About Edmond's Rosewood

One of the best real estate investments I believe anyone can make is purchasing a model home from a builder with a guaranteed lease back. Model homes are designed to give the builder the ability to sell custom homes, and the spec homes under construction. The builder typically will be upgrades in the home to create the best impression, and they are kept in immaculate condition because first impressions do matter. The builder wants to sell the home to an investor and pay rent for two basic reasons. First, banks do not loan much for the construction of model homes and they are kept for at least two years typically, so this ties up the builders line of credit and cash. Second, the builder can write off the full amount of rent off taxes. Another good reason is that at the end of the builders need to have it as a model home he doesn't have to worry about selling the home, it is already sold. Let's look at an available example.

2801 NW 172nd, Edmond, OK 73013

This is a split level home with 4 bedrooms, 2 baths, and a 3 car garage downstairs, and a bonus room upstairs that can be a media room or a 5th bedroom. The home is 2288SF (Plans), is fully fenced, sodded and landscaped, sprinkler system, and is in a gated community called Rosewood which has a neighborhood pool and park. Inside is Stainless steel appliances, has 2 inch blinds throughout, maple cabinets, and granite tops in the kitchen and bathrooms. The purchase price would be $219,000. The lease would run for one year with option to renew for one more year at $1800 per month.

General Area

Edmond, Oklahoma has the highest household income and adult education level of any city in Oklahoma. The city government is a model for all other cities in Oklahoma in providing amenities to its residents, and running a budget surplus. Edmond spends more money on parks, soccer fields, recreation facilities, and events and festivals than any Oklahoma town. One of the two school systems in the Edmond area is Deer Creek, where the home is located, and Deer Creek is yearly rated as either the No. 1 or 2 school system in the state.

Advantages to the Investor

Tpically when in investor buys a property it is not rented. This means that their may be vacancy which affects the rate of return, and the typical property management fee is 87.5% of the first months rent, and 8% per month management fee. In a model home you not only get your first months rent with the closing packet, you also pay no upfront fee or monthly fee which enhances your bottom line. Often on model homes upgrades come at no extra charge. Even though the home is open usually six days a week, their is much less wear and tear because of the limited open house hours, and the builder is responsible for any upkeep, and is expected to deliver the house in excellent condition at the end of the lease. In this particular example, it also happens to be one of the lowest priced homes in the neighborhood which means you are surrounded by more expensive homes.

The Bottom Line

Using 20% down and an interest rate of 6.75% which can vary, the expected monthly cash flow would be above $350 per month over your total payment. The internal rate of return which is the return you get as long as the investment stays in the property can be calculated for you. We can send you the excel spread sheet based on the amount of time you expect to hold the property. We will also factor in a conservative appreciation for the holding period because Oklahoma is still appreciating. I have blogged before about how the federal Government statistics has Oklahoma as the No. 1 state for the rise of median and average price in the first half of 2008, and Forbes called us the most recession prooof city. Out stable housing market will really enhance your return because Oklahoma had no bubble pricing to burst. In fact we are still considered undervalued by national standards. For more information and a spread sheet, please email me at joe@joepryor,com and we will send it to you. This house is ready at this writing.