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interested in knowing if any of the forum members have ever used this option and if so how would you set it up?
rent to own
- Thread starter bingbangboom
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Bingbangboom,
We have been offering rent to own for our tenants for about 3-4 years now. We offer a 4-7 year term, low down up front, and they get to accumulate 15% of their rent on a monthly basis towards the purchase. They take care of all maintenance, with our approval... We also allow them to transfer the credit to any property in our portfolio that we have for sale at the time they wish to trigger the option. The sale price is determined at the end with an appraiser. Many people have commented on how they like the way we run our rent to own program. You can also read more about how ours is structured on our website, under "Assisted home purchase" at www.LibertasHoldings.com
Hope this helps,
We have been offering rent to own for our tenants for about 3-4 years now. We offer a 4-7 year term, low down up front, and they get to accumulate 15% of their rent on a monthly basis towards the purchase. They take care of all maintenance, with our approval... We also allow them to transfer the credit to any property in our portfolio that we have for sale at the time they wish to trigger the option. The sale price is determined at the end with an appraiser. Many people have commented on how they like the way we run our rent to own program. You can also read more about how ours is structured on our website, under "Assisted home purchase" at www.LibertasHoldings.com
Hope this helps,
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Tyler:
What expences do you continue to pay on the property in a rent-to-own agreement? Insurance?
What expences do you continue to pay on the property in a rent-to-own agreement? Insurance?
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Greg,
We still own the property, so all mortgages, taxes and insurance are paid by us. Our strategy allows us to have long term renters in the property for 4-7 years, at which time they become the buyers of the properties we wish to sell, saving us the realtors commission. In exchange for not having to pay a realtors commission, maintenance over the 4-7 years, and zero vacancy over that time, we compensate the rent-to-own tenant by giving them 15% of all rent on that property which was paid on time. After all they are "business partners"...
Hope this helps,
We still own the property, so all mortgages, taxes and insurance are paid by us. Our strategy allows us to have long term renters in the property for 4-7 years, at which time they become the buyers of the properties we wish to sell, saving us the realtors commission. In exchange for not having to pay a realtors commission, maintenance over the 4-7 years, and zero vacancy over that time, we compensate the rent-to-own tenant by giving them 15% of all rent on that property which was paid on time. After all they are "business partners"...
Hope this helps,
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Yes thanks.
What do your numbers show for the % of rent-to-own that actually
stay long term and end up buying?
What do your numbers show for the % of rent-to-own that actually
stay long term and end up buying?
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Greg,
We haven`t had anyone over the 4 year mark yet. We`ve had a couple walk away from the rent-to-own, for financial reasons of their own. Of the ones we have currently we expect at least 75% to be in position to qualify at the end. We also plan to help them out, if there is a shortfall, by holding a second if need be. We might even be willing to do an agreement for sale with them. We have the intention of selling these places to them, but they have to work on their end to be able to qualify, if they don`t do that in time, we will extend the contract or see if another property suites them better...
Hope this helps,
We haven`t had anyone over the 4 year mark yet. We`ve had a couple walk away from the rent-to-own, for financial reasons of their own. Of the ones we have currently we expect at least 75% to be in position to qualify at the end. We also plan to help them out, if there is a shortfall, by holding a second if need be. We might even be willing to do an agreement for sale with them. We have the intention of selling these places to them, but they have to work on their end to be able to qualify, if they don`t do that in time, we will extend the contract or see if another property suites them better...
Hope this helps,
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- 17
QUOTE (markl @ Dec 1 2007, 09:02 AM) We offer this to prospective tenants.
Check out our website it details how we do it.
www.homeownersoon.com
Regards,
Mark Loeffler
Sounds great, but how do you get mortgage financing on the properties if the tenant cannot qualify?
Denise Hamilton
Check out our website it details how we do it.
www.homeownersoon.com
Regards,
Mark Loeffler
Sounds great, but how do you get mortgage financing on the properties if the tenant cannot qualify?
Denise Hamilton
You mean if their credit isn`t good enough? - We have them work with a credit specialist from the start to establish credit and teach them what better credit looks like. 680+ in 3 years can be done with almost anyone.
You mean income wise? We give them their top range that they can buy in. If it is pre existing and they do not have enough income we can offer to find them one that fits in their price range. If they are stuck on something to big and to expensive we walk away.
