Rent to Own - A true win-win situation?

[Minoune79]

I would like to hear what people think about the rent to own process. Do you believe that it is a true win-win situation?



Josee Guindon
CEO, President
Premium Property Solutions Inc
[email protected]
www.ClickMyPlace.com

 

[housingrental]

When done correctly you ensure your tenant is setup for success and can follow through with purchase. So yes true-win if done right... why not?

 

[MarkTorgerson]

QUOTE (Minoune79 @ Apr 29 2010, 07:28 AM) I would like to hear what people think about the rent to own process. Do you believe that it is a true win-win situation?



Josee Guindon
CEO, President
Premium Property Solutions Inc
[email protected]
www.ClickMyPlace.com

Absolutely!! But only when executed with the clients best interest in mind. The succeess of any rent to own company should be based upon how many deals they close......not how many deals they sign.

 

[omanalese]

Hi Josee,

If you do everything in your power to ensure that the tenant-buyer`s financial situation has been reviewed with a mortgage professional and/or credit counselor to project and determine the necessary path to get out of debt and into home ownership you are on the right track. As well, you have to make sure that the deal is suitable to the return the investors are looking for.

In the end it`s a balancing act between the two. Just like Zig Ziglar says, "Help as many people get what they want to get what you want."

As well its a win for the real estate pros you work with because its a deal that they couldn`t have done without you masterminding the whole thing.

Happy investing,

Oliver
QUOTE (Minoune79 @ Apr 29 2010, 09:28 AM) I would like to hear what people think about the rent to own process. Do you believe that it is a true win-win situation?



Josee Guindon
CEO, President
Premium Property Solutions Inc
[email protected]
www.ClickMyPlace.com

 

[invst4profit]

The biggest problem is the tenant/buyers. People are unpredictable and often when dealing with customers having a history of poor money management they are prone to repeating there mistakes.

Screen them, coach them and let them go. It`s like raising kids.

It`s a good thing there is a nice profit in it for the investor as it seems like a lot of work just to help someone else own a home. Especially someone not capable of doing it on there own but I guess that is the hook.

 

[AndyLuchies]

For me, the biggest part of the RTO win/win scenario is that you double-dip with the rent--or maybe the better idiom is "have your cake and eat it too"--as a tenant, I am essentially entering into a great payment plan for my house, much like a payment plan for a car, which I cannot otherwise get.
As an investor I get better cashflow that I could ever hope to get in a conventional rental.

The tenant pays extra money (credits) that he will get back anyways, to live in a house he can`t yet own.
The owner gets an extra $200-$500 cashflow EACH month on the property that is taken out of the eventual appreciation of the property so he never has to pay it back. Its like getting your profit at the beginning of your investment instead of the end!

We provide a savings plan system for the tenant, and a cashflow plan for ourselves. Win. Win.

 

[AndyLuchies]

Here`s some tenant benefits I pulled off my JV presentation:

Built in savings plan for tenant.
Experience home ownership before he/she would otherwise be able.
Guarantees no raising rents for the entire term.
Tenant receives a guaranteed, fixed purchase price for the property in the future (if using fixed appreciation model).
Helps tenant spend money on an appreciating asset instead of a depreciating one.

The only downsides for a tenant to an RTO is:
1) They now have to take care of the property they live in.
2) They have to come up with a higher monthly payment.

 

[ChrisDavies]

And be ready for the eventuality that as many as 75% of your tenants won`t close, which is fine. Be ready to move on, find a new tenant and adjust your strategy.

 

[GaryMcGowan]

QUOTE (ChrisDavies @ Apr 30 2010, 11:08 AM)
And be ready for the eventuality that as many as 75% of your tenants won't close, which is fine. Be ready to move on, find a new tenant and adjust your strategy.




75% is not something that we can live with. That is why we employ a credit specialist and our mortgage broker to work with our Tenants throughout the term that they are living in the home.



If you are setting up your Tenants to fail then you hit that number every time. The scenario has to win win and achievable. If it is not then don't do it. Sure we will have people not complete the term or not buy the home but we have to make it achievable and provide the guidance to do so.

Why Rent To Own for us? Because it takes very little of "our" time. It is easily managed and it runs very smoothly. It produces 80% of our profits and requires only 20% of our time.

 

[Captainmartson]

QUOTE I would like to hear what people think about the rent to own process. Do you believe that it is a true win-win situation?

Hi,

Yes it`s of-course beneficial and above information are 100% correct.

 

[Minoune79]

Thanks everyone with your great insights! It is quite interesting to see that everyone who replied is for rent to own

Josee Guindon
CEO, President
www.ClickMyPlace.com

 

[invst4profit]

[quote name=`Gary McGowan` date=`Apr 30 2010, 05:35 PM` post=`84754`]
75% is not something that we can live with. That is why we employ a credit specialist and our mortgage broker to work with our Tenants throughout the term that they are living in the home.

I can understand your personal desire for customers to be successful and it definitely appears your efforts are in that direction but financially if a customer does not close where is the down side for the investor.
Since the investor keeps all of the customers money and simply turns around and finds another customer this certainly makes RTO a win/win style of investment from my perspective.

A certain percentage of failures must be perceived as a plus from the perspective of increased profit.

Have any RTO investors experienced difficulties in evicting particularly in Ontario?

 

[JoeRagona]

QUOTE (invst4profit @ May 10 2010, 08:23 AM) Have any RTO investors experienced difficulties in evicting particularly in Ontario?

No. It is because I structure my RTO with two seperate leases. When I took the tenants to the LTB twice, once for back rent we `threw away` the Option lease and concentrated on the lease only portion. They were required to pay all back rent (about $4500) and the second final time I evicted for late payment again successfully.

The down side was that I could not collect on the `option` money owed. There may be other ways to structure contracts with the option amount included, but from my knowledge you cannot use this at the LTB.

 

[PeggyDupont]

QUOTE (JoeRagona @ May 10 2010, 10:00 AM)
No. It is because I structure my RTO with two seperate leases. When I took the tenants to the LTB twice, once for back rent we 'threw away' the Option lease and concentrated on the lease only portion. They were required to pay all back rent (about $4500) and the second final time I evicted for late payment again successfully.



The down side was that I could not collect on the 'option' money owed. There may be other ways to structure contracts with the option amount included, but from my knowledge you cannot use this at the LTB.






Helllo Joe,



What do you mean when you say you could not collect on the 'option' money owed? Could you please provide more details?



many thanks



Peggy

 

[JoeRagona]

QUOTE (PeggyDupont @ May 18 2010, 11:58 AM) Helllo Joe,

What do you mean when you say you could not collect on the `option` money owed? Could you please provide more details?

many thanks

Peggy
Sure Peggy,
I have two separate agreements one being a standard lease and one an `option` agreement that spells out the details of the particulars such as extra payment towards the final purchase. So in other words, let`s say the monthly payment is $1300 and $300 of it is going towards purchasing the home (thier option payment).

Then let`s say they stop paying the option portion and want to only rent. Now I am charging them $1000 as opposed to the $1300.But NOW, things change again and the stop paying rent. When I take them to the LTB, I can only apply for the loss of $1000 NOT the original $1300 because they are two separate agreements.

That is how I played my RTOs and as I mentioned, there are numerous ways to do the contracts. As far as I know, if you have everything in one contract you can`t use that at the LTB because it mentions RTO.

Correct me if I am wrong.

However in my case, this allows the tenant an `out` to stay within the property and hopefully get back on track to try again. You don`t have to ask them to re-sign a lease this way either as it`s done from the start.