Clever investing with a Rivergum Display Home
If you’re in the market to find a savvy, value-packed investment, there has never been a better time to consider a display home.
Most often purchased pre-construction as a house and land package; the benefits of having a corporate tenant, a lease commitment for multiple years, owning a comprehensive home of exceptional quality inside and out, and rental returns unachievable elsewhere, a display home investment makes a lot of sense.
As with any home purchase, there are a range of things to consider when buying a display home.
The benefits
Premium interior and exterior design and finishes:
Display homes demonstrate a builder’s best work. Always impeccably presented and maintained, they feature both the latest in specification standards, on trend features and have significant investment in the outdoor areas over and above the average home. These are sales offices for builders, and for homes that aim to make a lasting impression when toured they ultimately become highly aspirational homes in the area.
Location, location, location!
Whether buying to eventually live in, or as an investment, developer display villages usually occupy the best locations within new developments. Whether opposite feature parks and reserves, positioned with convenience and easy access, or in premium ‘dress circles’, in most cases your purchase will enjoy a location that is premium within the broader development.
Surrounded by other quality homes
If the home is positioned within a display village, you’ll then benefit from owning a home in a highly visually desirable street – a commonly high standard of new homes presented to an excellent standard, and this is a huge advantage when on-selling or retaining for further leasing.
Leaseback rental return
Display homes are key marketing initiatives for builders who often want use of the homes but not necessarily want to own them. Freeing up display home capital helps builders roll out an ongoing program of new homes across the metropolitan area to showcase the latest styles and trends. As a result, the rental returns and lease durations are often very competitive, especially when interest rates are so low.
Confidence with longer initial lease commitments
Every display home and village are different, but display homes often have a lifespan of 3 to 5 years depending on the context. If it is a brand-new development and the land supply is significant, the builder lease duration will likely be longer. Look for initial fixed terms of 2 to 3 years and then a series of 6-month extensions the builder can use until the homes are closed.
They’re ideal for investors
Display homes are perhaps one of the most attractive property investment opportunities. Higher than residential letting returns, a single corporate tenant, no management and letting fees, and confidence that the builder will maintain the property in impeccable condition for the duration makes these a worry-free investment. Also, as an off-plan purchase, investors save with reduced stamp duty (usually only paid on the land component and not the package value as one would with an established home), and substantial benefits of depreciation and other taxation benefits.
Other things to consider
How you are buying the home
A display home purchase requires entering into two contracts; a land contract with the builder (or sometimes with the land developer), and a build contract that details the display home inclusions inside and out as well as the terms of the lease back. You can expect a land settlement followed by 6 progress claims from the builder after work commences.
Financing your purchase
Banks look at different kinds of investment differently. Some banks like the certainty of a display home lease-back while others have very specific lending criteria. Rivergum’s lending partner, Truevest Finance, has helped many people buy display homes and have the experience and expertise to help you navigate the finance options. To learn more, visit truevestfinance.com.au
Limited opportunity to customise the home to your personal tastes
When designing and building a new home the creative control sits with the customer; a display home is quite different and the builder will have pre-designed every aspect of the home. An advantage is that the builder will use its depth of creative interior and exterior designers to produce a very much on-trend home, and this is ideal if you would prefer to ‘leave it to the experts’.
Certainty of builder lease term
Whether for investment or for your eventual personal use, the initial and optional extensions of the lease available to the builder make it difficult up front to predict the duration. For investors, often the longer the builder leases the home the better due to the attractive rental return, however if the home is intended as your next residence, you’ll need to be flexible as to when.
When handed over, the home is not brand new
With any 3 – 5-year-old home it is expected that there will be some wear and tear, however as builders invest heavily in ongoing maintenance of display homes, you’ll have confidence in its outstanding presentation. At the end of the lease the homes are often professionally cleaned, have their carpets steam cleaned, and touch up and maintenance painting completed (for example where internal signage is removed). Display homes are not completely repainted or have floor coverings replaced, and if the garage has been used for a sales office you can expect a full conversion when the home closes.
Warranties
By the time a display home is closed, all but the builder’s statutory warranty will have ended. So, in most cases appliances will be brand new and never used, but warranties have expired. The exceptions are things installed at the hand-over stage such as hot water services, or if the garage has been used as an office, the new garage door.
To learn more about display home ownership, and to get information on Rivergum Homes’ latest displays for sale, visit www.rivergumhomes.com.au/now-selling/displays-for-sale/ or call 1800 675 706.