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Straight Rental or Stick to R.T.O.?

thejules

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Oct 23, 2007
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241
So I am trying to attract a "Rent to Own," Tenant and I got close. This nice young couple want to "Rent" from me. They both have income, but he just got laid off and decided to use his skills to become self-employed. They looked at the new Townhouses and they definitely want to "Rent" it! The new Townhouse will carry all expenses at $1500 rent with 20% down. So do I seek another joint venture capital investor for the $52227 cash required to close, or "What do I do?"
 

Sherilynn

Real Estate Maven
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Oct 22, 2007
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2,803
I'm confused, so to clarify:
  • You don't own the property yet, but you have it under contract to purchase with conventional financing.
  • You are buying the property with the intention of finding a RTO tenant.
  • You can't close on the property without a JV partner.
Is that correct?
When is the closing date? Are you able to get out of the contract (or assign it) if you can't find a partner and can't close?

Generally, we only buy RTO properties with conventional financing when we have a tenant approved and the tenant chooses that property. We only do "property first" RTO when we are buying with Agreement for Sale with Seller-Financing (no mortgage qualification and often low money down). Property first can also be done with a sandwich lease (you lease option from the seller and then you lease option to an RTO tenant).
 

thejules

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Oct 23, 2007
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241
Hi Sherilynn, Thanks for replying! I don't have an active offer on anything. Back in January I placed my Tenant First R.T.O. when I started the Rapid Cash Training. I didn't receive any Qualified Tenant buyer responses. Just a few tire kickers, and some local realtors whom were trying to figure out what I was trying to do. Another response was from a local Developer. He called me in and offered me some of his new Townhouses to sell using this strategy. So we worked out a price of $243000 for his newly constructed 1800 sq.ft. homes, and he offered VTB for down payment at 5% interest. SO I changed my advertising to "Property First," R.T.O. ad in the Houses for Rent section. All I seem to be attracting are overly qualified Tenants that want to rent. The Developer is allowing me to use his Open House to show prospective Tenant buyers, and lately overly qualified Tenants.
 

Sherilynn

Real Estate Maven
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Oct 22, 2007
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Yes, you will get a lot of tire kickers. And it can take months to find a suitable tenant buyer, especially at this time of year. Plus in certain markets (Edmonton, for example), most people want houses rather than townhouses or duplexes.
So while your deal has potential, it may not work.
As for whether you should find a JV partner and buy them as rentals, that's a possibility but I don't know enough about your market to comment on the numbers.
 

Thomas Beyer

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Aug 30, 2007
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RTO is a senior strategy, with more work to find suitable quality tenants that fit both your criteris, have the downpayment and fit into your desired house/TH in the right timeframe, but higher returns if you can pull it off. Even more complicated to line up a JV partner at the same time. All doable, of course.

Decide what is first: JV partner, RTO tenant or property ?

Nothing wrong with straight rentals. Like a balanced meal: eat pasta, meat, fish, veggies and dessert ..

Today I own condos, SF houses, multi-family in various locations, mobile home parks, development land, .. some by myself and many with investor partners .. and have done JVs and RTOs with partners .. all with their pro's and con's ..
 

thejules

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Oct 23, 2007
Messages
241
Thanks for you insight Sherilynn. I'll persevere through this learning block. I have posted the "Straight Rental," under the Joint Venture sections, and my other outlets of social media. If I get a J.V. partner, I will do it. But I will keep advertising for the Tenant First Strategy as well.

Thanks for your insight Thomas. I believe that I am having difficulty with this strategy because for the last 14 years I have been a "Buy and Hold" Investor and I have to rearrange my brain waves to think, "buy and then sell it." I like you food analogy, and I beleive I will have lunch now!
 
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