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Frequently Asked Questions on Display Homes


Here you'll find the answers to some of the most frequently asked questions about display homes. If you can't find the answer to your question below, please contact one of the Principals.

Why should I invest in a display home over a traditional property?

  • You get a home that includes the majority of options you pay extra for as standard
  • The builder is your tenant and leases-back your home
  • Longer lease terms ranging from minimum 12-months up to 3-years depending on the suburb are available
  • Your home is managed and maintained internally and externally (including landscaping) for you by the builder at their expense
  • If required, you can purchase the display furniture package, any fixtures and fittings at an agreed price
  • Most display homes offered for sale have been independently valued either by the Principals or bank valuers before being offered for sale
  • Display homes are often located in premium high-growth locations surrounded by high quality homes
  • You won't have property management, inspection or let fees to pay while the builder is your tenant
  • The home includes full landscaping, architect designed gardens and outdoor living spaces
  • You can expect the highest level of finishes both inside & out to show-home quality!
  • The homes are never lived in or slept in & the appliances never used – the home is returned to you in show home condition
  • Regular professional cleaning & maintenance to maintain show home presentation standards during builder tenancy

Will I receive higher rental income from the builder?

In most cases you will receive above-market rental income from the builder as your tenant, as that's the initial attraction to buy a display home.

However, when the builder moves on, your home will return to being a traditional investment property with market rents and property management.

The downside to having above-market rental income from your display home is that your bank may not offer you a residential home loan or a competitive interest rate. Instead, they see the home as a commercial property often with no discounted interest rate and maximum lvr of 70%.

We assess all display homes as if they were not display homes as this ensures buyers obtain the maximum lvr with a competitive interest rate.

Builders instead provide buyers with alternative incentives to make it worthwhile purchasing a display home. Talk to Empower Housing Group about what incentives are on offer from the builder of the home you are interested in.

What's the difference between the builder as the tenant compared to a traditional tenant?

  • The builder has a vested interest in the home as it shows hundreds of potential buyers, of their properties, as to what they can expect should they engage the builder
  • Anything that is faulty or damaged by the walk-thru traffic is immediately replaced at the builders expense
  • Landscaping is attended to as and when required at the builders expense
  • The home is cleaned and maintained to show-room condition and always presentable 24/7
  • Homes may or may not include builder-paid operating expenses, water usage etc. Ask us which builders pay what and when

As an investor, what returns can I expect from a display home?

Generally, display homes are located in display villages and new estates.

Evidence suggests that growth rates can be higher in new estates and display villages than in established areas and often ideal for growing equity. Income will be based on the prevailing market rents based on availability and appeal.

Homes we offer are graded for growth and income in all cases.

  • Growth - using firms such as CoreData, SQM and APM, the growth rate of the suburb can be based on sales evidence from the past 12-months, 5-years or 10-years
  • Income - using comparable rental evidence sourced from popular websites such as realestate.com.au, the rental income based on market, is used to determine the expected level of after-tax income investors can expect when the home is returned to a traditional tenant

We aim for a combined 9% in returns and suburb growth. The suburb may produce a growth rate of 6% for example and the gross income of 3%. Or, a growth rate of 3% and a gross income of 6%.

Some homes may be better for income than growth or better for growth than income or a balanced return.

What banks and non-bank lenders will provide finance for a display home?

Most banks and non-bank lenders will provide finance for up to 95% depending on the relationship buyers have with their banks.

When borrowing higher than 80% lvr, the banks mortgage insurers will want to see evidence of existing borrowing arrangements before permitting a 95% lvr investment property loan.

Banks and non-bank lenders use market rents to assess serviceability and value as-is ie without furniture, white goods and or furnishings.

The Principals have full credit licences and can assist with your financing if and as required. Visit the finance website for more information on the financing of display homes.

Can I buy the home to live in and not as an investment?

Yes! They are finished to a very high standard and include many options as standard.

Tell me about the rebates on offer from the builders?

Builder incentives can include:

  • A cash payment at settlement time available from particular builders - amount advised by Empower Housing
  • Guaranteed rental returns from 12-months to 3-years from particular builders based on the age and location of the display home
  • Rental guarantees should the builder exit the property before the agreed leaseback term

Is a display home suitable for a Self-managed Super Fund? (SMSF)

Yes! It's ideal for a SMSF. Here are some of the following reasons why:

  • The property has up to 3-years of guaranteed leaseback
  • Higher fixed rental income for the term of leaseback or a cash payment at settlement to pay for stamp duty or costs etc
  • The property is fully fitted-out with high quality inclusions and fittings
  • Financing is much easier as the lvr's are generally max 70-80%
  • Your combined balances going into a joint SMSF results in an approximate balance of $130,000* being required. *$500,000 purchase price x 20% contribution i.e $100,000 + stamp duty, legal expenses, borrowing expenses + reserve
  • Located in identified growth areas ensuring a long-term hold in the low or no tax environment of a SMSF grows your retirement funds

Do I receive income tax (negative gearing) benefits while the builder is the tenant?

Yes. Most display homes include the maximum term of depreciation.

Investors can expect all of the ATO allowable deductions from any display home offered from this website. During the leaseback term, if rental incomes are fixed i.e 6-8% for 12-months or up to 3-years on the particular display home purchased, the amount of negative gearing will vary (PAYG incomes) as the income is positive.

Owners can expect allowable depreciation and allowable interest deductions if purchasing for investment purposes.

Do I get extra warranty from the builders?

Many developers of new homes offer one to ten years’ warranty on their properties. Some builders may extend their warranties to ensure you receive an extended term of warranty when the builder has exited the display home.

Display homes we offer include finance packages!

I'm Robert Kirk, Principal of Empower Housing Group WA. I can assist you with a complete package including the right home, appropriate finance and what a property can do for you. I'm also a Financial Advisor and can assist you with a SMSF purchase, Advice, Loan and Insurances.

Disclaimer: Accessing and using any information from this site is on the condition you read and agree to the following. Before making any financial commitment to any property you should seek professional advice from a qualified and registered financial advisor. While every attempt is made to keep the information accurate and current, this site should be used to locate properties of interest to carry out further investigation as to the viability and suitability of the investment property to your personal situation. Indicative returns on investment are just that ‘indicative’ being based on information provided from third parties in regard to sale price and expected rent to be obtained. They are not deemed to be the final return once all other costs e.g legal fees, stamp duty, rental fees, utilities connections and the like associated with buying a new home are added in. Using links from this site to other web sites and the like means you are accessing information from sites we have no control over, we will not be held liable for any loss incurred from the use of information from this site and outbound linked sites. Management of Empower Housing Group and Empower Housing Group WA April 2014.

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