I was hoping I could get any positive or negative feedback on builder leasebacks.
I am looking at building when I return to Aust. but I have just come across a builders website that had a house and land for $365,000 and to be leased back for two years at $1800 per month and used as a display home. (disregarding property cycle and timing of purchase!)
As a general way to get into property, with a view to either move into it in 2 years or make it an investment property, I’m wondering on the negatives. Naturally there would be wear and tear on the carpets, and maybe a few marks on walls or floors, but can anyone enlighten me to other negatives?
Thanks,
David
Well,
More than often the rent return being offered by the builder is above market for that type of house in that area, so it looks good as an investment…BUT usually that rent has been capitalised back into the purchase price,
By this I mean you are effectively paying for the rent.
Compare the cost of a block of land plus the house to build in that area, and you should find quite a significant difference between the two.Having said that, its not a bad way to go for a passive investment, as usually the builder pays the outgoings, for the 2 yr leaseback period, etc.
Its horses for courses, not my cup of tea…but may suit others who want passive, no hassles investments.
KP
My accountant did this and made a fantastic profit. BUT, the deal was struck in the lead up to the boom so his CG’s were dramatically improved because of this.
Today, with flat growth etc, it might not end up the performer you think it will be.Hi Stombiz,
The only other comment I would make is that, based on my observations, it seems that the builder’s display homes are generally located on the busiest street in the subdivision, often at the main entrance and as such traffic noise could be an issue for resale purposes.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Thanks,
All interesting points to consider. Being OS the passive side of it did appeal to me.
I was also concerned with the inability to rent it out if I decide not to live in it. So this would also be a factor that would need alot of consideration.
I think I will if I take the next step, at least need to get back and step into a couple, compare with a normal IP and then crunch numbers.
Thanks again for the help!
David
Aren’t builders display homes usually the flasher homes in the newer suburbs?
If you are going to rent it out, what is the market like for these sort of homes? What do the PM’s say about its rentability & rental price?
[
]Matt
Originally posted by MJT:Aren’t builders display homes usually the flasher homes in the newer suburbs?
Hi Matt,
The floor plans are usually found within the local area too – depending upon the numbers of buyers who opt for that particular design. Where they do have an advantage is that the yards are fully landscaped whereas some Mr and Mrs Average New Homeowner sometimes overextends and then has difficulty finishing the place off to the same standard.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
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