A display home also called a model or show home is a term for a “display” version of manufactured homes, or houses in a subdivision created by a developer. They are used in newly built developments to show the living space and features of homes available.
There’s no substitute for walking through a display home. You get to experience exactly how your dream home will feel, its layout, its design, its spaciousness, its ambience.
More and more people are discovering the benefits of buying a display home and leasing it back to the builder at a guaranteed commercial rate for the life of the display village. It’s a sound investment.
As with all property based investments, buyers should be careful and there are several factors to consider. The following are some of the pros and cons associated with buying a display home as an investment.
Pros and Cons of Buying Display Homes
Pros:
- Guaranteed tenant for life of the display village
- High rental yield while property is a display home because builder pays rent at commercial rate
- The property is taxed at residential rate even though rent is being paid at a commercial rate
- House is often at highest quality because builders want to show their best work
- Depreciation can still be claimed
- High short term returns during lease back period could generate enough income to pay for deposit on the next investment
- Gardens and outdoor areas will be maintained by builder while property is a display home
- Builders/developers make great tenants and usually have the property professionally cleaned at least twice a week
- If home is part of a display village your investment will be surrounded by quality homes on an attractive street
- You will save on property management fees because there will be no need for a property manager
- It will attract quality tenants and a high rent once it is no longer leased by the builder
Cons:
- It might be harder to get financing in some areas because some builders set a high premium price and the banks value the same property at a lower price. So, look for builders who use an independent appraisal to set the purchase price
- Banks base their assessment on market conditions and not what the builder is prepared to pay
- Display villages don’t have a fixed end date so they could finish the lease sooner than expected
- Short term yields might be high but you run the risk of it decreasing once the house is put on the rental market
- There are no laws in place for a rental guarantee so you have to ensure that you lease to a reputable builder who meet their financial obligations
- Your tenant could also be your property manager
- Appliances can become out dated by the time the property is ready for tenants with expired warranties
- High quality fixtures might be considered a waste of money for a rental property;
- Property could suffer from abnormally high wear and tear in certain areas like the carpet and flooring because of heavy foot traffic
- Display homes are normally built near main arteries for visibility and these is sometimes seen as a negative by tenants later down the road
- Availability of suitable properties is low compared to regular residential properties on the market.
A well-researched display home can be a stress free, high yielding property investment with great depreciation deductions and no property management fees. Indigo Homes have several display home investment opportunities. Contact us for more information.
