The Leaseback Loophole: How Smart Investors Are Living Rent-Free in Their Own Properties

When it comes to where you live, most people would say that you either rent a home or own one — but what if there were a way to do both at the same time? Introduce the leaseback deal: a savvy play in real estate investing where you buy a property, then rent it back to a developer or management company and effectively live on the rental income while building equity. It may sound too good to be true, but a growing band of savvy investors are doing it to help cover their mortgage payments — and, in some cases, even pocket extra money. Here’s how this underused strategy works — and why it could be your ticket to a more-affordable home of your own.

How the Leaseback Model Actually Works

In an ordinary leaseback, you buy a resort unit, condo residence, vacation home or even a commercial space. Upon closing, you sign a lease with a management company that runs the property. They pay you guaranteed monthly rent — often enough to cover your mortgage payment — and take care of everything, from maintenance to guest bookings.

Key advantages include:

• Predictable monthly income regardless of occupancy rates
• Zero landlord responsibilities or tenant headaches
• Professional property management included
• Tax deductions on mortgage interest and depreciation
• Equity building while someone else pays the bills

The Numbers That Make It Work

So say you purchase a ₱3.5 million resort condo, with 20% down. You’re there paying monthly mortgage of ₱18, 000. A leaseback may be able to give you a monthly rent of ₱20,000–₱25,000 which more than pays your mortgage and even generates small positive cash flow. Over 15-20 years, you’ve created ₱3.5 million in equity without paying the mortgage yourself.

The catch? Leaseback lengths run 5–10 years and lease rates are typically below market. But for investors who need passive income without the burden of actively managing an asset, that trade-off can be worth it.

Where This Strategy Works Best

Not all properties qualify for leaseback arrangements. The sweet spots include:

• Resort destinations with consistent tourism demand
• Serviced apartments in business districts
• Boutique hotels seeking expansion without capital investment
• Corporate housing near industrial zones
  

Developers in places like Tagaytay, Batangas beach towns, and Clark are increasingly offering leaseback options as a selling point—especially for units they plan to manage as part of a larger resort operation.

Wrapping Up

Not everyone can take advantage of the leaseback loophole — you give up some upside potential, as well as personal use of the property. But it is a legitimate way for investors who want exposure to real estate without any landlord responsibilities to build wealth, while keeping the cash flow on day one and beyond. Review the lease terms, research the management company and make sure the guaranteed rent covers your carrying costs before you sign. Done correctly, you are paid to own real estate. That’s a loophole worth exploring.