Rent to Own Calgary

[VicChung]

Hi Fellow REIN members,

I have a 1/2 duplex that I am advertising as rent-to-own. I have read Marc Loeffler`s book and followed some of his advertising strategies. Unfortunately, I am not having much success and I am wondering if the web sites listed in his book is more applicable to the Ontario market than the Calgary market.

I would appreciate if anyone would have any recommendations on the following:

(1) Which web sites do you use for advertising?
(2) At recent REIN events, there was a company that advertised itself as a placement agency for RTOs. Has anyone used this company? What was the name of the company?
(3) Finally, for those using RTOs, what kind of commission are you offering to realtors for placing those clients? I am thinking $500-1000$

Regards, Vic

 

[jseib]

Kijiji is pretty universally popular as is craigslist if they work better in Ontario it`s probably only due to our higher population... Though it may not hurt to look for other local options.. Just ask a few friends and do searches for city name classifieds and some options should present themselves..

Without more details it`s hard to say where you are at or how hard you`ve tried but whenever we`ve done property first as opposed to tenant first it can take several months to find the right person... Especially if your not just handing the keys to the first person with a deposit.

That being said for us December oddly enough was insanely busy, January was a bit slow but February has been extremely slow for getting calls off our ads so far..

 

[cmattric]

Hi Vic,

I have a website that I advertise Rent-To-Owns. My Email list has already filtered tenant/buyer.
Contact me if you are interested selling your property to one of my buyers.
All I need is your ad.

visit www.calgaryowner.ca
to reach me [email protected]

Thanks
Mehmet

PS: I don`t do sandwich deals. You will be dealing with tenant/buyer.

 

[markl]

Vic,

Can you post a link to your ad? Have you paid to be top ad? Do you repost everyday? Are you calling people who want RTO?
Do you have a sign up on the property? If so what number are people calling? Do they get a live person or a VM?

As Jason has said it can take 2 - 3 months to fill a property with a good RTO tenant. Hence why we use the tenant first model 90% of the time.

Regards,

 

[VicChung]

QUOTE (markl @ Feb 10 2010, 10:55 PM) Vic,

Can you post a link to your ad? Have you paid to be top ad? Do you repost everyday? Are you calling people who want RTO?
Do you have a sign up on the property? If so what number are people calling? Do they get a live person or a VM?

As Jason has said it can take 2 - 3 months to fill a property with a good RTO tenant. Hence why we use the tenant first model 90% of the time.

Regards,


Hi Marc,

Thanks for your reply. I like your tenant first strategy. However, I thought I start by following the same strategy that Tim in your book chooses for his portfolio:

Here is a link to the ad:

http://calgary.kijiji.ca/c-housing-house-rental-Why-rent-me-When-you-can-own-me-and-sleep-with-me-W0QQAdIdZ185393477

I do post on a regular basis and answer my own phone calls.

Thanks,

Vic

 

[gwasser]

QUOTE (VicChung @ Feb 10 2010, 11:38 PM)
Hi Marc,



Thanks for your reply. I like your tenant first strategy. However, I thought I start by following the same strategy that Tim in your book chooses for his portfolio:



Here is a link to the ad:



http://calgary.kijiji.ca/c-housing-house-rental-Why-rent-me-When-you-can-own-me-and-sleep-with-me-W0QQAdIdZ185393477



I do post on a regular basis and answer my own phone calls.



Thanks,



Vic






Vic,



I looked at your add. These are some of my impressions. Too cluttered - i.e. too much detailed information.



Also, to much emphasis on great location and short travel times. Sorry but the place, in my perspective lies out in the boondocks. Definitely not inner city and during main hours driving to my house in West Hillhurst takes sometimes over half an hour. You know, on a good day, I can drive to Chapparel near the 22x in SE Calgary in under 20 minutes, no Calgarian falls for that 'ploy'. During main hour it takes an hour.



'Driving'? If you go for a RTO can you a afford downtown parking? Or Ride and Parks at $60 per month? With a family you probably need two cars there. So, don't push location too hard.



I would focus on pricing. That it is affordable and that working with you may result in them owning a house lot faster than they ever dreamed of.



I love the Heading!

 

[marcp]

As much as the headline is "cute", I`m not sure it`s pulling people in. Only 12 views so far on the counter (when I viewed the ad).

Maybe play with your headline a bit, try making it more to the point with respect to what the viewer wants, and don`t forget to bump your ad every 2nd day or so.

