Financing A Rental Property

Financing a rental property and or leases are a means of financing real estate even though tenants do not acquire fee ownership. Whether the tenant is a bachelor receiving the use of a $60,000 apartment for which he pays $650 rent per month, or a large corporation leasing a warehouse for 20 years, leasing is an ideal method of financing when the tenant does not want to buy, cannot raise the funds to buy, or prefers to invest available funds elsewhere. Similarly, farming leases provide for the use of land without the need to purchase it. Although some farm leases call for fixed rental payments, the more common arrangement is for the farmer to pay the landowner or landlord a share of the value of the crop that is actually produced-say 25%. Thus, the landowner shares with the farmer the risks of weather, crop output, and prices.

Under a sale and leaseback arrangement, an owner-occupant sells the property and then remains as a tenant. Thus, the buyer acquires an investment and the seller obtains capital for other purposes while retaining the use of the rental property. A variation is for the tenant to order a building constructed, sell it to a prearranged buyer, and lease it back upon completion. 

Financing A Rental Property To Seller Financing