What if You Could Buy a Show Home – and the Builder Paid YOU Rent?
(Inspired by a conversation with Rachel Alley, realtor and co-owner of Millennium Group / KW Capital Partners)
Every now and then, someone sends me an idea that makes me stop mid-scroll and think, “Well that’s pretty clever…”
That’s what happened when Rachel Alley, a local realtor and friend, emailed me about something called a builder model leaseback.
I’ll admit… I had to read it twice, but once I understood it, I thought, “This is one of those rare win-win setups you don’t hear about very often.”
So, what exactly is it?
The Simple Version
When homebuilders put up a new community, they usually build a “model home” (you know… the one you tour with all the bells and whistles). It’s professionally staged, spotless, smells like a bakery, and has every upgrade you can imagine.
Once most of the homes in that neighborhood are sold, that model has done its job. Rather than letting it sit empty, the builder can sell it to an investor (like you)… then lease it back so they can keep using it as a sales office until the community is completely sold out.
In other words, you own the house, but the builder becomes your tenant.
They pay you rent every month while they keep selling the rest of the development, and because these are typically structured as triple-net leases, the builder also covers property taxes, insurance, and any maintenance costs associated with the home.
That means your job is… well, just collecting checks.
Why It’s Smart for 1031 Exchange Investors
If you’ve recently sold (or if you’re planning on selling an) investment property and you find yourself staring down at a capital gains bill, you might already know about the 1031 exchange, which is a way to defer those taxes by reinvesting the proceeds into another “like-kind” property.
The challenge is finding the right property within the IRS’s strict time limits.
A builder model leaseback can be a perfect fit because:
- It qualifies as like-kind property for 1031 purposes.
- It generates steady, predictable income while you take a breather and plan your next move.
- You don’t have to play landlord (no tenants, toilets, or turnover).
- The tenant is the builder, not a random renter.
Most of these deals offer 5–6% annual income, depending on the price, lease term, and location. Not bad for something that’s truly hands-off.
What to Watch For
Like any investment, there are trade-offs.
- Once the builder moves out, you’ll need a plan to either rent it out to someone else or you can sell it.
- The returns aren’t sky-high… rather, they’re steady and conservative.
- You’ll need to understand the lease terms (length, renewal options, and who covers what).
It’s not a “get rich quick” play. Rather, it’s more of a “keep it simple, keep it safe” move, especially for investors who want to stay in real estate with less hassle…
…and, who doesn’t like avoiding capital gains tax?
Why I Liked This Idea
I love when people like Rachel share creative ideas like this. It’s a great example of how real estate and financial planning often overlap in unexpected ways.
For investors looking to protect gains, earn passive income, and keep things clean and simple, this strategy checks a lot of boxes.
Sometimes the best opportunities aren’t the flashiest… they’re just the ones that make sense in the right situations.
If you have any questions about this strategy, or to get a second opinion on your:
- Retirement plan
- Investment management
- Business Transition & Exit Plan, or
- If you’d like more information about 1031 Exchanges into other tax-efficient vehicles…
…feel free to reach out to us at www.LibertasWealth.com.
Adam Koos, CFP®, CMT, CFTe, CEPA is a CERTIFIED FINANCIAL PLANNERTM, one of approximately 3,000 active Chartered Market Technicians (CMT) worldwide, as well as a Certified Financial Technician (CFTe®) through the International Federation of Technical Analysts (IFTA), and a Certified Exit Planning Advisor (CEPA) via the Exit Planning Institute. In July, 2014, he was named by Columbus Business First as one of their 20 People to Know in Finance for 2014, was a recipient of the Forty Under 40 award in November of 2011, was ranked by Investopedia in July of 2017 as one of the Top-100 Most Influential Financial Advisers in the U.S. for 2017, his company is a 7-time winner of Columbus CEO Magazine’s “Best of Business” Awards for “Best Private Wealth Management Firm” (2010-2014, 2019, and 2024), a winner of Columbus Business First’s “Fast 50,” representing the fastest growing companies in central Ohio (2025), and is still the only financial planning and investment management firm in central Ohio to ever win the coveted Better Business Bureau Torch Award for Ethics and Trust (2011). Adam serves his clients as the president and portfolio manager at Libertas Wealth Management Group, Inc., a NAPFA-affiliated, Fee-Only Fiduciary and Registered Investment Advisory (RIA) firm, located in Columbus, Ohio.