Cheers,

 

[markl]

Hi Vic,

Have you put the price on? Typically we put the rental price on the property this gets you more hits on the ad. With Property first you can give them varying levels so you can say rent is $1,100.00 with no deposit but if you do $1,200.00 we`ll give you $150 credit. The beauty of property first is you can be much more flexible with your numbers as the tenant doesn`t know what you payed for it. So you might get a little less cash flow but you probably get a little more appreciation out of the deal.

Do you only have it up on Kijiji? I know Chris Davie`s has put out the best rental websites for different cities www.chrisdavies.ca this is where you want to target. As well have you put up ads in local supermarkets and bulletin boards? It sounds like you need to get someone who already lives in the area to be your purchaser. Is there a community newspaper?

 

[VicChung]

QUOTE (markl @ Feb 11 2010, 10:08 AM) Hi Vic,

Have you put the price on? Typically we put the rental price on the property this gets you more hits on the ad. With Property first you can give them varying levels so you can say rent is $1,100.00 with no deposit but if you do $1,200.00 we`ll give you $150 credit. The beauty of property first is you can be much more flexible with your numbers as the tenant doesn`t know what you payed for it. So you might get a little less cash flow but you probably get a little more appreciation out of the deal.

Do you only have it up on Kijiji? I know Chris Davie`s has put out the best rental websites for different cities www.chrisdavies.ca this is where you want to target. As well have you put up ads in local supermarkets and bulletin boards? It sounds like you need to get someone who already lives in the area to be your purchaser. Is there a community newspaper?

Hi Everyone,

Thanks for your input. I am re-posting every 2 days and this may explain the 19 visits only as I reposted late last night.

With regards to the rental price, my concern is that the rental price might be too high. For example, a 1/2 duplex on MLS would sell between $302,000 to $330k on MLS.
If I use the .0085 rule from Marc`s book, the rent would be approximately $2625 which is quite high. I understand some clients would be willing to pay that rent as 20 per cent also goes towards the downpayment and allows them to build their credit.

For example, when I listed on rentfaster.ca, it is mandatory to specify a rental price, thus, at $2625, the rental price would be quite high and would not be viewable by many potential clients. This would potentially limit my exposure. Anyone has any recommendation to this problem, I would really appreciate your feedback??? Marc?

Regards, Vic

 

[markl]

Vic,

.0085 is just a guideline not a hard and fast rule. What is market rent for a similar property?

 

[VicChung]

QUOTE (markl @ Feb 11 2010, 10:59 AM)
Vic,



.0085 is just a guideline not a hard and fast rule. What is market rent for a similar property?




Marc,



Market rent would be $1200- $1350.



I like the .0085 rule as it increased my cash flow significantly. If I charge market rent, how do I structure the option payments



Regards, Vic

 

[gwasser]

QUOTE (VicChung @ Feb 11 2010, 11:45 AM)
Marc,



Market rent would be $1200- $1350.



I like the .0085 rule as it increased my cash flow significantly. If I charge market rent, how do I structure the option payments



Regards, Vic


My guess would be, to get as much additional money as you are comfortable with. Of course, this also depends on the initial deposit of the RTOrs. Say initial deposits is 4% of the $300K or so purchase price that would be: $12,000 dollars. So would you be comfortable with that plus another $200 per month over the lease term?



The other thing you have to keep in mind that the 'deposit savings' may not keep up with the appreciation of the final sale price you're using. Say two year's appreciation of 6% on $300K would increase the final sale price to: $337K



So in the beginning of the term the deposit results in a LTV for your RTO's of 96% while at the end it is a downpayment of 12,000 plus 24x 200 = 16800 or a LTV of 95% so hardly any progress. So do they qualify with their current income and a LTV of 95% at the time of purchase?



$300 per month would result in a downpayment of $19200 or close to 6% down, which may give your RTO's a slightly better change to qualify.



$300 would present represent 19% of a total lease price of 1250+300=$1550.



I am myself very interested in this topic and love to hear Mark's comment on this approach.

 

[markl]

On property first deals I like to stick with properties that I have added significant value to ie Reno say I bought for $200k and put $25k in to get a present value of $260k. I would start my appreciation at the present value but not my rents.

I your case why not offer a couple of options? This of course depends on how much equity you have in the property and what you would be happy with as cash flow.

