Sale Leaseback Transactions: Condos That Pay You Guaranteed Rental Income

Sale Leaseback Transactions: Condos That Pay You Guaranteed Rental Income

Jan 26, 2021 January 26, 2021

If you’ve been looking for a real estate investment in a condo that you can rent for a steady income return, there is an investment type that you may not have heard of. “Leaseback condos,” “sale leaseback transactions,” or “leaseback incentive programs” are condo sale programs for pre-construction condos. It’s a unique condo sales transaction that not all buildings or markets have, but in Miami, it’s worth knowing about because it offers you a stream of guaranteed rental income for a period of time.

The sale leaseback transactions are structured to guarantee you a monthly rental income once the pre-construction condo project is ready for residents or you’ve closed on the deal. Recent Miami pre-construction or new construction condos with such transactions or programs include the pre-construction Legacy Hotel and Condos, Paramount Miami Worldcenter, Quadro just north of the Design District, and Smart Brickell. So, how does investing in a leaseback condo work? How do they guarantee you an income even when there are no tenants, and are they really worth the investment?

Read on for answers to these and other frequently asked questions about this guaranteed rental incentive program designed for condo buyers:


What is a Leaseback Condo, Leaseback Program or Rental Guarantee Program?

The condo leaseback program is an incentive offered to buyers, mainly for pre-construction condos. As part of the leaseback or rental guarantee agreement, the developer will be your tenant for a fixed amount of time and for a fixed amount of money. In essence, the developer will be “leasing back” your condo (upon closing or upon occupancy) and pay you a specified amount on a monthly basis, just like rent, typically for one to two years.

This pre-fixed rental is determined at the beginning of the agreement and is paid to the buyer regardless of whether the unit is further rented out by the developer or not, hence the “guaranteed rental income.” So, as a buyer, you stand to earn a steady stream of income on your investment condo from the minute you sign the contract – even if it sits vacant.

In Miami, developers have recently started/have been using such leaseback programs to make their pre-construction condos stand out as a much more lucrative investment option. But since these incentives are available for a limited time only, a local realtor will be in a better position to offer you details and more up-to-date information on which developers and buildings are currently offering the program.

Legacy Hotel and Condos

Miami’s Legacy Hotel and Condos is one pre-construction property offering one of these sale programs.


How do Sale Leaseback or Guaranteed Rental Income Programs Work?

As per the program, developers “lease back” the condo from the owner to be able to rent it further on their own terms and convenience. So, the ultimate tenant pays rent to the developer, who in turn pays you. This rent could be higher or lower than the current market price, but would ideally be higher than what the developer needs to pay you.

The basic elements of a guaranteed rental income program include:

  • Fixed Term. Developers usually offer condo leaseback programs for a fixed period of time such as one year, two years, or even five years.
  • Fixed Rate. The monthly rental income guaranteed to you is a fixed percentage of the purchase price and will be mentioned as a 8% leaseback or 10% leaseback. For example, if you purchase a $500,000 condo with an 8% leaseback, you would receive $40,000 annually, or the equivalent of about $3,300 per month rent. 
  • Rental Payout Begins. This depends on the terms of your contract. The developer could choose to start paying you the month following closing (also the time when your mortgage payments begin) or from the point of occupancy (when the condo is ready for possession).
  • The Guarantee. Regardless of whether the developer is able to find a tenant for your condo, you rent it, or it sits vacant, you will get paid for the entire term of the program.


Want to know about the latest guaranteed rental income incentives offered on pre-construction condos in Miami? Call, chat or email us for updates.



Who Pays the HOA Fees and Property Taxes on a Leaseback Condo?

When it comes to property taxes, you (the owner) will be required to pay any and all taxes due on the condo.

As far as the HOA or monthly association fee is concerned, again, you (the owner), will be required to pay it, except for when the developer chooses to waive it as part of the promotion. 


Who Finds the Tenant for a Leaseback Condo?

In most leaseback transactions, the developer is responsible for finding the tenant, and the unit may go into a rental pool. This is a huge advantage for you as the owner, especially if you don’t live in the city. Also, since the developer is the one who has to absorb the financial risk of paying rent on a vacant condo, it is usually in their best interest to find the tenant. However, do check your contract for the exact terms relating to finding tenants and their management.

Paramount Miami Worldcenter

Paramount Miami Worldcenter is also one of the pre-construction projects offering one of these sale programs.


Why Would You Do a Sale-Leaseback?