If I didn`t answer the question please let me know
Regards,
Mark Loeffler
www.homeownersoon.com
You mean income wise? We give them their top range that they can buy in. If it is pre existing and they do not have enough income we can offer to find them one that fits in their price range. If they are stuck on something to big and to expensive we walk away.
If I didn`t answer the question please let me know
Regards,
Mark Loeffler
www.homeownersoon.com
Thank you for your posts on the details of each program. I’ve had a chance to read through both programs and see Pro’s/Con’s with each one as they appear to be setup quite differently. Both appear to provide a win-win for both the company and purchaser
How has your experience been so far with the rent-to-own?
How long have you been running these options?
Do you feel that other markets (outside your main areas) could greatly benefit from these services and be successful?
How has your experience been so far with the rent-to-own?
How long have you been running these options?
Do you feel that other markets (outside your main areas) could greatly benefit from these services and be successful?
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QUOTE (Merriora @ Dec 7 2007, 04:06 PM) Thank you for your posts on the details of each program. I`ve had a chance to read through both programs and see Pro`s/Con`s with each one as they appear to be setup quite differently. Both appear to provide a win-win for both the company and purchaser
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How has your experience been so far with the rent-to-own?
How long have you been running these options?
Do you feel that other markets (outside your main areas) could greatly benefit from these services and be successful?
Our experience with our rent-to-own program has been great. We believe that the people who participate in these programs take care of the properties as if they were their own. They are motivated to pay on time, add value to the property(upon our approval) and really appreciate the entire program and what we are trying to achieve with them...home ownership.
We have been doing our rent-to-own program for about 4 years now, with about 10 people total. The majority of our portfolio is still rent only. We`ve had 2 families walk away after one year and are hopefully looking at our first successful purchase in the next 6 months.
I think our rent-to-own would work fantastically in markets outside Edmonton. Especially for the landlord. Having the tenant take care of all maintenance keeps the properties more hands free than a normal rental unit.
Hope this helps,
[/size]
How has your experience been so far with the rent-to-own?
How long have you been running these options?
Do you feel that other markets (outside your main areas) could greatly benefit from these services and be successful?
Our experience with our rent-to-own program has been great. We believe that the people who participate in these programs take care of the properties as if they were their own. They are motivated to pay on time, add value to the property(upon our approval) and really appreciate the entire program and what we are trying to achieve with them...home ownership.
We have been doing our rent-to-own program for about 4 years now, with about 10 people total. The majority of our portfolio is still rent only. We`ve had 2 families walk away after one year and are hopefully looking at our first successful purchase in the next 6 months.
I think our rent-to-own would work fantastically in markets outside Edmonton. Especially for the landlord. Having the tenant take care of all maintenance keeps the properties more hands free than a normal rental unit.
Hope this helps,
- Joined
- Nov 14, 2007
- Messages
- 61
QUOTE (Merriora @ Dec 7 2007, 05:29 PM) Have you found any additional costs associated with rent-to-own other than legal fee`s?
Thanks
I can`t think of any additional costs... If anything, I would say there are less costs, no realtor commissions...
Hope this helps,
Thanks
I can`t think of any additional costs... If anything, I would say there are less costs, no realtor commissions...
Hope this helps,
R
RussellWestcott
Guest
Guest
Howdy, there may be some debate on how a Rent to Own is taxed... Capital Gains vs. Business Income (and that can be a big difference). There are quite a few detailed discussion threads on the members only section of the forum for this topic, but I believe that the orginal poster would not be able to get access to all the information on the members only side.Bottom line, is make sure you surround yourself with like minded people and get a good team around you to help you with your decisions.
My position has always been regarding Rent to Own, this is a SELLING strategy (albeit it may take many years to complete), but you are selling your property to someone. Make sure you are clear on your long term plans when it comes to your Real Estate portfolio. Most people who I know that have made tremendous wealth in Real Estate are people who have taken a long term approach to this business and are long term `holders` of their properties. When the time comes that you want to sell. Rent to Own is a great exit strategy and great way to help sell your property to someone who may need some help... but only when you are ready to sell.
Here is a good post from an accountant that was just recently at our REIN™ meeting presenting.
Quote courtecy of George Dube, Real Estate accountant, talking about the potential tax issues , it was interesting to see in the REIN™ members only thread this quote comes from that there were three different accountants, and although the agreed to some points, each had a difference of opinion... go figure, that when it comes to tax that there is no black and white answer, and each of the accountants on the thread were Real Estate accounting experts. I guess the message is make sure YOU and YOUR accountant are on the same page...
