Sell Rent Back

[GoRentFreeFast]

Is anyone else doing a ‘Sell & Rent Back’ program for motivated sellers ? (i.e. we (an investor) buy their property at deeply discounted price from the seller and lease-to-own it back to them). We also pay for credit repair during the term of the lease.

We’re doing about 4 a month and I’ve never seen anyone else doing it here in Ontario...Anyone?

Philip

 

[tbarcier]

I have the opportunity to do one right now. I`m just unsure of how to go about it the proper way.

 

[GoRentFreeFast]

QUOTE (tbarcier @ Nov 20 2009, 05:35 PM) I have the opportunity to do one right now. I`m just unsure of how to go about it the proper way.

Hi Thomas, Email or call me and we can work out a JV on this one. 1.888.433.6065

Philip

 

[GaryMcGowan]

I have been approached by a RTO company here in Toronto to do this scenario a few times. However after attending the Edmonton Ron Legrand event I`m now deeply turned off of the idea.

I understand each situation is different; The message from the stage was "Why would I lease it back to the current owner when they have already proven they are in money trouble, behind on payments, can not renew their current mortgage, bad consumer debt and so on". I understand that our RTO clients are usually cut from the same cloth, after putting this into perspective I think one would have to analyze it case by case. But I`m on the other side of the fence on this one -- for now.

Now I`m very interested in buying the home at a discounted price and then doing a RTO or offer Seller Financing to someone different.

 

[GoRentFreeFast]

QUOTE (GaryMcGowan @ Nov 20 2009, 06:06 PM) I have been approached by a RTO company here in Toronto to do this scenario a few times. However after attending the Edmonton Ron Legrand event I`m now deeply turned off of the idea.

I understand each situation is different; The message from the stage was "Why would I lease it back to the current owner when they have already proven they are in money trouble, behind on payments, can not renew their current mortgage, bad consumer debt and so on". I understand that our RTO clients are usually cut from the same cloth, after putting this into perspective I think one would have to analyze it case by case. But I`m on the other side of the fence on this one -- for now.

Now I`m very interested in buying the home at a discounted price and then doing a RTO or offer Seller Financing to someone different.


As you mentioned Gary LTO clients are ‘cut from the same cloth’ however we look for tenants who historically have earned good credit and a circumstance or event knocked them from good standing (divorce is a biggie). Please note we also provide credit counselling to ensure the investors tenant is in an excellent position to get a mortgage at the end of term. Over the last 6 years we’re averaging out at a 99.5% success rate (reaching term) so we’re doing something right...

Philip

 

[GaryMcGowan]

Sounds good Philip,
btw 99.5% of what? What number would give 100%?!!
Sounds like you have a good system but someone taught me to ask "What is behind the curtain" !!

QUOTE (GoRentFreeFast @ Nov 20 2009, 06:30 PM) Over the last 6 years we’re averaging out at a 99.5% success rate (reaching term) so we’re doing something right...

 

[tonypeters]

Philip, CAUTION...WARNING BELLS...BEWARE!!This is a great idea, but I would HIGHLY recommend that you do NOT enter into a "Lease with Option to Purchase" or "Rent To Own" type of arrangement with ANY of the houses you pick up for a "severely discounted" price!

WHY? If you end up in court because a Tenant/Buyer has defaulted and you need get them out, you WILL be viewed by the judge as "TAKING ADVANTAGE" of somebody in their time of difficulty, and NOT helping them!

How do you think I know this? I am aware of a number of (legal) case studies that involved this exact strategy. Everything is fine until things go sideways. In almost EVERY case, the judge has ruled in favour of the "poor" homeowner!

I highly recommend you STAY as far AWAY from this strategy as possible, otherwise there is a very good chance you WILL be going to a seminar of your own! And I am NOT talking about the $949.00 (plus GST) variety here, I am talking about a "real life" seminar that could cost you TENS of THOUSANDS of $$$$!!!

Sorry for being so BLUNT and to the point, but I would hate to see you get yourself into trouble!




QUOTE (GoRentFreeFast @ Nov 20 2009, 03:28 PM) Is anyone else doing a `Sell & Rent Back` program for motivated sellers ? (i.e. we (an investor) buy their property at deeply discounted price from the seller and lease-to-own it back to them). We also pay for credit repair during the term of the lease.

We`re doing about 4 a month and I`ve never seen anyone else doing it here in Ontario...Anyone?

Philip

 

[GoRentFreeFast]

QUOTE (GaryMcGowan @ Nov 20 2009, 07:03 PM) Sounds good Philip,
btw 99.5% of what? What number would give 100%?!!
Sounds like you have a good system but someone taught me to ask "What is behind the curtain" !!

