Lease Back

[Monty Burns]

Long time lurker, first time poster.

I am looking to buy my first purpose bought IP.
I have found one I like in a high growth area with good returns.

It is a house that a builder has built but wants to lease back for 18months with the option of a further 1 after that at 7%.

to me this looks good but my MB has stated
"I am thinking it is a display home or something similar in which case the loan to value ratio is reduced by funders."

is this true and if so why???
The way I see it, it is a house that has a tenant for 18months. All maintenance will be done by the tenant and there is no need for me to hire a PM during that time.

 

[sparky23]

Hi Monty

Some lenders see it as commercial but your MB should know which lenders would be less restrictive - which area are you looking at? Also don't think about it for too long, to my cost in the past I have found that display homes don't stay on the market for long! It doesn't hurt to put in an EOI whilst you do your due diligence.

 

[twobobsworth]

Yep sounds like a display home. I have some near me for sale with rent of 7% when most houses in the area are between 4-6%. They're asking about $75K more than what I think they're worth plus on really small blocks.

 

[Monty Burns]

the properties were in Mango Hill but are under offer.

 

[Bazza]

Yes these properties are normally over priced for the area. But, after 2.5 years when the estate is built up you could probably add another 20- 30% to the valuation which more than takes care of the $75k.

Cheers,

Bazza