RTO Financing

[khourypa]

Hello,

I am new to RE however I am employed as a Mortgage Agent and I would like to be involved as a RE Expert on my own deals. I purchased the "Creative Quick Turn Investing" and enjoyed it a lot along with 4 books on ACRE, Joint ventures and so forth. I love the quality of the material taught and sold by REN.

I was wondering if the "Rent to own Success in Canada" program talks (explains in detail) about submitting and getting approvals from lenders being CMHC, MBS, or even MICs. (RTO deal with a co-venturer)


I have to admit, I emailed few BDMs (contact point for Mortgage Agents to inquire on RTO deals) of different lenders inquiring about if they finance RTO deals where the ownership structure is one partner ownership as explained in the " RE Joint Venture" book and the "JV secrets ebook". I don't believe they have any idea of what I am talking about.

Which prompted my question if the "RTO Success in Canada" program addresess the mystery in approving those deals? I even talked to other mortgage agents in the industry if they know lenders for these RTO deals explained above. They are clueless.

When I mentioned to one lender that the lawyer representing me will file the JV agreement as a notice on title of subject property to protect my 50% beneficial ownership (can't qualify for a mortgage myself) since I will be doing all the work from finding the co-venturer, property and RTO client and so forth. I am receiving very weird responses from lenders . I believe the majority of mortgage agents are not sophisticated enough to have dealt with these deals. I admit , I am one of them. Not for too long though. (lol).


Does anyone know if these financing issues are discussed in the "Rent to own Success in Canada"?

Thank You

Patrick
"Live Well and Prosper"

 

[DonnaMcGuire]

Patrick, the Rent To Own Success in Canada home study kit does not go into great detail about the financing methods you've mentioned. As you know, that would be a whole book all on its own!

We did discuss it at some length in our Rapid Cashflow Program earlier this year. We had some great input from our Ontario Focus Team members. If you contact me directly, [email protected], I can connect you with them.

Take care,
Donna

 

[khourypa]

Thanks Donna. I will send you a quick email.

 

[Thomas Beyer]

Unclear if you are asking for yourself as the owner of the house, or the TB (tenant-buyer) as the future owner of the house ?

If the former, you just apply like any old mortgage with a tenant, i.e. rental property.

If the latter, they apply once they are close to buying it, like any owner would, with employment income verification, down payment verification and purchase contract. The only tricky part here is that some banks, and sometimes CMHC, do not recognize the already accrued deposits. You need to write your purchase contract to reflect those past-payments as essentially a first deposit, so a bank and/or CMHC recognizes it. That is what I did with with RTO deal.

So, as an example, if the house is $400,000 and they accrued $500/month (over and above the rent) for 30 month or $15,000 then I'd use $15,000 as the first deposit in the purchase contract.

 

[khourypa]

Hello Thomas,

I am asking as someone who wants to do JV deals with a co-venturer. I totally understand how to submit deals for a 100% rental properties as I have done it i the past as a Mortgage Agent. As I eluded previously, once I mention to lenders that the exit strategy for these deals in Rent to own, lenders seems uninterested. I was testing some waters with some lenders like Street, CMLS, MCAP,Xceed and B2B and even private lenders. Most responses are " we don't touch these deals" .I know for a fact they provide "small rental" as I have access to their underwriting guidelines

Are you telling me when RE experts do these RTO deals, they submit these deals as "non owner occupied 100% rental" and do not mention the Option agreement of it?

Thank You

Patrick Khouri
"Live well and Prosper"

 

[Thomas Beyer]

I'd say it is a rental property. The option to buy is .. optional !

 

[khourypa]

I understand. Thank you for your responses Thomas.

 

[khourypa]

Are we submitting the "Lease" and "Option" agreements to the lender? Or just the "Lease" agreement only ?

 

[Sherilynn]

We supply our lease agreement as part of the mortgage application. The lease doesn't mention the option. Having an option on the property doesn't mean it will ever be exercised, and why would the bank care if I plan to sell the property for a profit within 2 or 3 years?

As for the JV issue, normally we close on the property and JV the property later. That has been the easiest.

When we have had deals where we don't have access to the cash to close, my co-venturer and I have applied together. This has caused some complications, but always got done in the end. Examples: 1) National Bank has a 16 unit limit, and our combined properties totaled more than 16, so one of us had to be removed from the application; 2) Scotia's system could not allow a corporation and an individual to be on the same application, so they allowed the "money partner" to be a guarantor on the application and made an exception to allow the down payment to be supplied by the guarantor.

 

[khourypa]

Thank you so much for your input Sherilynn. I can't wait to close my first deal with a co-venturer .

p.s.: I love the spreadsheet included in the " "Creative Quick Turn Investing".