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What is a Model Home Leaseback In New Construction in Central Florida Real Estate Market?

If you're an investor in new construction real estate, you may have heard of the term "model home leaseback." Essentially, this is an arrangement in which a builder or developer leases a model home back from the investor for a set period of time, typically one to two years, in order to use it as a showcase for potential buyers.

At first glance, this may seem like a win-win situation: the builder gets to show off a fully-furnished and decorated home, while the investor gets guaranteed rental income for a specified period of time. However, there are a few things to consider before entering into a model home leaseback agreement.

First and foremost, it's important to ensure that the terms of the leaseback agreement are fair and favorable to you as the investor. This includes not only the rental rate, but also any provisions for maintenance or repairs during the leaseback period. Additionally, you'll want to make sure that the leaseback agreement includes a detailed inventory of all furnishings and decor included in the home, to avoid any disputes over missing or damaged items at the end of the leaseback period.

Another consideration is the potential impact on resale value. While a model home may be outfitted with all the latest and greatest features and finishes, it may also be subject to wear and tear from constant foot traffic and showings. Additionally, the home's layout and design may be tailored specifically to showcase the builder's products, which may not appeal to all potential buyers.

Finally, it's worth noting that a model home leaseback is not without risks. While you may be guaranteed rental income for the duration of the leaseback period, you may also be subject to fluctuations in the local real estate market. If the market takes a downturn and the builder is unable to sell homes, they may be unable to continue the leaseback arrangement, leaving you with a vacant property.

Overall, a model home leaseback can be a valuable tool for new construction investors, but it's important to carefully evaluate the terms of the agreement and weigh the potential risks and rewards before proceeding. By doing your due diligence and working with a knowledgeable real estate professional, you can make an informed decision that aligns with your investment goals.

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