What are you doing for Easter weekend? If you celebrate the holiday, Happy Easter! And if you don’t, we sure hope you’re enjoying a long weekend and the spring weather—20 degrees yesterday!
We were working all morning on the final details of our latest Rent to Own project. One more trim piece, one more TP holder replaced and the last bags of garbage and recycling removed from the property. Our spring inspection report, and our smoke alarm biannual worksheet are now complete at this property. Then at lunch, the Tenant Buyer arrived. The lease was signed, the Move In inspection done, and the keys were handed over. Mom, Dad and daughter all love the property and are excited to move in. It’ll be a busy long weekend for them! So here’s how the Rent to Own process is a triple win, in a real life example.
The Tenant Buyer gets to move in today (literally!): their new home puts both Dad and Mom closer to their workplaces, and their daughter is now closer to her new school. This family will spend the next 2-3 years working closely with a fabulous mortgage broker and credit repair specialist; that gives them 2-3 years to repair their credit and save more Down Payment, all with the advice of an expert. Yes, they still pay rent until the purchase is complete, but they are building equity in their home starting today.
The Joint Venture partner on this deal is a Money Partner: they have used their credit and their assets to finance the purchase of the home. They have a key role here! There are many benefits to the investor with this deal strategy. First, the exit strategy is planned, although not guaranteed. The goal is to have 2-3 years of cashflow and mortgage paydown, zero vacancy costs, and 0 realtor fees on the exit. This investor also benefits from having a strong deal brought to them—no pounding the pavement, making calls, or driving around with a realtor to figure out what will cashflow. At this point, the Tenant Buyer has agreed on a purchase price, so the Investor can even predict their ROI based on the predicted property appreciation. The Investor will have a huge Return on Time (today they left for vacation, while their investment started making money. And this JV partner should receive approx. 30% Return on their Investment, per annum—yes, assuming everything goes as planned!
The other half of the Joint Venture agreement is the Working Partner—that’s us in this case. We have sourced the property with our marketing and networking. In this case, we were able to buy below market value because a seller needed to get out of their home soon (a fourth win, for those of you keeping track); we solved their problem, and we paid less for the house in exchange. Once we took possession, the cleaning, repairing and renovating began. That was followed closely by marketing and hosting open houses for Rent to Own Tenant-Buyers. A strict and thorough screening process ruled out a few people, even before they reached our next step. Our partnership with a great mortgage broker allows for even more thorough screening—ensuring we set this family up for success. And finally, we manage all the paperwork for the Lease, the property, the Option Contract, and the bookkeeping. In this particular property, we have less than $10,000 into the deal, but we “invested” hundreds of hours of labour, at no charge until the deal closes successfully. We will ultimately see healthy returns on our time and investment.
So it’s time for a short celebration for the Tenant Buyer and the Joint Venturers. Then it’s right back to work to make sure all the details are covered and the deal “matures” as we planned. And then of course, it’s off to the next deal …. Contact us today to learn more, or for a referral to a great mortgage broker who is familiar with the Calgary market.
