What if you could cash out on your home when the market's hot and then stay in it?

That's what some sellers are doing by renting their properties back from the buyers for less than their previous mortgage payments.

For 71-year-old Anne Cottrell the thought of listing her home for sale was daunting.

"I was getting nervous about my age and what would happen when I retire," Cottrell told CBC Toronto. "But I wanted to capitalize on the market, get rid of my mortgage and have some extra money."

The only problem: she wasn't ready to downsize.

"When I started looking at what the rent would be for a one bedroom, plus den, it wasn't worth it."

Cottrell negotiated a rent that's less than her mortgage 

Reluctantly, Cottrell put her three-storey King Street West townhouse up for sale.

"But then I basically freaked out because I realized that I didn't want to move," said Cottrell, who has lived in her home for about 25 years.

Anne Cottrell

Anne Cottrell says she never imagined she'd be able to sell her townhouse and then rent it back from the new owner for four years at a fixed rate. (Petar Valkov/CBC)

That's when her agents recommended something called a lease back, or a sell and stay. It's a clause in the listing that tells potential buyers that the seller plans to rent back the property for a year or more after it's sold. 

"We've been doing this now for the last two years," said Andrew Ipekian, real estate broker with Keller Williams Referred Urban Realty. "It's much better than those reverse mortgages. This is where you get the money in your pocket and you just rent. Someone else is responsible for the property tax and the maintenance."

Cottrell sold her townhouse to a Chinese investor and signed a four year lease on the same day.

She negotiated a fixed rent that's lower than what she was paying in mortgage and maintenance fees combined.

"It's like freedom 71. My mortgage is paid off. I invested the extra money and I can travel or do whatever I want," said Cottrell.

Used the extra money to buy a sailboat 

Dan and Tina Heimann agree. Selling their lakefront condo gave them financial freedom, helping them achieve their dream. 

Dan and Tina Heimann

Tina and Dan Heimann used the extra money they got from the sale of their condo to buy a sailboat. (Tina Heimann)

"We're at a stage in life where we're thinking of retiring and leaving," said Dan Heimann. "And one of our retirement plans is to take off on our sailboat. We don't need to be in the city anymore."

They too wanted to get in on the seller's market but weren't in a rush to leave, because the preconstruction condo they bought in Cobourg won't be ready for at least another year.

"We didn't want to have to be forced to sell in 2018," said Heimann. "Sure this year [the market] grew by 30 percent, but next year? Maybe not."

To find the perfect buyers for the Heimanns' two-bedroom condo in The Beach, Ipekian's company held a private open house for prospective buyers from their neighbourhood.  

In one day, the condo sold to a couple a few blocks away who plan on using it as their retirement home.

As for the Heimanns, they bought a sailboat with the extra money.

"It doesn't matter if our condo isn't ready on time," said Tina Heimann. "[The buyers] are planning on moving in, but they're not in a hurry. So we can extend our one-year lease."

tina and dan

Dan and Tina Heimann's two bedroom lakefront condo in The Beach. (Tina Heimann)

Landlords know tenants can pay rent

Ipekian says this deal doesn't just appeal to those who are in search of the perfect unit.

The "sell-and-stay" idea also works well for people who want to demolish the home they bought and build a new one on the property, but know permits will take a while.

And of course, as in Cottrell's case, this deal draws in investors.

"Many people are scared of renting their investments out," said Ipekian. "But here you're already kind of interviewing the prospective tenant because you've already seen the house and the condition they kept it in. You also know their financial situation because you just wrote them a fat cheque."