All,

I have an opportunity to buy a model home and lease it back to the builder for 1 1/2 years. The builder will essentially be paying my mortgage payment for the next 18 months. What are the pitfalls of such an arrangement? What discounts in terms of price would you negotiate upfront? What terms would you require in the contract and lease?

Thanks

why didn't the model home sell?
how long has it been on the market?
why would a builder suggest this?
what's the builders plan if you decide not to do this?
what do you get out of this?
whats the builder's exit plan?
are they going to buy it back from you?
are they asking for an option?
what happens if the builder defaults?
security deposits?
any up front money for you?
if youre going to seller finance, how are you going to protect title and the property?

its pretty much like a sales-leaseback commonly used by TIC, REIT's, and condo conversions developers

The model home has already been built and furnished. I don't have much detail other than this would be a 1 year lease with a 6 month option. They will pay PITI, 3% closing assistance, and 3% commission. They will also pay utilities, maintenance, and security costs. They would keep all the model furniture. I would purchase the property as an investor with 20% down. This would eventually be my primary residence. I'm not in a hurry to move in. I would like to purchase it at a discount, have my mortgage paid for 18 months, and essentially have a nearly new home 18 months later.

Having been the CEO of a Real Estate Development company, we did a few "lease backs". But to really understand it you need to realize that as a builder I had 15% to work with, so on a home that may retail for $300K, I could lease it back instead of giving them the discount I could and did give everyone else. So the truth of the matter is we leased them back with the buyers own money. We still netted the same or even more.

Jerry Burns

Could you explain this in greater detail?