RTO`ers in Calgary

[dwoychuk]

Hello again,

I am just wondering if there is anyone in Calgary having great success with RTO`s. I have been reading some of the posts and checking out as many sites of RTO companies as I can, but I am hoping to get some information on where to start.

Here are a few questions that come to mind.

Is this a good place to start investing or should I start with standard rental properties?
Is there a particular demographic that fits this strategy better than others?
Should you find a house to buy first or find the client that wants a house and then buy? Does this really matter if it is a sound property?
Do Fix-er-up-ers work well for this type of investment (for the renter to put in some sweat equity) or should you look at "move in ready" properties?
What do you look for in the financial analysis?

Look forward to your responses.

Thanks in advance,

 

[RedlineBrett]

I think what is missing in a lot of the RTO material on REIN is just how hard it is to compete with today`s mortgage market. Buyers can get in at 5% down and get rates as low as 2.15%. And without the urgency to `get in the market now` these guys are more and more content to sit on the sidelines, rent and save up that 5%.

To get a good tenant/buyer there has to be something `more` in it for them.

I own a mortgage brokerage, work as a buyer agent and have many tenants all in Calgary. I just don`t think the standard pitch of helping them `buy` a property for a much smaller down payment while making them pay through the nose monthly will wash with enough tenants to make a viable business model out of it.

 

[marcp]

Bret, I take it you`re not coming across many folks that you can`t qualify for 5% down at 2.15%?

This is rather different than what Mark Loeffler told me, that since the B lenders have left or are leaving the market (Resmor, Wells Fargo, etc), his RTO business has tripled. Perhaps he will contribute to this thread and mention how many deals he`s actually doing a month.

Do you really find it that easy to qualify anyone that comes to you for a 5% mortgage at 2.15% ??

 

[RedlineBrett]

QUOTE (marcp @ Nov 26 2009, 11:55 AM) Bret, I take it you`re not coming across many folks that you can`t qualify for 5% down at 2.15%?

This is rather different than what Mark Loeffler told me, that since the B lenders have left or are leaving the market (Resmor, Wells Fargo, etc), his RTO business has tripled. Perhaps he will contribute to this thread and mention how many deals he`s actually doing a month.

Do you really find it that easy to qualify anyone that comes to you for a 5% mortgage at 2.15% ??

I`m not talking about current homeowners - with lots of equity - that are in payment trouble and want to sell and rent back from you. Distressed owners with equity make up most of the B lender`s business.. not huge first place loans at exorbitant rates which CMHC would not approve.

First time buyers that can`t get approved are nearly all due to lack of income or lack of downpayment. There are certainly exceptions, but I chose to take my business away from this type of deal due to lack of volume.

 

[markl]

So I think what it comes down to is how many buyers do you need to work with to turn it into an economically viable business? We are currently averaging 2 deals a week. I am organizing myself a little to ramp that up. There are other companies in the market place as well as individuals providing these services to people on their own.

There is no shortage of people who do not qualify for traditional financing. We are very selective to who we will work with as we are making a major investment in them. Even when all you had to do was be able to write your name correctly and you got 100% financing for 40 years we were still in business.

But we have kind of high jacked the thread here.

1. I invest in Single Family homes as they are the most liquid of all properties. IE most buyers and buyers who buy on emotion and not numbers. If my RTO tenants do not buy and I need another exit strategy. rent-to-own is just one of the exit strategies I use.

2. don`t know if this is demographic but we buy properties that are 3 - 3.5 X average income of the area we are looking. If we are working on property first model. Tenant first have them work with your mortgage broker to qualify them and then let them work with your realtor.

3. ups and down to both house first and tenant first strategies. Big plus to property first is your buying in an economically fundamental town for certain reasons and if your tenant does not complete you typically make more money by holding the property and putting a new tenant buyer in place. Tenant first they are more likely to purchase the home as there is more emotional attachment and they have a better sense of belonging in the neighbourhood.

4. Fixer uppers work great. I would caution if your tenant is doing the work though to make sure you regularly inspect and insist everything is done to code. We will buy a property first deal put $10k into the property and realize $20k in equity that gives us a higher starting price more inline with comparabe properties.

I hope I have answered all the questions as well if you want the financial analysis spreadsheet I and most REIN members use now send me an email I am happy to provide it for you.

 

[dwoychuk]

QUOTE (markl @ Nov 26 2009, 02:34 PM) So I think what it comes down to is how many buyers do you need to work with to turn it into an economically viable business? We are currently averaging 2 deals a week. I am organizing myself a little to ramp that up. There are other companies in the market place as well as individuals providing these services to people on their own.

There is no shortage of people who do not qualify for traditional financing. We are very selective to who we will work with as we are making a major investment in them. Even when all you had to do was be able to write your name correctly and you got 100% financing for 40 years we were still in business.

But we have kind of high jacked the thread here.

I hope I have answered all the questions as well if you want the financial analysis spreadsheet I and most REIN members use now send me an email I am happy to provide it for you.


Hi Mark,

Thanks for the reply and yes it answered my questions, for now!

I will definitely send you an email, I would love to see that spreadsheet. It is not my intention to have RTO`s as my primary business but it is an area that my wife has shown some interest in (which is a BIG plus for me); it is also part of my Belize as a way to help other people along the way. So whether it is a starting point or starts later, I am very interested to learn the ropes of it.

Bret and Marc, I also appreciate your discussion. As they said at the ACRE event, when Don goes on his rants it`s sometimes the best information you can get. So please don`t stop because it is not directly answering my questions.

