Display home leasebacks pay it forward

first_imgDisplay homes are maintained to mint condition by the builder. Photo: David Clark/AAPGold Coast Property Advisors valuer and buyers’ agent, Tony Coughran, said due diligence is key when buying a leaseback investment — particularly around the security of the lease and the builder. “What’s the property going to be worth if it becomes vacant next week?” Mr Coughran said.“Do your homework on the builder themselves — are they longstanding? Are they reputable? Will they be around in five years’ time?” Mr Coughran said leaseback investments tended to suit buyers who pay a large deposit and keep their borrowings low.“It gives investors a financial buffer,” Mr Coughran said.Relinda and Gerry Mitchell were over the moon with their leaseback investment at Elvire St, Ormeau Hills, which they purchased in December 2015 for $650,000.More from newsMould, age, not enough to stop 17 bidders fighting for this homeless than 1 hour agoBuyers ‘crazy’ not to take govt freebies, says 28-yr-old investorless than 1 hour agoNot only did the builder provide assured high rent return without management fees or vacancies, the couple sold the property for a tidy profit at the end of the lease.Mrs Mitchell said a previous experience had tainted their view on the traditional approach to renting out a home.“We had tenants in our own home when we went travelling and it was a major hassle,” she said.In contrast, Mrs Mitchel had one word to describe her leaseback experience.“Fantastic,” she said.“It’s been completely stress-free, worry-free — a great investment,” she said.“There’s no-one living in it. The bathroom and toilets have never been used and it’s been built to fantastic specifications level,” she said. “Some might say we spent a little bit more than market at the time but now we’ve sold it at a profit we couldn’t be happier,” she said.Mrs Mitchell said if they’d wanted to move in at the end of the lease, there was even an option to purchase the display-home furniture at a discount.“We could have walked into that home exactly as it was for a substantially reduced price,” she said.Mrs Mitchell said they’ve been so impressed with the result, they’ve decided to go again.“We’ve actually put a contract on another one over at Yarrabilba,” she said.Mrs Mitchell’s big tip for buyers was to get a depreciation schedule and maximise the tax advantages.She said investors should also do their due diligence on the lease.“Just be aware of the terms and the leaseback and just what your outgoings will be,” she said.Follow Kieran Clair on Twitter at @kieranclair Gerry & Relinda Mitchell have been thrilled with their leaseback investment. Photo: David Clark/AAPIMAGINE a beautifully appointed investment property where the tenant paid above market rent plus your council rates, kept the home in immaculate condition and repaired any wear and tear at the end of their lease.Leaseback display homes are those stunning high-specification houses in residential estate display villages. Builders sell these homes to investors and lease them back so they can continue being used to market their skills.Leasebacks can be a dream option for set-and-forget investors given the generous lease terms, according to Metricon general manager, Peter Ryan.Mr Ryan said advantages for the investor included above-market rental return (often around eight per cent yield), no management fees, high calibre ongoing maintenance and no vacancies.He said for the builder, the deal allowed them to free up capital they’ve spent on building the home.“With over 50 display homes on sites at any one time, if we’re able to get our money back and lease it back, we’re able to build more display homes,” Mr Ryan said. Given their high level fittings, finishes and fixtures, builders don’t make much profit on leaseback sales, he said.“We think of them as a marketing expense,” Mr Ryan said.For many investors, the security of a long term tenant is attractive.“You’ve got to be prepared to hold them for generally between two and three years, but we may, in good locations, lease them for up to five years,” Mr Ryan said.He said buyers found listings for leaseback display homes via portals such as realestate.com.au, or on building company websites.last_img

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