Today, real estate investment appears relatively unattractive due to very high prices in major cities and steadily falling prices in rural areas. To obtain attractive returns, it is essential to think outside the box and not hesitate to place oneself on atypical products such as the sale with repurchase. A system still poorly known to the general public that can offer you high profitability.
The principle of the sale with repurchase consists for the salesman to become tenant of the good sold and to repurchase it at a price agreed from the beginning within the limit of five years. Concretely, the seller and the buyer sign a deed of sale as for any real estate sale. The deed has the particularity of including a clause called the right of redemption. This specifies the redemption price and the maximum period available to the seller to exercise it. A lease or an occupancy agreement is signed simultaneously so that the seller remains in the property.
As a buyer, you collect the rents during the rental period and collect the difference between the buyback price and the sale price when the seller exercises his option to buy back. You thus benefit from two sources of income, rents and the resale margin.
Due to the repurchase option reserved for the seller and the rental of the property, you buy the property at a discount of approximately 30% compared to its real value. Depending on the arrangements, rents can range from 6% to 10% of the sale price. You also benefit from a redemption margin of between 0% and 10% of the selling price. You can therefore expect a return of 6% to 15% annually. In addition to this attractive profitability, you have the advantage of being protected against the fall in the real estate market since you bought the property at a discounted price.
The majority of sellers make a repurchase sale because they need urgent financing and are unable to pay their monthly loan payments. They are sometimes in the process of foreclosure and risk seeing their property sold at auction. To solve their problems of over-indebtedness, the sale with repurchase is often the last resort for these owners who wish to keep their property.
The sale of the property for repurchase allows them to settle all of their credits and continue to occupy it. As soon as their bank accounts are cleaned up, they buy back their property at the price agreed at the start of the operation. Thanks to the repurchase, they keep a property to which they are attached and settle their debts.
Under these conditions, the repurchase sale is a successful operation for both parties. The investor benefited from a profitable investment in the property and the seller managed to get out of debt while keeping his property.
However, the sale with repurchase is not without danger. It is necessary to be attentive to the ability of the seller to be able to buy back his property before committing himself. Otherwise, you risk finding yourself with an eviction and litigation to manage. Some unscrupulous buyers have sometimes taken advantage of the sellers’ distress to make redemptions and definitively acquire the property at a discounted price. It is important to respect a certain ethic. As the operation is already costly for the seller, it must be beneficial to him.
Before embarking on this type of operation, it is essential to meet the sellers and build trust by discussing the project in detail. It is preferable to be accompanied in your steps by a specialized company.