I had the privilege of attending as a guest of Dave Debeau’s Canadian Real Estate Profits group to the last R2O Bootcamp right here in Kamloops BC.
If you are framiliar with Rent to own/lease options, this was a great course that covered the basics with a lot of gold nuggets along the way. Here are some of the guest speakers and things they taught that stuck me as very valuable:
Very knowledgeable mortgage broker. Has a service that keeps tenant buyers accountable for the length of the term. It’s very cheap($1500 1st yr and $500 /yr thereafter) and includes 4 quarterly checks with your tenant buyer with reporting.
“Leverage: Banks sell mutual funds so they must be good. If you go into your bank with $100,000 and ask for $500,000 of the banks’ mutual funds you will be told no. But go with $100,000 and ask to buy a $500,000 piece of property and they ask you to have a seat. They won’t even leverage thier own product but thy will leverage real estate.”
As a refreshing change, Dave Dubeau spoke about rent to own scams and how we as potential rent to own operators should ensure to follow a proven system so we don’t end up on front page news. If you have good intentions but no plan, things can go sideways quickly. Here are a few of the types of rent to own scams:
“Nice people – dumb deals.”
– no plan
– no paperwork
– no follow up
– failure, hard feelings, small claims court
– ie Parents by their kids a house, employer buys their employee house, tenant buyer does not live up to expectations, there is no recourse for investor. Relationships damaged.
“Churn and burn”
-typically an unscrupulous landlord
– Intentionally seeking a tenant failure(accepting the first person who has a large enough option payment, that is the only criteria)
– Incomplete paperwork, no credit repair plan
– tenant buyer gets screwed
“Rent to own investors falling victim to turn key deals”
– Rent to own operator/deal maker finds a deal
– Finds rent to own operator finds a “deal”
– Find a tenant buyer
– Wholesales the entire deal to you
– They keep the option fee and leave you to deal with the fallout
– No skin in the game
Some of examples of this might be the Golden Oaks company in Ottawa as per attendee discussion.
Form C of the Land Titles Act is very useful for registering Option to Purchase, JV agreements, and other things against the title of a property. Very interesting and would have saved me a ton of time trying to figure out how to secure interests in the past. In Alberta this is called a caveat, Ontario it is called something else. A good idea if you are an RTO buyer to register your option to purchase on title.
It sure is neat to get the perspective of different investors, that is why I encourage everyone I meet to continue their education and attend events even if they do not seem like they are in line with their current strategy.
Myself I will continue with buy-and-hold, but it is nice to have added rent to own to my toolbox.
Until next time,
Stay until next time,