Using Leaseback Financing for Short-Term Funding

Leaseback financing is an option if you are looking for short-term funding. You do need to own property that you are willing to give up ownership of in order to participate in this type of funding. However, it can be an option if you need money but don’t want to get tied into a long-term financing situation.

How It Works

Leaseback financing involves you selling your property to an investor. The investor will lease the property back to you. There is a set time period for this lease at the end of which you will then either just end your lease or have the option to buy back your property. During your lease period, you will have to pay monthly rent.

If you are looking into this as a short term option, you should remember that you will need to have the money to buy back the property at the end of the lease or you should be prepared to move on and give full ownership to the buyer. 

More Money Than a Traditional Mortgage

A benefit of a leaseback situation is that you can get a lot more cash than you would if you sold the property straight out. In addition, you have more negotiating power, and you retain the ability to use the property any way you want without normal rental conditions during the term of the lease.

Better Financial Profile

This type of financing allows you to create a better financial profile. This can be beneficial if you are trying to boost your credit for getting other funding. It eliminates the debt of the mortgage and introduces a deductible debt for monthly rent payments. Not to mention that you would now have the amount of money you got from the sale of the property. So, you will look much more appealing to traditional lenders.

Some Things to Keep in Mind

It may be difficult to find an investor that is willing to do this type of financing for a short term situation. Many investors want to be able to earn back their investment over time. However, you can make it more attractive if you make sure you prove that you will be able to buy back the property at the end of the lease. This way, your investor will know that he or she can expect to recoup their money when all is said and done.

Leaseback financing is something worth considering if you are looking into alternative financing options. It may not be for everyone, but if you own property and want to use it to help boost your working capital, then it could work for you.