QUOTE ...Just to add to the confusion and contradictions, clearly this is a difficult topic and I believe equally clear there is not an obvious answer. For what its worth, generally speaking I believe "rent to owns" are income in nature and have treated them as such in my own case. I acknowledge that there are a handful of court cases where the option to purchase can be treated as a capital gain (but would suggest that generally speaking since 1980 these would be categorized as stand alone transactions often involving real estate used to house a business). I agree with Navaz`s line of argument to be made if you are trying to pursue the capital argument. I think that both Navaz and Todd have provided great comments (I delayed originally responding to Todd and your comments as I thought it would be unfair to do so before the meetings in Calgary and Edmonton). It further shows how very intelligent and capable advisors can look at similar situations and walk away with different opinions.
My primary reasons for suggesting income in a general sense:
- if not a primary reason on purchase to sell the property, certainly an extremely strong secondary purpose as evidenced by the typical agreements and typical advertising
- many investors will have a history (or soon will by the time the audit arrives), frequency of transactions (i.e. not a stand alone transaction), potential involvement with other sophisticated investors, and be sophisticated investors themselves
- certainly debatable whether 5 years is a long period of time (but admittedly much better than 2 or 3 years)
- the whole name "rent to own" in my mind is highly suggestive of the primary intent
- court cases since 1980 (but highly caution that alternative opinions could be formed)
- discussions with senior CRA auditors (but as per Todd`s comments, these are not conclusive)
- other factors as indicated in my checklist can point towards either capital or income
Warm regards...
George
Trust this helps
My position has always been regarding Rent to Own, this is a SELLING strategy (albeit it may take many years to complete), but you are selling your property to someone. Make sure you are clear on your long term plans when it comes to your Real Estate portfolio. Most people who I know that have made tremendous wealth in Real Estate are people who have taken a long term approach to this business and are long term `holders` of their properties. When the time comes that you want to sell. Rent to Own is a great exit strategy and great way to help sell your property to someone who may need some help... but only when you are ready to sell.
Here is a good post from an accountant that was just recently at our REIN™ meeting presenting.
Quote courtecy of George Dube, Real Estate accountant, talking about the potential tax issues , it was interesting to see in the REIN™ members only thread this quote comes from that there were three different accountants, and although the agreed to some points, each had a difference of opinion... go figure, that when it comes to tax that there is no black and white answer, and each of the accountants on the thread were Real Estate accounting experts. I guess the message is make sure YOU and YOUR accountant are on the same page...
QUOTE ...Just to add to the confusion and contradictions, clearly this is a difficult topic and I believe equally clear there is not an obvious answer. For what its worth, generally speaking I believe "rent to owns" are income in nature and have treated them as such in my own case. I acknowledge that there are a handful of court cases where the option to purchase can be treated as a capital gain (but would suggest that generally speaking since 1980 these would be categorized as stand alone transactions often involving real estate used to house a business). I agree with Navaz`s line of argument to be made if you are trying to pursue the capital argument. I think that both Navaz and Todd have provided great comments (I delayed originally responding to Todd and your comments as I thought it would be unfair to do so before the meetings in Calgary and Edmonton). It further shows how very intelligent and capable advisors can look at similar situations and walk away with different opinions.
My primary reasons for suggesting income in a general sense:
- if not a primary reason on purchase to sell the property, certainly an extremely strong secondary purpose as evidenced by the typical agreements and typical advertising
- many investors will have a history (or soon will by the time the audit arrives), frequency of transactions (i.e. not a stand alone transaction), potential involvement with other sophisticated investors, and be sophisticated investors themselves
- certainly debatable whether 5 years is a long period of time (but admittedly much better than 2 or 3 years)
- the whole name "rent to own" in my mind is highly suggestive of the primary intent
- court cases since 1980 (but highly caution that alternative opinions could be formed)
- discussions with senior CRA auditors (but as per Todd`s comments, these are not conclusive)
- other factors as indicated in my checklist can point towards either capital or income
Warm regards...
George
Trust this helps
Is the purchase price they can afford the same as the bank, ie 40% of their gross wage? Do these potential owners like to know what their purchase price will be after the 4 years or so, or are they happy with using the appraisal method when the time comes? Is there a point during their rental period that the deposit is non-refundable, or is it non-refundable as soon as they move in?
Hazel
Hazel