Agreement for Sale and FSBO

[Hamiltonriver]

I just attended the Canadian Real Estate Investor Forum this weekend at the Carlu in Toronto. It was great. Thanks Don and Russell for putting on such great seminars!



I met quite a few people who are REIN members and they have now joined a group from the speaker from the U.S. to learn about buying For Sale by Owner properties where the investor does not have to use any of his own money and does not have to use banks or joint venture partners. They talked about Agreement for Sale which I don't quite understand. For me, this is great as some day, I will hit the brick wall in terms of getting money from the bank and if I don't have to go through them or use JV partners, it sounds too good to be true.



Can someone enlighten me on this particular market niche and comment on the pros and cons of this system versus using the traditional banks and JV systems to obtain money for investment?

 

[Thomas Beyer]

AfS: Agreement for (future) Sale: An agreement to buy property in the future, with some $s today (not 0 usually !!) and some monthly payment that usually exceeds the mortgage payment. Seller stay on title until property is transferred to ultimate buyer in the future. This ultimate buyer might be you, or someone you sell it to, for example a tenant-buyer with a lease-option !



Ron LeGrande is a very entertaining and educational speaker !



I suggest you take his 4-5 days course in the US. Or join REIN .. or both. Then do 2 or 3 normal deals. Then do lease-to-own and AfS if you must. You will find it very hard work to make a living.



Do not expect that after an hour of listening, with no money, that you can buy a property that cash-flows for a long term hold in Canada ! It does not work usually.



Any property which you can buy with an AfS has issues usually, the most frequent being that the mortgage exceeds the property value, and the 2nd that the rent you can get is too low for a long term hold.



I say "usually" or "frequently" because some people specialize in this techniques, [see Mark Loeffler's book/blog posts] after years of polishing a technique on how to find renters or future buyers of such properties, and even more time sifting through the rubble of potential deals.



The problem in Canada, much like the US, is that the banks have little to lose foreclosing on a property with a CMHC mortgage, as they get re-imbursed by CMHC.



The trick is to

a) find properties that are worth more than the mortgage plus its arrears and back taxes

b) find a tenant-buyer that buys property from you with an option deposit that exceeds the $s you offer seller.



A difficult strategy to execute .. not impossible .. but difficult. Not a junior strategy. It is one that needs a lot of experience !

 

[johnsu]

I would agree, this strategy is for people with more experience and would not be recommended as a first deal. Difficult but not impossible. What typically happens because the complexity of doing this deal, is that the few deals become hard to find, and the few found becomce difficult to sell to the owner and then a negative self doubt circle may or may not set in. There's many moving parts.

 

[Hamiltonriver]

Thanks, Thomas. Much appreciate your clarification.

 

[Hamiltonriver]

Thanks John. I will definitely a new investor. May be when I have more experience, I can look into this.

 

[EdRenkema]

Ron LeGrand is one of the best presenters I have seen, he is selling his system and he is very convincing. Like Thomas says this is an advanced strategy. Don't think for a minute it takes no money, you will need to set up your own marketing system and that takes both time & money, approximately $6 to $10K to get set up and 4 to 6 months to get your first deal. These numbers are not fixed, but one more thing - it takes a huge amount of commitment and Ron will be the first to tell you that.