Within the realm of real estate investing there are many areas to invest in. One of the best kept secrets in the real estate investing community and also one of the best and safest areas that investors are looking at is that of Model Home leasebacks. Let us look at why model home leasebacks are a great investment play.
Because of how it is structured a model lease back is one of the safest investments in the world of real estate. Here is how it works. The builder builds the home, sells it to the investor and then leases it back for a minimum two year period (with periodic 1 year options to renew the lease). The builder covers the utilities, HOA (home owner’s association dues), insurance, maintenance, and taxes during the lease back period. It is not only a safe investment but one with guaranteed positive cash flow during the lease period. The builder will be using the home as a model to sell new homes to home buyers in the community. Investors know that this type of investing is a rarity and it is often called the best answer to long distance investing as it is virtually hands off.
Models homes are the first homes built in the neighborhood. Builders always build in price increases as the neighborhood is selling and the model homes generally have the best of upgrades and amenities as the builder wants to show prospective buyers options and upgrades that they can choose to add to the new home that they will be purchasing. Model homes are decked out and aid the builder in the sales process. As the community is built up and the homes appreciate you are locked into the original lower pricing from the time the community begins.
Over the past several years many west coast investors along with folks relocating from the north east have been looking toward the Carolinas because of positive job growth and steady appreciation. Because of our relationship with the builders, our track record of sales to investors who are buying in the Charlotte market, and the advantage of having the “inside track with the builders”, we are able to have the first crack at the model lease back homes that are offered by local builders and developers in the Carolina market.
A seasoned investor is always looking at the exit strategy of any investment even before it is purchased. Model leaseback homes have a tremendous advantage as they can be very easily shown to prospective buyers and renters during the leaseback period and can be rented or sold before the end of the lease. Therefore the investor can maintain his stream of cash flow with out interruption. Model homes are open during the day for easy viewing. Some builders may even offer a guaranteed sale after the end of the lease or they will buy back the home. Savvy investors can sometimes negotiate to have the furniture included in the deal so that it will remain in the home after the lease period ends.
This type of investing is also very attractive to the soon to be retiring baby boomer generation that may be relocating in a couple of years and can coordinate the end of the lease with their taking possession of the home. The same can be said for the second home or vacation home buyer that may wish to hold the home as a vacation home for holidays and seasonal use. Fully furnished homes can re rented out when not in use to maintain a constant cash flow all year around.
As you all know Charlotte, NC is one of the few hot, viable markets left in the United States for growth, cash flow, and appreciation in real estate. It has a great mix of job growth and according to United Van Lines, it is number one in the nation for people moving into the area.