Market rent is $1350. So why not advertise it for $1,700.00 give them the break down $350.00 deposit $1,350.00 rent or go $1,800.00 and give them $350.00 credit up to you but I would give them the option for every $100 extra they choose to save you will give them an additional $50 towards the purchase therefore $1,900.00 payment = $650.00 credit. You may have to start the price a little higher than $300k to account for it. But it is a great way to get extra cash flow on RTO`s. We use the .0085 on the tenant first side but when we have a property first deal we have to be more flexible that is why we like the added value approach or if you can get a property below market value.

 

[LillianHo]

QUOTE (VicChung @ Feb 11 2010, 09:23 AM) Hi Everyone,

Thanks for your input. I am re-posting every 2 days and this may explain the 19 visits only as I reposted late last night.

With regards to the rental price, my concern is that the rental price might be too high. For example, a 1/2 duplex on MLS would sell between $302,000 to $330k on MLS.
If I use the .0085 rule from Marc`s book, the rent would be approximately $2625 which is quite high. I understand some clients would be willing to pay that rent as 20 per cent also goes towards the downpayment and allows them to build their credit.

For example, when I listed on rentfaster.ca, it is mandatory to specify a rental price, thus, at $2625, the rental price would be quite high and would not be viewable by many potential clients. This would potentially limit my exposure. Anyone has any recommendation to this problem, I would really appreciate your feedback??? Marc?

Regards, VicIf I am a potential rent to own tenant, I would be more interested in all the numbers. Like rent, cash credit, terms, purchase price. The ad is used for filtering the potential tenant buyer, if the number doesn`t work for them, they are not interested. They will ask these questions anyway. For my experience, they are more interested in the lower rent now than the purchase price. Of course if you can offer them affordable on both, it will be more attractive. So I think buy low it`s very important in RTO.

 

[JDaley]

Anyone who can afford to pay $2625 a month won`t be wasting their time in the Beddington, and I agree with gwasser the location is no where near the DT. Are you trying to get your money out of this property (when did you buy ?) ?

 

[JimSlobodzian]

Vic,

Thanks for sharing your experience so far.

I agree with a couple other posters about your ad:
- suggest changing the headline. Maybe less emphasis on "standing out" and more on a clearer message
- the ad needs some info on #`s (monthly payment or price, etc.). Without that, I think many will "pass" and not bother contacting you.

Good luck, and please keep us posted on your success!

Cheers,

 

[VicChung]

QUOTE (JimSlobodzian @ Feb 11 2010, 08:40 PM) Vic,

Thanks for sharing your experience so far.

I agree with a couple other posters about your ad:
- suggest changing the headline. Maybe less emphasis on "standing out" and more on a clearer message
- the ad needs some info on #`s (monthly payment or price, etc.). Without that, I think many will "pass" and not bother contacting you.

Good luck, and please keep us posted on your success!

Cheers,

Thanks everyone. I appreciate the support and recommendations.

Marc and anyone else who wants to comment on this. In the book, a 6% appreciation is recommended. Again, I understand that this is just a number. However, if I was a potential buyer, I would ask the question of "what would happen if the market went down.

What if the market only went up by 4% and thus, the tenant-buyer would lose out? How do you explain and justify this to the client?

Vic

 

[gwasser]

QUOTE (VicChung @ Feb 12 2010, 09:27 AM) Thanks everyone. I appreciate the support and recommendations.

Marc and anyone else who wants to comment on this. In the book, a 6% appreciation is recommended. Again, I understand that this is just a number. However, if I was a potential buyer, I would ask the question of "what would happen if the market went down.

What if the market only went up by 4% and thus, the tenant-buyer would lose out? How do you explain and justify this to the client?

Vic

Hi Vic,

I understand Calgary`s real estate market appreciated on average 6% per year over the last 40 years or so including the 1982 real estate crash. So you can tell potential RTOrs that real estate is a long term game and even if their value might be down a bit at buyout time, over the long term they should be doing fine. Afterall, they probably plan to stay at least another 3 to 5 years in the place upon lease expiry.

 

[markl]

Vic I will throw it out to you what happens if the market appreciates 8% or 30%? If they are worrying about qualifying one of the things you have to be prepared to do is help them out at the end of the time perhaps holding a 2nd mortgage to get the deal done.

 

[VicChung]

QUOTE (markl @ Feb 12 2010, 01:38 PM) Vic I will throw it out to you what happens if the market appreciates 8% or 30%? If they are worrying about qualifying one of the things you have to be prepared to do is help them out at the end of the time perhaps holding a 2nd mortgage to get the deal done.


Thanks Marc. Do you have clause in your contract for rental increases as well? it is 6%? in Calgary, in the last boom, rents went up over 30% in many case?