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An alternative to classic acquisition: The real estate leasing model

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Variations of real estate leasing

If a lessee does not wish to purchase the property through traditional real estate financing, a real estate leasing provider can be commissioned instead to be the lessor. There are three different variations of contracts with which this can be done.

New building leasing

The lessor purchases a plot of land, tailored to the lessee's requirements and specifications, and builds the property there. This is possible for both commercial and residential properties.

Buy-and-lease

Here, the real estate leasing provider acquires an existing property. The lessee chooses the property. The lessor rents the house or flat to the lessee; usually a right to purchase is also included in the real estate leasing contract.

Sale-and-lease-back

Sale-and-lease-back is a contract used by companies to bridge financial bottlenecks. A company sells the property to the lessor but receives the right to use the property from the lessor.

Example of real estate leasing

If you would like to obtain the right to use a property, such as a condominium, and are considering the option of leasing for this purpose, you have the option, for example, of signing a partially amortised leasing contract. Here, you decide to lease the flat, live in it during the term and agree on a fixed amount to be paid to the lessor each month. A contract is drawn up for this. The amount of the leasing instalments, the leasing period and other agreements are legally stipulated in the contract. The right of first refusal at the end of the period can also be stipulated in the contract. The economic residual value at the end of the lease term is contractually determined. The usual term is between 20 and 30 years.

Whether leasing is worthwhile should be calculated precisely beforehand

Costs for the lessee

There are various advantages and disadvantages of real estate leasing. Whether leasing is worthwhile should be calculated precisely beforehand. One important factor is the costs that you will incur as a potential lessee. The leasing instalments represent fixed costs that you determine in advance. They are made up of interest, repayment and the administration fee. In addition, you will incur further costs for maintenance, repairs and insurance of the property. If you also want to buy the property after the contract expires, the other costs include the outstanding balance as well as ancillary purchase costs such as land transfer tax, notary fees and land registry costs.

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