How to sell your house and rent it back

Rates and Fees verified correct on December 3rd, 2016

Sell your house and rent it back2 -feature image

Selling your property and renting it back means you can free up cash without uprooting yourself.

If you need to sell your home but don’t like the idea of moving, you could consider a situation where you rent the property back off the new owners. This option can enable you to stay in your current home, while also freeing up funds for other purposes.

Why would I sell and rent back?

There are a number of reasons you might wish to sell your home and then rent it back, including:

1. Freeing up funds for investment

You might want to free up some capital to invest in another property or perhaps in shares. If you want to do so without having to move, you could consider a sell and rent back situation.

2. Difficulty servicing a mortgage

If you’re in over your head with your mortgage and have exhausted other avenues to keep your home, you might have to sell to avoid foreclosure. Entering into an agreement to rent the property back can potentially minimise the upheaval of this situation.

3. Building a new house

The process of building a new house can take many months from start to finish. Selling your current property and then renting it back can provide you with funds to finance your new home, and gives you a place to live during the construction period.

4. Flexibility of renting

Home ownership simply isn’t for everyone. You might find you don’t want the long-term commitment of owning a home, or the associated repair and upkeep costs. A sell and rent back arrangement takes away the commitment of home ownership without the stress of moving.

How can I do this?

While rent and sell agreements are common in some countries, only a few companies in Australia specialise in these arrangements. It’s more likely that you’ll have to make renting a condition of the sale. You’ll want to engage a solicitor to help draw up a contract stating that the buyer of your property will rent it back to you at an agreed price for an agreed period of time. You might also want the contract to stipulate that if the buyer decides to sell the property you’ll be given the first right of purchase.

The pros and cons of renting your old house back

Make sure you explore all the risks and benefits of sell and rent back agreements before deciding if this arrangement is right for you.

Pros

  • Allows you to free up capital
  • Allows you to stay in your current place of residence
  • Could negotiate below-market rent

Cons

  • Could limit the number of interested buyers
  • Could lead to a lower sale price for your house

It may be difficult to make the shift from owning your property to being a tenant

Should I buy a house and rent it back to the seller?

If you’re a property investor, it could be wise to explore arrangements where you rent a property back to the sellers. You can get the benefit of guaranteed tenants and rental income, and could possibly negotiate a lower sale price. You might also find tenants that previously owned the property will be more conscientious in the way they treat it. In some cases, though, they could still feel as if they have ownership of the property, so make sure you read and agree to all the contracts and conditions before buying a property under this type of arrangement.

Adam Smith

Adam has more than five years of experience writing about the Australian home loan market.

Was this content helpful to you? No  Yes

Related Posts

HSBC Home Value Loan - Resident Owner Occupier only

Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

ME Bank Basic Home Loan - LVR <=80% Owner Occupier

A low variable rate loan with no application or ongoing fees.

NAB Choice Package Home Loan - 3 Year Fixed (Owner Occupier)

Receive discounts on interest rates with the Choice Package. 250,000 Velocity Frequent Flyer point offer, conditions apply.

Ask a Question

You are about to post a question on finder.com.au

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the finder.com.au privacy policy, receive follow up emails related to finder.com.au and to create a user account where further replies to your questions will be sent.

Ask a question
feedback