Is a Display Home a Smart Investment?

Business Finance

Is a Display Home a Smart Investment?

Real estate is a booming industry, especially for professional investors committed to the principles of “buy low, sell high.” As new home prices continue to rise, more and more investors are flocking to this particular investment vehicle to continue growing their portfolios.

While real estate properties may be a long term win, there are a few considerations to be made on the types of properties that are worth the down payment. Display homes come to mind here—homes purpose-built in neighborhoods under construction to show off the design elements that will grace the future homes to be built and attract future buyers.

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Display homes are built first once a lot has been sectioned off for development. They are built to demonstrate the types of houses that will soon exist on the spaces around it, with countless potential buyers roaming through the space to help make a decision whether or not to move to this particular neighborhood. But once the lots are all accounted for they must be sold as well. This is where you come in. Direct from the builder, model homes go for less than those around them because they were designed for an illustration purpose, whereas the others were built with particular specifications in mind.

Display units are no less valuable, just not built for a particular client in mind.

Because of this, display homes are often sold at a discount and contain many of the upgraded features that would normally cost you a premium had you contracted the builder to include it in an ordered house in the area under construction. This can be a great way for an investor to purchase some high-quality fittings without the additional price tag before moving the property to another buyer for the markup.

Many of these properties are also modular homes, meaning that interior changes are not difficult to make if the structure isn’t attracting the crowd you’d hoped for upon purchase. However, for buyers looking to move in, this could be a problem, as avoiding additional renovations is entirely the purpose of buying one of these lots in the first place. A display home, unless containing exactly the blend of features you want, misses that mark of a purpose-built house exactly to your specifications.

But because of their discounted pricing, these units can often beat out the short term gains an investor could hope to make in stock market REITs dealing with the same sector. The physical assets are a major bonus when buying below market value. As well, because the neighbors would have selected the features and space of their homes, as the owner of a display model, you have the benefit of judging your price per square footage directly against the cost of the others around you, helping you to calculate the potential profit far more accurately.

Display homes for sale often represent a great value, especially for the new real estate investor. Because you are buying a virtually new home—one with no previous occupants —you won’t need to deal with any major upkeep before putting the property back on the market. The entire process takes far less renovation energy than a more traditional flipping scenario but will require some general maintenance.

Display homes are used to model the conditions of future units, showing bath options, kitchen and bedroom inclusions, and other specifications that one can expect in their built home. This means that lots of people will have walked through, possibly contributing minor damages and scuffs to flooring and appliances as they fiddle with the particular features. Former display models all require simple maintenance to bring them back into saleable condition, but there isn’t as much risk associated with these properties as with others because they were built to impress, which is what the home will surely do once you put it back on the market.

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