Forums / Property Investing / General Property / Investing into Display Home with 7% – 8% leaseback for 2 – 3 years

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Viewing 13 posts - 1 through 13 (of 13 total)
  • Profile photo of microchip78microchip78
    Participant
    @microchip78
    Join Date: 2009
    Post Count: 19

    Hi Experts,

    I was looking for Investment Property in Melbourne, and I come across a deal from one of the famous builder about buying a display home with lease back option.

    It sounds great with 7% – 8% lease back for 2 – 3 years and sell it just before lease back is about to finish …

    Does anyone have any experience, idea or thought about investing into Display Home as IP?

    Any Pros and Cons? Any catches? Anything need to think before considering this?

    How about finance?

    Anything is worth sharing …

    Thanks in advance …

    Profile photo of insanoinsano
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    @insano
    Join Date: 2009
    Post Count: 34

    Bump*

    I've been pounding the payment recently checking out the new display village in my area and heard "this one's for sale" more then a few times.

    Anyone got any experience with these, some with a 9% return over 2 yrs with option to lease further ect…..

    Profile photo of DerekDerek
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    @derek
    Join Date: 2004
    Post Count: 3,544

    You need to be very careful to make sure the price of the property has not been inflated to cover the cost of the lease back arrangement. I would also say that 9% on a fully (over) priced property is good value for money.

    Display homes are often placed on the estates access roads and can subject to noise and traffic.

    Profile photo of insanoinsano
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    @insano
    Join Date: 2009
    Post Count: 34

    Thanks Derek, good points obviously lots of due diligence required before making such a purchase.

    I like your armchair investments too, if only I had more capital to be able to cover in entry with lots of breathing space :)

    Profile photo of bardonbardon
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    @bardon
    Join Date: 2004
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    I cant see it been financially viable to buy this house and sell it in three years.  The transaction costs will most probably kill that notion dead in the water.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    Finance may be more restrictive for this sort of thing too. eg. Suncorp would lmit this to 80% LVR

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
    Join Date: 2005
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    You need to make sure that you are not overpaying for the property. At the end of the day the builder can put any rent on the property that they like. The issue is what will the property be worth in 2 or 3 years time. Do you due diligence very carefully

    Nigel Kibel | Property Know How
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    Profile photo of JamesParnwellJamesParnwell
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    @jamesparnwell
    Join Date: 2012
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    Finance can be very difficult to get for a Display Home. Many lenders exclude them completely!

    Profile photo of insanoinsano
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    @insano
    Join Date: 2009
    Post Count: 34

    Cheers!

    Saw on the news or similar last night that low doc loans are popping up again, an elderly couple on $23k annually was offered a loan for $850k with a $7k/moth repayment lol

    Peter Switzer was commenting on them coming back through some dodgy brokers fudging numbers to get high loans through…. and some banks offering 97% lvr

    Still toying with the display home idea, as an investment for a few years then converting it to our PPOR

    Profile photo of DerekDerek
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    @derek
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    insanowayno wrote:
    Saw on the news or similar last night that low doc loans are popping up again, an elderly couple on $23k annually was offered a loan for $850k with a $7k/moth repayment lol

    Peter Switzer was commenting on them coming back through some dodgy brokers fudging numbers to get high loans through…. and some banks offering 97% lvr

    You got a link to that story?

    As far as I know the imposition of the NCCP was about protecting consumers from such lending practices. Given NCCP is supervised by ASIC any lenders/brokers party to loans of that magnitude should be very nervous.

    Be interesting to hear from one of our resident brokers.

    Profile photo of Jacqui MiddletonJacqui Middleton
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    @jacm
    Join Date: 2009
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    They have to be insured differently too as the tenant is commercial, not residential.

    I looked into such a purchase once, in a half-hearted manner.  Bank went out and valued it WAY below asking price.  Enough said.

    Jacqui Middleton | Middleton Buyers Advocates
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
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    Have to agree with Derek Lodoc as we used to know it is a thing of the distant past.

    ALL lenders require on a lodoc loan either Accountants confirmation / BAS / Trading statements or a combination of all 3 / all.

    There is no such thing as a self declaration without ANY form of income verification even at a very low lvr.

    Any Broker fudging figures deserves to get the full force of NCCP down upon him.

    In relation to finance for a display home it can be done but restricted number of lenders.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
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    Profile photo of jmsracheljmsrachel
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    @jmsrachel
    Join Date: 2012
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    Richard, if some one took out a lodoc loan in the past did they ever have trouble with the ATO afterwards? It’s kind of risky saying you declare x amount when you really earn a lot more then your stating.

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