Sell House To Short-term Investor But Stay Living There As Guaranteed Tenant.

[sausage3]

My wife would like to sell her house but have a contract linked to the sale stating that she remains living there as a guaranteed tenant for 2 years and then after 2 years be able to buy it back for the same price it was sold for. This seems like a great short-term investment opportunity for someone but can anyone think of any potential problems that may arise?

It's a new build on a small moo baan just outside of Chiang Rai, purchase price was 2.6 Million baht and she's suggested selling it for 2.2 Million but have a rental contract for 3 years paying rent of 10,000 baht per month but at some point during the 3rd year be able to buy it back for the same price, 2.2 million baht. Would it be possible to have a legally binding contract linked to the sale which states all this and stops the new buyer from altering anything, preventing her from staying there or not selling it back to her? It seems like a good investment opportunity as the person who buys it would make between 240,000 and 360,000 profit depending on when she bought it back and if she didn't would have a house that's worth more than the 2.2 Million that was paid.

Any thoughts kindly appreciated but please try to limit the usual nonsense about farang buying homes for thai women etc as it's not relative in this case, she bought it with her $$$.

Thanks

[MrRichard2009]

There is such a thing as "The right of first refusal" ..... meaning the new owner has to offer it to you first but you can refuse.

[emsfeld]

Just out of curiosity - have you actually found an investor willing to get into this deal?

[trogers]

Just out of curiosity - have you actually found an investor willing to get into this deal?

No real property investor will bite.

Min. return on a Bt2.2m investment (after proper valuation) will be 12% pa or Bt240k a year.

If this is deemed not reasonable, try mortgaging the house.

[torrenova]

Are you are saying the house is worth 2.6m ? If so, then 120k a year is only 4.6% with no capital appreciation.

As well as the impossibly poor return, a short term investor would need to be sure of an exit route and there is no guarantee that your wife would have the money to buy it back.

There are property transfer fees as well. Twice.

If it is really worth 2.6m then the 2.2m cash is still high if the investor had to liquidate because your wife could not repurchase. It is really only a 15% reduction and you might have to reduce prices 30% to get a quick sale.

The deal could be structured for sure but borrowing the money from the bank is going to be so much cheaper. The only other option which might work is an outright sale with a 3 year tenancy attached meaning that the new investor has a tenant for the first 3 years. Adding in repurchase clauses makes it too expensive.

[stgrhe]

First the OP needs to find out whether such a contract violates the law or nor. It is important to understand that if a contract is signed, and part of it is against the law, then that part of the contract will not be valid. To me this rather complex structure needs first be checked by a lawyer.

[torrenova]

First the OP needs to find out whether such a contract violates the law or nor. It is important to understand that if a contract is signed, and part of it is against the law, then that part of the contract will not be valid. To me this rather complex structure needs first be checked by a lawyer.

How on earth could it break a law ? As far as I can see it is a sale, call option, lease and sale (or not). Nothing illegal in that. Lease is under 3 years so no need to register. Enforcing it might be one thing but that would be breach of contract, not a breach of law.

[emsfeld]

Just out of curiosity - have you actually found an investor willing to get into this deal?

No real property investor will bite.

Min. return on a Bt2.2m investment (after proper valuation) will be 12% pa or Bt240k a year.

If this is deemed not reasonable, try mortgaging the house.

Yup. That's what I figured as well - it's not really a good deal for an investor as it is being offered by OP. And yes - the first thing that came to my mind too, it's a call option. Options in general are a good deal for the party at the short end

[ozsamurai]

In essence you are asking for a private lender is all, capital assets for underwriting the loan is the house, interest on the loan is rent, easy contract, but as most have said not worth it for the lender.

Oa

[quiksilva]

In industry circles we call this a sale and leaseback. Its more commonly found in commercial property, no legal issues with it at all.

Now assuming that you can find an investor that will accept your rental terms, there should be no problems so long as the contract is drafted well. You will of course have to ensure that any creditors are paid.

The important issues to cover are the usual lease terms, the buy back clause, and the first right of refusal.

There are no hard and fast rules as to what should be done, but investors usually prefer a long lease term of 10 years plus (remember a registered lease protects your interests too). The required returns will depend on the investors' perception of risk. 12% sounds about right to me given the value of the asset, although some may accept a little less.

Its usually preferable for the tenant to set the price in buy back clause, or a mechanism for computing the price. How and when that can be executed will be another key point.

The right of first refusal is also important, but one thing you must understand that once it is exercised, its gone. So draft accordingly.

[dr_Pat_Pong]

In industry circles we call this a sale and leaseback. Its more commonly found in commercial property, no legal issues with it at all.

Now assuming that you can find an investor that will accept your rental terms, there should be no problems so long as the contract is drafted well. You will of course have to ensure that any creditors are paid.

The important issues to cover are the usual lease terms, the buy back clause, and the first right of refusal.

There are no hard and fast rules as to what should be done, but investors usually prefer a long lease term of 10 years plus (remember a registered lease protects your interests too). The required returns will depend on the investors' perception of risk. 12% sounds about right to me given the value of the asset, although some may accept a little less.

Its usually preferable for the tenant to set the price in buy back clause, or a mechanism for computing the price. How and when that can be executed will be another key point.

The right of first refusal is also important, but one thing you must understand that once it is exercised, its gone. So draft accordingly.

The age of miracles .......

[PattayaPositive]

I think everybody is a little bid to negative here.

I think you could find yourself an investor to do so but it must be someone who knows the market very well and therefor knows the price is ok.

If you find such an investor I think the most important thing to do is that you register the lease at the landoffice.

In this case you can not get kicked out.