses from this sector.