Among many property investments in and around Perth, WA, there are a few that can easily stand out, namely, display homes. So, what exactly is a display home and what are the advantages of adding it into your investment portfolio?
Builders want to showcase their best work and one of the ways they do this is to take a lease from a homeowner and renovate and improve their home for display purposes. Vision One Home says the objective is to show potential buyers or investors their capabilities and their different services. Imagine the best tenant in the world who cleans up the place professionally and regularly and maintains the property so well you won’t even need a property manager. Sounds like something right off of a fictional book, doesn’t it? Fortunately, it doesn’t!
The Pros of Display Homes
First, let’s talk about property appreciation and taxes. Firstly, your property would be leased by a contractor and the terms are normally for one to two years. Of course, the agreement may include extension options should the builder decide to keep the display home for longer than that. The rent is of course commercial since they are builders looking for a place to showcase their services, but the good part is the taxes are still considered residential. In addition, tax deductions are significant and, more importantly, can be claimed! The high returns can ensure additional funds for the next property you purchase. Finally, since the house is maintained in top notch condition, it’s more likely to be rented out by quality tenants should the builder’s term end.
All of these are, of course, part of the advantages of display homes, but let’s check out the disadvantages of having this type of tenant.
The Cons of Display Homes
If you’re looking at banks to finance your investment, it may be a little difficult. Banks would base their investment on market rental conditions and the case may be that the builder may not be willing to pay that much. For instance, your bank loan may lend you based on a return of 5%, but the builder’s return is 8%. This can be a bit problematic.
If your display home is part of a display village, you might be surprised that these places do not have a set end date. This means the builder may end their lease shorter than the terms of your agreement.
Finally, as with all contracts, you must do your due diligence, as there are no laws governing rental guarantees. We recommend that you lease to a builder with a clean reputation in order to get the most of our investments.