Sales with Guaranteed Rental

Sales with Guaranteed Rental, also known as Sale & Leaseback in Anglo-Saxon countries, allows an investor to acquire a home to capitalise upon through rental, but with a tenant from the very outset, as this deals with homes owned by individuals usually over 70 years of age who wish to obtain the sale price of their home but remain living there as a tenant. Thus, at the same time as signing the Bill of Sale, the Rental Contract is formalised with the buyer until their death (life annuity method) or for the period that the Senior Citizen wishes (temporal annuity method, for 5, 8, 10 years, etc.).

 

Sale with Rental or Sale & Leaseback operations managed by Grupo Retiro are analysed and assessed advised by our team of professionals so that their economic conditions are adjusted at all times to the market situation. Nevertheless, as in any sale and/or rental, the parties will be free to determine the final legal and economic conditions of each transaction.

  • Sales price: to establish this price a comparative analysis of market value in the area, complemented by the issue of various Automated Valuation Model appraisals with the main valuation company, we also evaluate the possible revaluation projection in the future, as well as the Housing Association costs (Technical Inspection of Buildings, necessary renovations, improvements to the home), contributions (Land Value Tax and Urban Waste Rate), etc.
  • Rental price: the monthly income will be determined in accordance with the market value for homes with similar characteristics (location, surface area, age, state, community services, etc.)
  • Final conditions of the operation: from the sale and rental price of the home, the profitability that the operation will have for the buyer is analysed, guaranteeing that this is adjusted to the average profitability of home rental in the area. This means that in certain operations, sales prices of these properties have a discount of between 10-25% compared to market prices, to obtain profitability demanded by investors.
  • Gastos e impuestos que tiene que asumir el comprador de una vivienda con alquiler garantizado o sale & leaseback: El comprador de la propiedad, asumirá los gastos e impuestos propios de cualquier compraventa, es decir, el Impuesto de Transmisiones Patrimoniales, así como los honorarios de Notario y del Registro de la Propiedad. Si se establece un aplazamiento del precio de la compraventa el mismo se garantizará en Escritura mediante la correspondiente Condición Resolutoria, la cual conlleva un Impuesto de Actos Jurídicos Documentados que será también a cargo del comprador. En relación a los gastos anuales de la vivienda, como en cualquier arrendamiento, el propietario asumirá todos los gastos de la Comunidad y del IBI, mientras que el inquilino se hará cargo de los suministros de la vivienda y de la Tasa de Residuos Urbanos si existiera.

The methods or types of Leaseback vary depending on the lease term that the seller wishes to establish, as in all cases the basic scheme consists of the sale of a property in which the seller (Senior Citizen) simultaneously establishes the Rental Contract on the property being transferred.

  • Sale with Life Annuity / Life Sale & Leaseback method: upon the sale of the home being formalised, a Life Rental Contract is formalised, so that the seller guarantees being able to remain as tenant of the property until their death or until they decide to end the rental, although the obligation to remain for a minimum number of years is usually established. The average period of use of the homes by Senior Citizens is usually between 10 and 15 years.
  • Sale with Temporary Rental / Temporary Sale & Leaseback: in this case the Leaseback is carried out through the sale of the home and the simultaneous signing of a Rental Contract for a determined period (5, 7, 10 years, etc.), which will terminate the contract when finished.

The main advantages that Sales with Guaranteed Rental have for the buyers of properties are the following:

  • Making a property investment with guaranteed profitability from the outset, as with the Bill of Sale the Rental Contract is simultaneously established, where the seller becomes a tenant receiving a monthly income in accordance with market price and has timely updates of the Income depending on the corresponding Consumer Price Index each year. Forget about having to update or renovate the home before beginning to rent it, looking for a tenant, losing months without charging rent, or undergoing the constant changes of tenants, with new expenses of cleaning the home for new tenants. Profitability of these operations is in the region of 5 to 7%.
  • Having the “best tenant” in the long term: the tenant of the home is the same person as who sold it, and is therefore the “perfect tenant”, as they will take care of the home as if it were their own, because to all intents and purposes it still is. Furthermore, these Tenant Contracts tend to be long term, guaranteeing profitability of the home acquired from the beginning and maintained, without suffering periods without income.
  • Enjoying special bill of sale conditions, due to these operations having a discount on real market prices (10-25%), and in many cases you can pay off the house with deferred payments during the first 2-3 years, which improves the profitability of operations.
  • Renting the home with maximum safety and peace of mind: the tenants, usually retired people, will count on the security of the income they receive from public pensions, as well as the significant capital that they obtain from selling their home, capitalising through payment of monthly rent without problems.
  • Incorporating a significant property asset into your portfolio from the outset. You are the sole owner of the home, without any kind of limitation. It is a conventional sale with all ownership rights.
  • Having almost certainly good prospects for the future, as the home is revalued over the years, as these are mid to long term rentals. Likewise, now is a great time for acquiring property, as prices have corrected themselves and according to experts will rise in the future.
  • The option of obtaining financing, as acquiring full ownership of the property you will be able to take out a loan with the mortgage guarantee of the home.

Like the Senior Citizens, investors have their rights fully guaranteed, as Sales with Guaranteed Rental operations are carried out with total transparency and within full legality. In this sense, the main guarantees of these operations are:

  • The purchase being formalised in a Public Bill of Sale before a Notary Public, registered in the corresponding Property Register. If in the sale there is any deferral of payment, this is always guaranteed through the Resolutive Condition.
  • The Rental Contract, established simultaneously with the Bill of Sale, is also public, also registered in the Property Register, providing the full legal guarantee of the situation before third parties.
  • The Rental Contract is written by Solicitors specialised in this product who guarantee full faithfulness to the requirements of the Urban Renting Act, taking care of the interests of both parties. Likewise, all legal requirements are fulfilled: liquidation of the Tax on Capital Transfers and payment of the deposit before relevant Municipal Bodies.
  • The agreed income is subject, within the Law, to its corresponding updating, with which it will be re-evaluated or will depreciate in accordance with the annual Consumer Price Index, which will lead the Rent to always be adjusted to current market prices.
  • In accordance with article 16.4 of the Urban Renting Act, and being Rental Contracts lasting over 3 years, the subrogation of the rental of the home to third persons is impossible after the death of the tenant.

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