Showhomes as a Smart Investment

Thursday, October 4, 2018 - 6:00pm

 

This article was originally Published on LinkedIn and written by Signature Homes Northland Home Consultant Steve Jaycock. Steve is a Masters qualified Architect and experienced consultant, designer and property investor, and won the Signature New Home Consultant of the Year award for 2018. If you are intersted in investing in a Signature showhome in Northland you can cantact Steve or elsewhere our Franchise Partners drectly or email marketing@signature.co.nz.

 

New home construction companies from time to time seek investors to finance their new showhomes. They can be a rarity as they are often 'picked up' in house due to their normally safe and profitable nature.

A building company, in order to maintain liquidity will often seek an investor in preference to tying up working capital, to finance a show home in order to show case their product. Typically these are turned over every two to four years (depending on the company) to keep a fresh look for for potential clients, and to showcase new products.

How does it work? Exact details vary from company to company but typically an investor will fund the project, either from cash funds or a mortgage, and own the property outright. The property will be leased back for an agreed annual sum, often with renewal options. The homes incur very little wear and tear without full time tenants and are often reinstated if need be, to new, prior to handing back to the owner.

Why is this desirable?

  • An investor will benefit from a secure guaranteed income over the period of the lease without fear of damages to the property.
  • The building company will usually cover all insurances and outgoings for the duration of the lease.
  • The lease-back fee could be a higher interest rate than a mortgage against the property giving an immediate net gain.
  • In a good location the capital gain will see profit over the period of the lease.

Could it work for you?

If you are considering relocating in the future ,a show home investment could see you purchase at this years prices, hedging against price increases and capital increases due to market pressures and knowing your home is secure for future occupation by yourself.

If you are looking for an investment over a one to three year period with potentially good returns and lease renewals, this could be worth considering.

Things to consider:

In all cases as with all investments your own due diligence is essential. The company you work with, the region, current and anticipated market trends, interest rates and levels of investment should all be considered carefully before committing to any investment opportunity.

How do I find out more?

Approaching a company of your choice, in the region of your choice and discussing the concept with either the franchise owner, company owner or a new home consultant would help you ascertain if any are currently available.