Has anybody bought a display home?

[Jamie_D]

Hello

I was looking around at display homes on the weekend and noticed
a listing for around 15 displays homes from the builder
they were quite well priced and were yielding 8.5% return
for 1 or 2 years

Just asking whether anybody has purchased one and what are the
positives and negatives

what do the banks think?
LVR's? etc

Cheers

 

[james_w]

Hello

I was looking around at display homes on the weekend and noticed
a listing for around 15 displays homes from the builder
they were quite well priced and were yielding 8.5% return
for 1 or 2 years

Just asking whether anybody has purchased one and what are the
positives and negatives

what do the banks think?
LVR's? etc

Cheers

banks are fine with 80% lvr on displays problem is if the builder is offering

8.5% yield for 2yrs it is most likely built into the price so check what the actual medium rent range is like in the area vacancy rates etc will it still generate a 8.5% yield after the 2yr guarantee you wouldnt want to be left with an empty house

 

[Rolf Latham]

Hiya

In my exp most dont like em, because the leaseback is on commercial terms.

Some lenders will do them, but the majority sure dont once they get wind of the registering the lease on title.

ta
rolf

 

[LynnH]

There can also be problems obtaining building and contents insurance on display homes and the premiums (if you can get insurance) will probably be quite a bit higher.

Suggest that you check this out thoroughly beforehand.

Cheers
LynnH

 

[jsj]

often the display homes have the extra rent built into the purchase price. Compare them to others in the area or find out how much the house would cost to build elsewhere , minus the land cost, there is often a big gap.
They are usually high spec, with all the best fixtures and fittings, so this can be good for resale or future values but can also be over capitalising depending on the other homes in the area. The best taps and tiles don't usually increase the rent expectancy though it can cause a quicker sale to an owner occupier. Generally, if the builder is using the property to showcase their workmanship, the standards of work should be there, or well patched over the two years, depending on the builder

 

[Sailesh Channan]

There can also be problems obtaining building and contents insurance on display homes and the premiums (if you can get insurance) will probably be quite a bit higher.

Suggest that you check this out thoroughly beforehand.

Cheers
LynnH

Good point Lynn, most insurance companies will only insure tenanted properties.

Building display homes are very cheap for builders as most suppliers will provide goods at below cost.

We have been approached by several of our suppliers to build a display home however, I am trying to resist the temptation. I have even been given an extremely good offer from a developer in a prestige estate who will let us build on the land and do not have to pay him back for 2 years. They will even have a sales person handle the inquiries. The real benefit I can see is that if the market picks up within the next 2 years then there will be a lot of capital gain for a moderate outlay.