Model Leaseback - First Rental Property - Advice Wanted!

[Travis B.]

Hi BP Nation!

My business partner has an opportunity to purchase a model home investment leaseback from a local builder. The builder will lease the model home back from them at $1950/month. The rental agreement will be a 12 month term that is renewable at the builder's choosing. Typically they end lease when the community is sold out (2-3 years). Details, costs,  and questions below.

Sales Price = $260,000

Square Footage = 2100

Nashville, TN market

1) Would you pull the trigger on this investment? 

2) What type of loan product/lender would you recommend? (I was thinking an ARM product because they plan to sell the property once the builder ends the rental agreement.)

3) What type of legal entity should they put the property into so they are protected?

4) Any other advice would be appreciated.

Thank you!

[Jay Hinrichs]

I have done this and quite like it... far better than tenants beating the crap out of your home.

@Patti Robertson  rents simply don't go up exponentially vis a vi purchase price.. and the value proposition here is  probably appreciation play or instant equity.. can't look at it like your buying low end rentals.. or MF..

builders use construction financing to build right ???  those loans are 9 months to 12 months... so they need to either sell or refi.. builders prefer to make a sale then lease back very common in the industry...

So I take the opposite stance as you I think its a good deal