Real estate lease-back ?
Crowdfunding and lease-back, or how to add the solidarity dimension to our real estate investments.
Real estate lease-back: Real estate lease-back allows a person to make his or her real estate assets liquid. The need to obtain cash is diverse: temporary financial difficulties, need for investment for his company, purchase of a property more suitable for seniors, difficult professional situation following an accident, etc… By selling his property with a repurchase option (sale with a repurchase option), the owner sells his property, but he retains the right to repurchase it at a price agreed at the time of sale for a period of up to 60 months. The owner-seller therefore becomes a tenant of his former property during the lease-back period until he can redeem it.
Purchasers: in general, they are one or more natural persons who group together through a lease-back platform to buy the property in the form of an indivision. Buying a property occupied by a tenant allows you to collect rents with yields ranging from 5% to 6.5% per year.
Discount and costs: The property to which the lease-back relates is sold at an agreed price which includes a discount from the market price generally of 35% and is generally redeemed at 75% of its value to take into account the reimbursement of disbursements (notary fees, agency or advisory fees). On the buyer’s side, buying a discounted property is attractive in the event that the redemption option is not executed. The buyer will be able to resell it quickly by selling it at a lower price than the market.
Risks: The risk of vacancy of the property is non-existent because the owner remains on the premises throughout the lease-back The buyer is protected from non-payment by the introduction of a guarantee but above all by the fact that the tenant in the event of non-payment loses his right of redemption. The lease agreement is then terminated and the property can be put up on sale by the buyer. According to our observations, the real estate lease-back platforms do a thorough analysis work upstream and only 10% to 15% of the files end with a sale on the market.
The difference with rental investment?
The differences with a traditional rental investment lie primarily in the duration of the investment limited to 5 years by law, the discount of the property at purchase, the repayment of disbursements at the time of redemption and the absence of a rental vacancy. Of course, there is also the solidarity and responsibility dimension of this type of investment, which gives people benefiting from this approach a second chance.
Lease-back as it is practiced?
Real estate lease-back is an investment in LMNP generally carried out through joint ownership, and benefiting from a total or almost total tax deduction over the duration of the investment. The other side of the coin is that the entry ticket will remain high for an investor, this down payment will probably constitute a large part of his savings, and will probably not allow a dilution of the risk within the portfolio between several investments. For this reason, platforms generally set up an indivision between investors in order to reduce the entrance fee. In practice, the number of investors is limited to 4.
Crowdfunding and real estate lease-back
EuroRaiser strongly believes in the enthusiasm of this generation of investors to invest in projects where the return dimension is important but not necessarily essential. We see it on matching donation platforms, local business financing, renewable energy project financing.
EuroRaiser has added the solidarity dimension to crowdfunding rental property. Together with our partners, we choose the lease-back deals that correspond to our criteria and values and put them online.
Crowdfunding of solidarity real estate
The asset is acquired by a EuroRaiser partner investment company that will use EuroRaiser members to finance the equity capital through a bond issue. The bond rate is calculated on the basis of the rental yield of the property proposed by the lease-back companies, plus a percentage to cover withholding tax aspects when interest is paid. In order to compensate for this higher rate, bank leverage is used to make the purchase.
The investment company acquires the property and receives the rents. Its income is used to repay coupons each year, bank loan interest, fees and taxes. When the property is resold, the principal of the loans is repaid.
In the end, the investor can generally subscribe from 1000 euros in a real estate lease-back operation without having the worries related to the management of an undivided interest with the same level of net profitability as that proposed by the real estate lease-back company.
For any further information please contact us at firstname.lastname@example.org.