I am just starting out and don`t own any investment properties yet so I am trying to take in as much info as I can. I posted earlier this month regarding thoughts on doing a JV deal with family in the beginning and got some great insight on that matter. I am still in the same boat and need to find a solution to start when I don`t have any capital of my own so that is why I am exploring some of these other strategies as a possible starting point.


Thanks again everyone!

 

[David Chien]

QUOTE (markl @ Nov 26 2009, 01:34 PM) So I think what it comes down to is how many buyers do you need to work with to turn it into an economically viable business? We are currently averaging 2 deals a week. I am organizing myself a little to ramp that up. There are other companies in the market place as well as individuals providing these services to people on their own.

There is no shortage of people who do not qualify for traditional financing. We are very selective to who we will work with as we are making a major investment in them. Even when all you had to do was be able to write your name correctly and you got 100% financing for 40 years we were still in business.

But we have kind of high jacked the thread here.

1. I invest in Single Family homes as they are the most liquid of all properties. IE most buyers and buyers who buy on emotion and not numbers. If my RTO tenants do not buy and I need another exit strategy. rent-to-own is just one of the exit strategies I use.

2. don`t know if this is demographic but we buy properties that are 3 - 3.5 X average income of the area we are looking. If we are working on property first model. Tenant first have them work with your mortgage broker to qualify them and then let them work with your realtor.

3. ups and down to both house first and tenant first strategies. Big plus to property first is your buying in an economically fundamental town for certain reasons and if your tenant does not complete you typically make more money by holding the property and putting a new tenant buyer in place. Tenant first they are more likely to purchase the home as there is more emotional attachment and they have a better sense of belonging in the neighbourhood.

4. Fixer uppers work great. I would caution if your tenant is doing the work though to make sure you regularly inspect and insist everything is done to code. We will buy a property first deal put $10k into the property and realize $20k in equity that gives us a higher starting price more inline with comparabe properties.

I hope I have answered all the questions as well if you want the financial analysis spreadsheet I and most REIN members use now send me an email I am happy to provide it for you.

 

[David Chien]

QUOTE (markl @ Nov 26 2009, 01:34 PM) So I think what it comes down to is how many buyers do you need to work with to turn it into an economically viable business? We are currently averaging 2 deals a week. I am organizing myself a little to ramp that up. There are other companies in the market place as well as individuals providing these services to people on their own.

There is no shortage of people who do not qualify for traditional financing. We are very selective to who we will work with as we are making a major investment in them. Even when all you had to do was be able to write your name correctly and you got 100% financing for 40 years we were still in business.

But we have kind of high jacked the thread here.

1. I invest in Single Family homes as they are the most liquid of all properties. IE most buyers and buyers who buy on emotion and not numbers. If my RTO tenants do not buy and I need another exit strategy. rent-to-own is just one of the exit strategies I use.

2. don`t know if this is demographic but we buy properties that are 3 - 3.5 X average income of the area we are looking. If we are working on property first model. Tenant first have them work with your mortgage broker to qualify them and then let them work with your realtor.

3. ups and down to both house first and tenant first strategies. Big plus to property first is your buying in an economically fundamental town for certain reasons and if your tenant does not complete you typically make more money by holding the property and putting a new tenant buyer in place. Tenant first they are more likely to purchase the home as there is more emotional attachment and they have a better sense of belonging in the neighbourhood.

4. Fixer uppers work great. I would caution if your tenant is doing the work though to make sure you regularly inspect and insist everything is done to code. We will buy a property first deal put $10k into the property and realize $20k in equity that gives us a higher starting price more inline with comparabe properties.

I hope I have answered all the questions as well if you want the financial analysis spreadsheet I and most REIN members use now send me an email I am happy to provide it for you.

Hi Mark:

Could you send me a copy of the financial analysis spreadsheet please. My email address is : [email protected]. Thank You!

 

[Mvarga]

Hello Mark, could you send me a copy as well please. My email is So I think what it comes down to is how many buyers do you need to work with to turn it into an economically viable business? We are currently averaging 2 deals a week. I am organizing myself a little to ramp that up. There are other companies in the market place as well as individuals providing these services to people on their own.

There is no shortage of people who do not qualify for traditional financing. We are very selective to who we will work with as we are making a major investment in them. Even when all you had to do was be able to write your name correctly and you got 100% financing for 40 years we were still in business.

But we have kind of high jacked the thread here.

1. I invest in Single Family homes as they are the most liquid of all properties. IE most buyers and buyers who buy on emotion and not numbers. If my RTO tenants do not buy and I need another exit strategy. rent-to-own is just one of the exit strategies I use.

2. don`t know if this is demographic but we buy properties that are 3 - 3.5 X average income of the area we are looking. If we are working on property first model. Tenant first have them work with your mortgage broker to qualify them and then let them work with your realtor.

3. ups and down to both house first and tenant first strategies. Big plus to property first is your buying in an economically fundamental town for certain reasons and if your tenant does not complete you typically make more money by holding the property and putting a new tenant buyer in place. Tenant first they are more likely to purchase the home as there is more emotional attachment and they have a better sense of belonging in the neighbourhood.

4. Fixer uppers work great. I would caution if your tenant is doing the work though to make sure you regularly inspect and insist everything is done to code. We will buy a property first deal put $10k into the property and realize $20k in equity that gives us a higher starting price more inline with comparabe properties.

I hope I have answered all the questions as well if you want the financial analysis spreadsheet I and most REIN members use now send me an email I am happy to provide it for you.