This leaseback typically offers rental returns way over the general market rental yields, making it a very attractive real estate investment. Based on the experience of Mark from Mortgage Basics, a guaranteed rental returns can range from 6% up to 10.5%. For an investor, this sounds almost too good to be true.
Display homes can make a great investment, however, often buyers don’t expect the lending criteria to be different for display homes compared to the regular home loans. Mark Polatkesen from Mortgage Basics put together a few key advices when considering the purchase of a display for investment.
Mark’s Guide To Purchasing A Display Home For An Investment
Different lenders treat display homes differently. Typically there is a leaseback involved in the property which means the mortgage insurance cannot be covered by the bank. The buyers need to be aware that banks may only allow them to borrow up to 80% of the value of the property.
Find out for how long a guaranteed rental return is promised by the builder/developer. In our experience, these vary between 1-3 years and sometimes come with options to extend.
Some lenders treat display home purchases as Residential Loans and other lenders treat them as Commercial Loans. Commercial Loans can often be an expensive option for an Investment, so it is important to be mindful of this and discuss your plans with a Display Home experienced mortgage specialist to determine which loan type suits the particular home and situation to ensure you get the best possible offer available. The Brokers at Mortgage Basics will always source the most competitive home loan product to suit your exact needs.
Not every builder offers their display homes up for sale. Mortgage Basics have assisted their clients with purchasing display homes with the following builders:
- Porter Davis
- Carlisle homes
- Henley Homes
- Urban Edge
- 8 Homes
- Orbit Homes
Our display home financing experts at Mortgage Basics have more than 12 years of experience with display home loans and assisting investors in sourcing the best loan in the market for their investments.