How do lease terms vary?
Most builders will only sign a renewable 1 year lease. There are a couple of reasons for this. One is that many of their accounting policies require them to accrue the full term of the lease in the year it is written. So if you had a 4 year lease, the builder would need to set aside all the lease payment for 4 years. That is not likely to happen. Another reason is exit strategy. The builder may sell out the community 6 months earlier than planned and may need to exit early. That is part of the risk you assume as an Investor with the leaseback program. You may lose his rent earlier than planned but you still have the high demand asset for rent or sale. And if the builder gives you the typical 60 day move out notice then you have plenty of time to chart a course of action.
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