Better Living at Home

The Sale Leaseback Process: A Guide

September 30, 2022
The Sale Leaseback Process: A Guide

Are you considering a sale leaseback arrangement but aren’t sure how to begin? The sale leaseback process is a unique way to stay in your home while turning 100% of your equity into cash flow.

So, what is a sale leaseback? Selling and leasing back the use of an asset has long been a business practice for commercial real estate and equipment, but using this sale leaseback arrangement to unlock equity for residential property is a relatively recent evolution. 

Let’s explore whether a residential leaseback agreement is a good fit for your needs, and what the process entails.

Who’s Eligible to Enter a Sale Leaseback Agreement?

If you own a home and have a combination of equity and future income or current assets that will allow you to commit to monthly rental payments, you’re eligible for a sale leaseback (SLB). 

There are several sale and leaseback advantages and disadvantages to consider. But more homeowners are choosing this option for advantages like flexibility, freedom from debt, and ability to translate their equity into cash flow to help with financial needs, retirement planning, or business ventures.

When a Sale Leaseback May Benefit a Homeowner

Consider Jane and Bob, both in their early fifties. They bought a house in 1998 and are six years away from the end of a 30-year mortgage term. During that time, they raised two children, fenced in the backyard for a couple of hounds, and made close friends among their neighbors. 

With both kids now living in other states, Jane’s turned one bedroom into a craft space for wintertime quilting, and Bob uses another for freelance consulting work, making it a tax-deductible home office. 

Their home works for their needs, but they’d love to have someone to call for leaky faucets and to handle replacing the aging roof—Bob and Jane would rather spend time and money visiting their children and traveling for fun than dealing with house repairs and upkeep. 

After considering multiple options, Jane and Bob decide on a sale leaseback agreement. It’s the right fit for them because they: 

  • Want to continue living in their current home
  • Want to avoid the work, time, and stress of maintenance and repairs
  • Don’t have heirs who want to keep the property in the family
  • Are under the age 62 limit for a reverse mortgage

Financially, an SLB transaction will allow them to: 

  • Pay off their mortgage and avoid taking on more debt
  • Turn 100% of their home equity into cash for travel and retirement investments
  • Stop paying for repairs, maintenance, and property insurance and tax
  • Budget for a stable monthly lease payment and utilities

What Are the Requirements of an SLB transaction?

Qualifying for a sale leaseback transaction is simpler than other home equity solutions because it’s not a loan. Rather than a lender, you’re working with a sale leaseback provider. 

While mortgage lenders operate under a combination of government restrictions and in-house calculations to come up with fairly standardized credit score, income, and debt requirements, SLB providers are acting as home buyers and landlords, which allows for more variance in qualifications. 

For instance, Truehold typically works with homeowners who have: 

  1. A single-family home worth between $100k and $500k
  2. Enough home equity and/or liquid savings to cover at least three years’ rent.

Some other providers require: 

  • Specific debt-to-income ratio limits
  • Proof of income
  • High credit scores

The Sale and Leaseback Process

Like any major real estate transaction, an SLB should start with some research on your part because it is important that you understand how to evaluate a sale leaseback. So before you opt for sale leaseback financing, be sure you understand: 

  • Different loan and sale options available to access equity to choose what’s best for you
  • Today’s real estate market (as of mid-2022, it’s still a seller’s market)1
  • How your home equity is determined through property value and mortgage principal
  • Trends of sale and rental payments on homes in your neighborhood
  • Your credit score and whether your credit report contains errors you can address
  • Tax implications of an SLB versus other sale or loan options
  • Any lease agreement before you sign

With Truehold, you can convert your home to a sale leaseback transaction in as little as 30 days, or at your own pace. Steps include: 

  1. Request a no-obligation info kit and offer online or by calling 314-353-9757
  2. Talk with a Truehold advisor about your home and our solutions
  3. Receive an SLB offer including home price and rent cost and details to review
  4. Work with us to schedule an independent inspection and appraisal
  5. Consider the final offer, which will be presented based on both house and rent fair market value 
  6. Pay a one-time 5% transaction fee—no closing, moving, or appraisal costs
  7. Receive the full cash amount of your home equity in less than 30 days
  8. Stop paying mortgage, property tax, property insurance, and maintenance costs
  9. Begin paying monthly rent

Understanding the Terms of the SLB Agreement

Even though you can continue living in your home with no move and no new loans or debts, sale leaseback financing is a major change. We recommend that you: 

  • Engage a professional such as a real estate lawyer, agency, or mortgage broker 
  • Include any family members and friends you’d like in discussions with us
  • Review the details of both the sale and rental documents and ask questions 

We’re Here for You

If you’re ready to learn more about Truehold's Sale-Leaseback option, connect with us today for an info kit and get the ball rolling on a  free, no-obligation offer. Truehold is built on putting people first, and our expert advisors are happy to talk you through multiple options to unlock your home equity and plan for your future. 

You can call us at 314-353-9757, email hello@truehold.com, or visit our website

Sources: 

1. Consumer Affairs. Buyers market vs. Sellers market. https://www.consumeraffairs.com/finance/buyers-market-vs-sellers-market.html

Get a free info kit to learn more about Truehold's Sale-Leaseback.

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