Can You Sell Your House To The Bank & A Buyer At The Same Time & Still Own It?

Imagine what would happen if you sold the same housing unit to two (2) different buyers at the same time, but you still retained title to that housing unit.  Sounds like a real problem that could end up with you having your picture on the wall in the Post Office.  Yet this can and does happen in America and it is perfectly legal.  It’s been happening for decades, and doesn’t involve selling swamp land in Florida, but Florida is where you would expect to see this happen for another reason.

We are talking about senior housing development capital structures.  More specifically, we are talking about a type of retirement community business known as a Continuing Care Retirement Community (or “CCRC”) where the entry-fee approach is utilized.  The entry-fee CCRC business has two (2) basic variants and one of them allows the developer to essentially sell the housing unit to the bank (i.e.: get developing financing to build the CCRC), then sell the housing unit to the future resident and do all of this and still own the property and the housing unit as a result.  Imagine what this would do for your investment yield prospects if you could pull this off with a condominium project or single-family housing development.

The CCRC business model was introduced into the senior housing market back in the early 1960s and penetrated the market with a unique value proposition: “a champagne retirement living experience on a beer budget”.  The entry-fee CCRC approach requires the resident to not only pay an ongoing monthly rental fee but also pay a materially-significant fee upon taking occupancy that may or may not be refundable to one extent or another depending upon the business deal reached between the parties.  Many operators use the entry-fee to create life-care estate actuarial reserves because they are promising to take care of the resident for the rest of the resident’s life by offering independent living, then provide the resident with assisted living if the resident needs that level of care later in their life or skilled nursing care if the resident eventually needs that – and do this amazing feat for one low monthly fee they agree to pay today and never increase that fee.  It sounds like a great deal for the resident but it can be a death trap for the property if the costs of care get out of control and that is exactly what happens in many cases.  For thirty years I have been advising owner/operators to get out of the lifecare business because it has risks that just cannot be controlled.

The solution is a modified entry-fee approach.  Under the modified entry-fee approach there is a guarantee of access to care but no guarantee of cost containment.  The monthly fee will change over time but the resident gets to remain on the property as care needs change.  This is crucial because the adult children would rather sleep with rattlesnakes than move an elder.  It also creates an incredible profit-taking opportunity because we can use sophisticated capital structuring approaches to the contract structure that give the resident real control over their future estate (i.e.: receiving up to 99% of their entry fee upon leaving the community and the next resident taking possession of their living unit) and giving the developer the opportunity to generate tremendous yields before the property even commences operations.  Essentially, this gives the developer the opportunity to raise capital, build the property, sell it out via the entry-fee approach and still retain ownership of all of the property and the operations.  Predictably, the yield on these types of CRE properties can be mind-blowing and that is why savvy CRE developers prefer this approach.


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