Sale-Leaseback transactions are great if you’re looking for a real estate investment with a guaranteed return. It’s really a hands-off real estate investment with secured and guaranteed return on your investment for a specified period of time. A sale-leaseback is also great for those who don’t live in the city they are buying in and don’t want to have to worry about finding the tenants, renter management, condo maintenance and more. Ask what the terms are for sale-leaseback you are interested in to understand more about its benefits. 


How Do I Know if My Leaseback Offer is Worth the Investment?

A leaseback program is a good choice for those looking to earn a steady rental income on their investment condo and don’t plan to occupy it. As the buyer, you don’t have to worry about cash flow or renting the unit, making it a great investment opportunity.

To figure out the difference between a ‘good’ and ‘great’ leaseback program, consider the following:

  • Does it cover your monthly mortgage payment, if any?
  • Does it cover your monthly association fee?
  • Does it cover a monthly estimate of your annual property tax?
  • Does it cover a monthly estimate of your annual insurance cover?

After factoring in all of the above expenses, if you are left with a positive cash flow, then the leaseback program is definitely worth considering. It would also be worth your while to ask a realtor if there are any similar offers available from competing developers that could give you a better return on investment. Alternatively, you should ask your realtor what the expected return would be if you were to go about renting the unit on your own.

Smart Brickell

Smart Brickell, one Miami pre-construction project offering one of these sale programs.


Are Leaseback Rates Negotiable?

No, leaseback rates are not usually negotiable. Since these are fixed incentives offered by the developer, they are uniform for all buyers. However, some buyers can negotiate for cash back at closing instead of taking the leaseback program.

A Leaseback Program is Not for You If...

  • You’re looking to purchase at the lowest price possible. Most developers use leaseback incentives to sell all of their units, and that means that they likely won’t be offering them at rock-bottom prices. 
  • You’d like to be more selective about your unit. Since such incentives are usually offered at the end of a condo pre-construction project, you will likely be limited in your choices.
  • You are looking to flip the condo soon after closing.
  • You would like more control in the renting process and are confident of getting a better return when handling things yourself.
  • You think the “guaranteed rent” does not cover your basic cost of ownership costs or does not meet your ROI expectations.


How can I know about the Latest Condo Leaseback Opportunities in Miami?

Simply call, chat, or email us to find out about the latest incentives offered by condo developers in Miami. As insiders, we are aware of recent updates and first-hand information on the latest leaseback programs on pre-construction condos along with other buyer-friendly offers. Contact us above on the upper right of the page to let a local real estate expert help you find the best investment condo for you in the Miami area.

Contact Us
Sep Niakan
Broker / Team Lead
(305) 697-7667
sep@blackbookproperties.com
Request Info
By sending you agree to CondoBlackBook's Terms of Use

