Hi All
Just wondering if anyone has ever bought a display home and then leased it back to the builder for whatever amount of time they list?? On the surfafce the rent received of between 7-10% seems great but they do seem over priced sometimes.
Is it generally the way that they over value the home when they sell it but get buyers with the attractive yields etc??
Just after any stories ta
Tim
The main reason display homes seem to be over priced is because in the pricing is everything that opens and shuts! You don’t get the standard home you get all of the bells and whistles, and the pipe organ too! Another point in relation to these is that most times the builder has to purchase the furnishings and you can arrange for these to be left in the home and or sold with it as chattel – This means more depreciation! Now that’s not such a bad thing is it?
Oh and the Rental return is to ensure you don’t want to occupy the premises in between times. I know of a couple of people who have purchased display homes and then evicted the builder as they didn’t wish to wait for a home to be built. That’s a bit rude for my mind, but to each their own.
All in all they aren’t such a bad thing if you sell them to an owner occupier at the end of the 2 year lease term, as tenants more often than not won’t appreciate the value of the property and it will not be a good thing for you. Yes I specifically mentioned a 2 year term and That stands! I wouldn’t accept anything less regardless of when they vacate…
Food for thought.
Stuart Milne
Non-Conforming Specialist
READY Mortgages
http://www.readymortgages.com.au
[email protected]
Mob: 0404 056 055Hi Tim,
Don’t be taken in by the high rent returns that you can sometimes get on display homes. You often only get good rent for a couple of years maximum and then the rent returns to market rate and you have to deal with that for the rest of the time that you hold the property.
I guess if you are doing a short term hold and are confident of capital gains in could be an OK deal.
Todd Burns
http://www.freepropertyhelp.com.auHi Tim,
I am in the process of buying a display home and leasing it back to the builder at the moment.
The house I am purchasing is at current market value in comparison to other properties around it and the lease back is at 7% of the purchase price.
I am having some trouble however raising the money from the bank as they dont recognise the 7% lease figure and want to do their calculations at what would be the current long term rental figures for the area.
I am wondering if any one else has any other suggestions to get the bank to see this is a great opportunity.
I looked at quite a few other display homes before making an offer on this one and yes, I saw some inflated purchase prices, one builder offered 10% lease back but had an inflated purchase price and also some of the lease terms that were offered were for a shorter term than I would have liked.
I think there are some great opportunities out there, but you just need to do your homework on what the property is worth, what the growth of the area is expected to be and how long you can get the lease for.
Happy hunting!!
I would also like to hear any others feedback.I too have been shown a deal like this before but turned it down. To me the area did not have a great potential for growth and the rent return post lease was going to be halved. Bear in mind most of these estates will be new and may take a while to get filled in. Check out some posts about buying into new estates and margins in H&L deals. At least you don’t have any headaches with the finishes and selecting colour schemes. But thats not to say these type of deals won’t work for you. Like all OTP purchases, they are awesome in a booming market.
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