What are the model home leaseback risks?
“Ok, this model home leaseback thing sounds too good to be true. Where can I get burned?” I cannot count the times I have been asked that question. And savvy investors should always be skeptical. Some risks are obvious. The builder could go bankrupt or the builder could decide not to finish out the community. Those risks are not too bad because you still have control of your asset in superb condition. Since you own it, you can rent it or sell it any time after the lease ends. If the builder defaults the same options are available. And you won’t likely have a scenario where the tenant has left the property trashed and slipped out in the middle of the night! Most builders give anywhere from 60 days to 6 months termination notice. No, you won’t have the same tenant paying a premium rent any more but if you financed correctly then you are prepared for the worst. And if your long term business plan is to buy and hold you are still in great shape. If you financed incorrectly then you can ren
