There have been recent talks about Angel Investors buying properties and allowing the previous owners to lease back from the investor. It’s funny that this is now “news” since it was in the paper last week, but the fact is that it has been around for years.
So what is an Angel Investor? Housing angels come in to buy homes from distressed home owners and allow the sellers to stay in the house at market rent. They purchase the properties through the short sale process. The terms can vary, but generally, the distressed sellers typically sign 2 or 3 year leases at market rent. At the end of the lease, they agree to buy the home back at appraised value.
It may seem odd that such a simple solution exists for distressed home owners. Many people find it suspicious when others are willing to help for what seems little gain. In reality, these investors are buying these homes at incredible discounts. Even some of the homes I helped investors buy last year for $30k and $50k are now at $70k and $80k. In addition, with inflation coming around the corner, buying these homes for cash are the safest investment where they often collect over 12% ROI every year. Even if they sell the home at the same price they bought it for, they will still come out ahead on the monthly cash flow.
So this turns out to become a win-win-win situation. The home owners don’t have to move and stay at market rent if they like, with the option to buy back later. The investor makes money on the deal any way you slice it. And finally, the investors keep the real estate market from going any lower. As the investment vehicle appears better, more and more investors come in.
Homeowners should always look at all the solutions if they get into financial difficulty. This approach can be a good option as a ‘last resort’.
.-= Clive´s last blog ..Piemonte houses =-.
This is great news. Its a wonder why the positive side of the real estate industry/downturn is ever highlighted. Thanks for the possitive news!
We could use some angel investors in the Oakland and San Leandro areas. It sure could make a big difference to many owners in a tight situation.
.-= Piedmont Real Estate´s last blog ..A brief explaination of the 2010 California Tax Credit for First Time Buyers and New Home Purchases =-.
I guess it would only be surprising if these investors were buying the houses in short sales. In that situation a deal to sell the house back to the previous owner would only hurt the bank. Otherwise it is a good deal for the investor, and probably not the best deal for the seller unless the seller just cannot find any other way to hang on.
.-= Homes Sale San Diego´s last blog ..San Diego Homes Sale Prices Up =-.