Your Miami Condo Awaits

Recent Posts

The 5 Most Luxurious Condo Buildings in Edgewater, Miami
Real Estate News The 5 Most Luxurious Condo Buildings in Edgewater, Miami
Surrounded by the eight-acre Margaret Pace Park, Edgewater is one of Miami’s favorite neighborhoods if you want to be close to everything, including the water. The previously low-key area has emerged as one of the most desired locations for luxurious, waterfront living in Miami, with some of the most elegant and sought-after new condo developments on Biscayne Bay. Now, to know which are the best condos in Edgewater, Miami, we are ranking the top five most luxurious buildings in this family-friendly neighborhood to give you an idea of the quality of life, level of design and construction, and price point you can expect if you’re looking at a tranquil, yet high-end, bayfront residence in Miami’s best kept secret neighborhood. First, let’s take a look at the neighborhood itself. This article was last updated on Jul. 17, 2024.   — Why Choose Edgewater, Miami? It is one of the hottest Miami neighborhoods right now for several reasons: It’s close to everything. Living in...
The Future of Downtown Miami: Exclusive Interview with Miami DDA's Christina Crespi
Lifestyle The Future of Downtown Miami: Exclusive Interview with Miami DDA's Christina Crespi
At Blackbook Properties, we are passionate about our city’s growth and love to stay on top of what’s happening next in Miami, so we can keep you updated on future Downtown Miami developments. This time, we visited the Miami DDA (Downtown Development Authority) for an exclusive interview with our friend and CEO Christina Crespi to gain insights on all the behind-the-scenes action that’s making Downtown Miami the most thrilling live-work-play-invest destination of the future. Grab a coffee or tea and listen to what she had to say to our very own Sep Niakan, Miami realtor and founding broker of Blackbook Properties!     You’ll discover in our new video interview how the Miami DDA—Miami Downtown Development Authority—was initially focused solely on this core neighborhood’s economic development. However, in recent years, it has evolved into a community development authority that aims to create a great quality of life for its residents and maintain a positive business environment. Plus...
June 2024: Fort Lauderdale and Palm Beach Pre-Construction Condo News Update
Preconstruction June 2024: Fort Lauderdale and Palm Beach Pre-Construction Condo News Update
South Florida’s pre-construction condo market was abuzz with activity this June. One Hollywood Residences launched sales after a design upgrade and rebranding. Lynd Living started taking reservations for the centrally located Aileron Residences in Dania Beach. And buyers can now tour the exquisite interiors and customizations available at Icon Beach’s new sales gallery. Also this month, the highly anticipated Entourage in the Sun broke ground in Pompano Beach, Selene Oceanfront topped off in Fort Lauderdale Beach, and more news in our complete June 2024 pre-construction condo market round-up for Fort Lauderdale and Palm Beach. Read on below. Sales Launched One Hollywood Residences – Hollywood Taking Reservations Aileron Residences – Dania Beach New Sales Gallery Icon Beach Residences – Hollywood Beach Topped Off Selene Oceanfront – Fort Lauderdale Beach Broke Ground Entourage in the Sun – Pompano Beach Planned/Proposed Oculina – Riviera...
The 5 Most Luxurious Condos in Surfside, Miami
Real Estate News The 5 Most Luxurious Condos in Surfside, Miami
Surfside is a small seaside community immediately north of Miami Beach and just south of Bal Harbour. It’s a tight-knit community that cherishes its ocean-front living options, beach walks, community center, and overall quality of life.  In our years of experience as a boutique brokerage in South Florida, we’ve seen a growing luxurious side to this beach town that has brought us top-tier residences tucked inside some of the most sought-after oceanfront buildings. In this blog, we’ve ranked the top five most luxurious condos in Surfside, Miami, according to their average listing price and we list all their amenities to help you know this coastal community better This article was updated on July 1, 2024. — Why Choose to Live in Surfside? This family-oriented beach town is perfectly positioned between the glamorous Bal Harbour and world-famous Miami Beach. A pocket-sized neighborhood, Surfside is somewhat of an extension of Bal Harbour and is favored by those looking for a mix of...
All of the Ritz-Carlton Residences in Miami, Miami Beach and More
Real Estate News All of the Ritz-Carlton Residences in Miami, Miami Beach and More
One of the most renowned brands within the hospitality industry, The Ritz-Carlton has a long history of being top of mind when it comes to sophistication, attention to detail, and service. They have made it their mission to stand out with these attributes in their hotels and their residence-only condos, The Ritz-Carlton Residences, are no different. When you own in one of these exclusive enclaves, you can expect a living experience and home with the utmost quality, personalized attention, lifestyle enhancements, and unique moments that make your life a luxurious and curated experience. If this sounds like your way of living, you’re in luck because South Florida, with its amazing landscapes, culture, and weather, has five Ritz-Carlton Residences for you to choose from, with two more in pre-construction development—one in Pompano Beach and one in South Beach.  In this blog, we’ll go through all of these incredible properties so you can learn more about what makes each one of them...
Miamians Favorite Places to Watch the Fourth of July Fireworks in 2024
Events Miamians Favorite Places to Watch the Fourth of July Fireworks in 2024
Nothing says summer in America like the Red, White, and Blue, and a hot July night that brings everyone together. Yes, we’re talking about the best show in town, the 4th of July fireworks. And in Miami, if you love a fabulous fireworks show, you’re in for a treat because many spectacular shows have several options for watching the fireworks in Miami. From Downtown to South Beach to Key Biscayne, we’re sharing our favorite best places to watch the 4th July fireworks in Miami in 2024! And don’t worry, we’re even letting you know a few things to do in Miami for the 4th of July, including the beloved Key Biscayne 4th of July Parade, which is great for kids.  Get your sparklers ready; it’s going to be a blast! — Where to Watch Fireworks in Miami in 2024 First, as tried and true Miamians, who’ve seen many a fireworks show here, we’ve got some general pointers on where to watch the many 4th of July fireworks in Miami so that you're sure to get an amazing view of, likely not just one...