Looking for a RTO company to JV

[Luong98]

I have two properties in Fort Saskatchewan that are currently being rented. Both tenants have requested that they would like to rent to own. Can the REIN community please recommend a RTO company that I can partner up with? I would prefer that they are from Edmonton and have atleast 3-5 years experience doing RTO successfully.

Thank you in advance.

 

[jseib]

Why would you need to JV with a RTO company in that scenario?

RTO companies more often then not sell the deals out to underwriters/investors, only the small or extremely well funded ones keep the deals in-house.

The trick is most RTO companies are usually run by a realtor or have a partner who is.. So they collect the realtors commission on the sale plus a tenant locator fee (usually $5000 or more). If you already have the tenant and the house, you really want an investor not an RTO company.

 

[Luong98]

Thank you for that great advice. I guess what I am really looking for is someone experienced in RTO that will partner with me to structure the deal. My alternative is structuring this deal myself but RTO is not my speciality. I`m not sure if this is typical but any help from the community would greatly be appreciated.

 

[MonteDobson]

QUOTE (Luong98 @ Sep 16 2010, 09:28 PM) Thank you for that great advice. I guess what I am really looking for is someone experience in RTO that will partner with me to structure the deal. My alternative is structing this deal myself but RTO is not my speciality. I`m not sure if this is typically but any help from the community would greatly be appreciated.
Try Lucas Fausak. He is also a realtor in Edmonton area that has started up a LTO company. More info @ http://reachsolutions.ca/

 

[RedlineBrett]

QUOTE (Luong98 @ Sep 16 2010, 09:28 PM) Thank you for that great advice. I guess what I am really looking for is someone experience in RTO that will partner with me to structure the deal. My alternative is structing this deal myself but RTO is not my speciality. I`m not sure if this is typically but any help from the community would greatly be appreciated.

LTO is a fringe business and there are no `big box` companies that specialize in 3rd party placement for this in Alberta. You basically need a property management company with a solid sales division and a very shrewd operator to dance around all the issues with RECA. I`d say just do it yourself... If you can market a property to rent and also market a property to sell your can find your own RTO tenants. All you need to see is a path of consistency in employment and a reasonable deposit. Ask for them to fill out a mortgage application at the same time as a lease application and send it off to your mortgage broker. This forum is also a great place to comment on your screening process and candidates.

 

[Dan_Eisenhauer]

I agree with Brett.

RTO is not a difficult concept to understand. I suggest that you buy Mark Loeffler`s book, and/or look online for "Rent To Own" or "Lease Options". There is a huge mound of material there for you to get. Or get to know someone who has done a few and can give you advice.

You will need a good Option Agreement, and a lawyer who understands it.

DYI, and don`t give up 50% of your profits.

 

[Lucas]

I respectfully disagree with both Brett and Dan...

Just as a seller would consult a Realtor when looking to sell their home conventionally (and pay a commission!!), its wise to do the same if you are considering selling a property via Lease-to-Own. Although it isn`t terribly complicated, there are legal dangers with "winging it" on your own. One could compare it to trying to sell conventionally on your own. I think the forum agrees that Realtors provide a very good service to the Real Estate industry.

From the original post, I don`t think David mentioned anything about sacrificing 50% of his profit...Outsourcing the facilitation of a Lease-to-Own tranaction should be in-line with what a Realtor charges.

In regards to RECA, I don`t think there are any specific rules against Lease-to-Own. As long as the transaction is fully transparent and all appropriate disclosures are made to ALL parties involved, RECA shouldn`t have any problems.

Of course, with the launch of REACH Housing Solutions Inc. (our Lease-to-Own company), I have a conflict of interest (thanks for the referral Monte!!).

Good luck with your properties!!


QUOTE (Dan_Eisenhauer @ Sep 17 2010, 01:17 PM) I agree with Brett.

RTO is not a difficult concept to understand. I suggest that you buy Mark Loeffler`s book, and/or look online for "Rent To Own" or "Lease Options". There is a huge mound of material there for you to get. Or get to know someone who has done a few and can give you advice.

You will need a good Option Agreement, and a lawyer who understands it.

DYI, and don`t give up 50% of your profits.

 

[JimWhitelaw]

Hi David, give me a call if you like. I`d be happy to meet you for a coffee and walk you through the RTO process to help you understand how to structure your deal.

 

[Luong98]

QUOTE (JimWhitelaw @ Sep 18 2010, 02:42 PM) Hi David, give me a call if you like. I`d be happy to meet you for a coffee and walk you through the RTO process to help you understand how to structure your deal.

Thanks Jim. I will call you tomorrow.

 

[RedlineBrett]

QUOTE (Lucas @ Sep 17 2010, 02:25 PM) In regards to RECA, I don`t think there are any specific rules against Lease-to-Own. As long as the transaction is fully transparent and all appropriate disclosures are made to ALL parties involved, RECA shouldn`t have any problems.

Regardless of how transparant you are RECA will jump all over you if you try and do a realtor`s (or property manager`s...or mortgage broker`s) job and don`t hold a license. They police the real estate act which governs the laws by which Albertans can do business in the real estate industry. If you are collecting a fee for trading in real estate you need to be licensed and abide by the code of conduct for industry members. If you are getting paid for putting buyers and sellers or tenants and landlords together and you DON`T have a license you are like a regular citizen trying to enforce the criminal code without being a police officer.

The only way around it is to fall under one of the exemptions for `definitions of trade`, the easiest of which means you need to have an interest in the property being traded. This is the grey area for unlicensed LTO companies or even mom and pop rein members trying to do assignments, sandwich LTO deals or the like. As soon as one investor takes it too far there will be an investigation + lawsuit which will likely result in the exemption criteria being re-evaluated to remove this ambiguity.

Just having a license might not be enough as you also need to work under a brokerage that allows you to operate your business model. There are trust account implications for deposits (very different for sales and management trades) and any commission payments must pass through the brokerage accounts.

So hiring a firm to "find me a tenant/buyer" or to "help me do a lease to own" is ultimately going to mean that our OP will be hiring a realtor. Look at his signature and you`ll see why this seems like a strange idea unless he doesn`t like representing himself (which is fine, I don`t).

 

[Luong98]

The exeption to the real estate act that relates to a person trading in real estate does not apply to a person who disposes of real estate owned by that person or in which that person has a substantial interest in (i.e. JV). In my particular case, as a REALTOR I do have the right to sell my properties privately (i.e. option it out) with the proper disclosure. What I need here, is someone to help me structure this deal either through a JV or offering me some friendly advice.