RTO Exit strategy on optioned house

[SamEfford]

Can someone help me bridge a gap that I have been struggling with?



Suppose I was to option a house and my exit strategy was RTO; however no RTO prospects presented themselves immediately. Would your preference be to keep the home empty and wait for the RTO, or rent the home under a traditional lease and keep advertising for a RTO buyer?



Thank you for all your comments.

 

[Dan_Eisenhauer]

What do your financial capabilities allow? Where is the ppty? And what is the RTO market like where the ppty is? Have you run any trial ads to see what the response rate is? What kind of tenant are you going to get if they know or think they are going to be bounced in three to six months in favour of another tenant?



If you can carry the ppty with no tenant in it for several months, then stick to your plan, after first knowing there is a demand for RTOs in that area. I would not rent to a traditional tenant unless it was on a traditional lease. It appears as if this ppty is in AB, where tenancy laws are a bit laxer than in other provinces. But check the legislation. You may not be able to get rid of tenant #1 until the lease expires. If you do this, be prepared to wait until the expiration of the lease until you begin mktg your RTO.

 

[ChrisDavies]

Sam, I'm wondering if Ft Mac's labour market may lead to people leaving in the middle of the RTO process if their job falls apart or they manage to get fired. I'm not thinking that'll be a frequent occurrence, but for me it's a plug for putting a normal tenant in on a fixed term lease.

 

[SamEfford]

Thank you for the replys.



[quote user=Dan_Eisenhauer]What do your financial capabilities allow?


For one property, than it wouldnt be a problem, but I am planning on more than one.



[quote user=Dan_Eisenhauer]Where is the ppty?


Currently in Fort McMurray, Alberta



[quote user=Dan_Eisenhauer]And what is the RTO market like where the ppty is? Have you run any trial ads to see what the response rate is?


Not yet. I will be starting ads in the next couple weeks.



[quote user=Dan_Eisenhauer]What kind of tenant are you going to get if they know or think they are going to be bounced in three to six months in favour of another tenant?


That is why I am looking to see what other strategy other investors are using.

 

[SamEfford]

Thansk Chris, I have not had this problem with tradional tenants, which implys that with an RTO tenant with a financial stake in the property than would be even less of an issue.

 

[SamEfford]

What if this was an AFS? How would that change my strategy?

 

[markl]

I would start doing a pre marketing campaign and gauge interest. You can always do a Tenant first strategy if you get someone that needs a house right away and they are a great tenant. Or you can sell the tenant to another investor.



This also allows you to gauge what type of advertising works in your market so when you do get an option on a property you can fill it right away.



As for renting straight out what is your intention? Would it still cash flow? Do you believe the property will appreciate? Those would be more my determining factors and if I got a great tenant in that only wanted to rent I would definitely review my options.



Regards,