LOL...I should have been more clear, sorry Gary...we do on average 250 (or so) LTO deals per year where 2 do not make it to the end of term...

In 2008 we did 247 LTO deals and this year we`re currently at 259 (as of 6pm...two more closing this weekend)

Philip

 

[tbarcier]

QUOTE (tonypeters @ Nov 20 2009, 07:18 PM) How do you think I know this? I am aware of a number of (legal) case studies that involved this exact strategy. Everything is fine until things go sideways. In almost EVERY case, the judge has ruled in favour of the "poor" homeowner!


Hi Tony. Which cases are these?

 

[MonteDobson]

QUOTE (GoRentFreeFast @ Nov 20 2009, 04:28 PM) Is anyone else doing a `Sell & Rent Back` program for motivated sellers ? (i.e. we (an investor) buy their property at deeply discounted price from the seller and lease-to-own it back to them). We also pay for credit repair during the term of the lease.
We`re doing about 4 a month and I`ve never seen anyone else doing it here in Ontario...Anyone?

Philip

In addition to the other comments posted, I believe that this strategy is actually illegal in a number of US states, obviously not so in Canada...yet, but I would avoid the strategy as it appears to be a bit "grey".

Correction: after sending this posted I googled "lease to own back to home owner" and here is an interesting article that came up. It appears that Fannie Mae is doing exactly this, to help homeowners keep a roof over their head.

Check out the article at http://www.homebuyinginstitute.com/homebuy...t-your-own.html

 

[tonypeters]

Thomas, I would have to dig through my files to find the case studies.

The problem arises when things go sideways with a Tenant/Buyer. While the investor may have "good intentions", the investor is essentially viewed (by a Judge) as "taking advantage" of the seller during their time of distress. It`s ok negotiating a severe discount, just DON`T create a "Buy Back" or "Lease To Own" deal with the (original) owner, that`s all!


QUOTE (tbarcier @ Nov 20 2009, 05:34 PM) Hi Tony. Which cases are these?

 

[tonypeters]

Monte, thanks for joining in on this thread.
I was aware of the Fannie Mae program, but that is a program that has been sanctioned in the states. It is also a program that does not involve negotiating severe (below current market value) discounts. There is a BIG difference between the two strategies.

QUOTE (MonteDobson @ Nov 20 2009, 06:00 PM) In addition to the other comments posted, I believe that this strategy is actually illegal in a number of US states, obviously not so in Canada...yet, but I would avoid the strategy as it appears to be a bit "grey".

Correction: after sending this posted I googled "lease to own back to home owner" and here is an interesting article that came up. It appears that Fannie Mae is doing exactly this, to help homeowners keep a roof over their head.

Check out the article at http://www.homebuyinginstitute.com/homebuy...t-your-own.html

 

[GoRentFreeFast]

Lets be VERY clear...the Below market price is specifically negotiated so that the LTO tenant can buy the property back at the end of term with the near equivalent discount...Our specific point is to ensure when they (LTO) approach the bank they are doing so with a price below MV....we still apply usual yearly equity gains to the price as we do for a normal LTO deal.

We`re simply reducing the initial $ required for the investor to secure the property if we can...

 

[AndyLuchies]

QUOTE (GoRentFreeFast @ Nov 20 2009, 08:34 PM) Lets be VERY clear...the Below market price is specifically negotiated so that the LTO tenant can buy the property back at the end of term with the near equivalent discount...Our specific point is to ensure when they (LTO) approach the bank they are doing so with a price below MV....we still apply usual yearly equity gains to the price as we do for a normal LTO deal.

We`re simply reducing the initial $ required for the investor to secure the property if we can...


Sounds interesting, I`d want to know more about legal action should the tenant walk, but this seems like an easy way to get financing for the investor as well, and get a great ROI given that the initial investment is lower than average (if the house is undervalued).

We bought in a similar situation (only at fair market value), and its been going along smoothly so far, but we would have prefered to do something below market value, which protects our interests better and gives the tenant added motivation to buy at the end, plus a greater buffer if the fixed appreciation model is more aggressive than the actual market (i.e. given that it started out lower, it still won`t be hard for the tenant to get financing on the full fixed sale price).

 

[GoRentFreeFast]

QUOTE (AndyLuchies @ Nov 20 2009, 09:23 PM) "do something below market value, which protects our interests better and gives the tenant added motivation to buy at the end, plus a greater buffer if the fixed appreciation model is more aggressive than the actual market (i.e. given that it started out lower, it still won`t be hard for the tenant to get financing on the full fixed sale price)."

Bingo!