Rent-to-Own beneficial to Landlord or Tenant?
- Thread starter tnguyen
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QUOTE (tninvestor @ Mar 16 2010, 08:45 PM) I just wonder does the RTO program beneficial to owner or tenant? 2yrs or 5yrs term? short or long term?
Well I am just trying to get started in this business, but from what I have read and learned so far if you structure the deal correctly it is a win for everyone in the end. Yes the investor makes money off the tenant-buyer, but the tenant-buyer gets to buy a house they may not have otherwise been able to purchase. As for the terms it seems best to structure it based on what the needs of the TB, if they need 2 years to be able to qualify for a mortgage on their own, then do a 2 year term, if they need 5 then do 5. I think in the grand scheme of things for real estate, RTO is a short term side of the business since the terms rarely exceed 5 years, however as others have pointed out to me, you could use RTO as an exit strategy on a current rental property.
Like I said, I am just starting and don`t have any investment properties yet but from what I have been reading and learning this is how I have begun to see it.
Hope this helps
Well I am just trying to get started in this business, but from what I have read and learned so far if you structure the deal correctly it is a win for everyone in the end. Yes the investor makes money off the tenant-buyer, but the tenant-buyer gets to buy a house they may not have otherwise been able to purchase. As for the terms it seems best to structure it based on what the needs of the TB, if they need 2 years to be able to qualify for a mortgage on their own, then do a 2 year term, if they need 5 then do 5. I think in the grand scheme of things for real estate, RTO is a short term side of the business since the terms rarely exceed 5 years, however as others have pointed out to me, you could use RTO as an exit strategy on a current rental property.
Like I said, I am just starting and don`t have any investment properties yet but from what I have been reading and learning this is how I have begun to see it.
Hope this helps
As Dan mentioned if the deal is structured properly it is a win for everybody involved. As for long to short term we match the term to the tenants needs and how quickly they can exit and get a mortgage through CMHC. Our typical deal is 2 years with 99.5% of all of our deals being 3 years or less as the vast majority of people that we work with can get financing after 3 years max any longer and we would just be taking advantage of their situation.
Regards,
Regards,
QUOTE (investmart @ Mar 17 2010, 10:29 PM) how about the following generalization: if you are not sure whether to be a flipper or hold long term, invest in RTO.
If the tenants decided not to purchase the house after the term end, then do i have to return the deposit and monthly credit back to the tenants? How about the interest on the deposit?
If the tenants decided not to purchase the house after the term end, then do i have to return the deposit and monthly credit back to the tenants? How about the interest on the deposit?
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QUOTE (tninvestor @ Mar 21 2010, 10:01 PM) If the tenants decided not to purchase the house after the term end, then do i have to return the deposit and monthly credit back to the tenants? How about the interest on the deposit?
usually not .. as the option purchase is usually worded in the landlord`s/owner`s favour !
You need special skills in RTO .. and you need legal advice specific to your province .. and you need TWO contracts: one for the rental part and one for the option to purchase !
This is a senior step NOT recommended for the beginner .. only after 3 or 4 "normal" buy-and-hold houses !!
usually not .. as the option purchase is usually worded in the landlord`s/owner`s favour !
You need special skills in RTO .. and you need legal advice specific to your province .. and you need TWO contracts: one for the rental part and one for the option to purchase !
This is a senior step NOT recommended for the beginner .. only after 3 or 4 "normal" buy-and-hold houses !!
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In reality there is a significant number of RTO tenants that do not complete the deal. The upside is of course in favour of the investor that keeps all deposits and simply moves on to the next tenant. Definitely to the advantage of the investor but the reality is you are offering the possibility of home ownership to someone whom otherwise could not afford or qualify for one. This is a known risk factor.
Ideally you would want to ensure your tenant has a large enough financial commitment to ensure they follow through with the deal but,again, for the investor there is no real down side regardless of whether the deal closes.
It is a win/win financial deal for the investor and a win for the tenant if they are happy going in although in the end some do lose.
Ideally you would want to ensure your tenant has a large enough financial commitment to ensure they follow through with the deal but,again, for the investor there is no real down side regardless of whether the deal closes.
It is a win/win financial deal for the investor and a win for the tenant if they are happy going in although in the end some do lose.
QUOTE (ThomasBeyer @ Mar 21 2010, 10:32 PM) usually not .. as the option purchase is usually worded in the landlord`s/owner`s favour !
You need special skills in RTO .. and you need legal advice specific to your province .. and you need TWO contracts: one for the rental part and one for the option to purchase !
This is a senior step NOT recommended for the beginner .. only after 3 or 4 "normal" buy-and-hold houses !!
Hi Thomas, I live in Calgary, do you know some quality lawyers who are very good at dealing with RTO/JV/VTB in Calgary area, and of course it will be wonderful if those pros can provide some discount for REIN member. Thanks a million, David
You need special skills in RTO .. and you need legal advice specific to your province .. and you need TWO contracts: one for the rental part and one for the option to purchase !
This is a senior step NOT recommended for the beginner .. only after 3 or 4 "normal" buy-and-hold houses !!
Hi Thomas, I live in Calgary, do you know some quality lawyers who are very good at dealing with RTO/JV/VTB in Calgary area, and of course it will be wonderful if those pros can provide some discount for REIN member. Thanks a million, David