“One great thing about rent to own is that it’s a strategy that will work in any market. As I write this book, times are tough for everyone. An ‘economic crisis’ is in full swing, and people are losing their jobs, homes and financial security. When the market bounces back, the divide between those who survived and those who sank will be enormous. But the real estate investors who have already implemented a rent-to-own strategy in some capacity are realizing cash flow despite the market!” —Mark Loeffler (aka The Versatile Investor, owner of 50 doors) in his Canadian bestselling book Investing In Rent-to-Own Property
Types of Investors We Are Looking For
February-2012: The purpose of this page is to update you on where we’re at with our Tenant-First-Rent-To-Own (TFRTO) investment strategy, to share with you our goal for 2012, and to let you know specifically what type of investment/investor we are looking for to help us reach that goal.
First, an update:
We currently have 4 TFRTO deals in progress (location, date started, date of closing)
-Bourget, September 17-2010, September 17-2013 (3-year deal)
-Aylmer, June 18-2011, June 18-2014 (3-year deal)
-Hawkesbury, December 19-2011, December 19-2015 (4-year deal)
-Spencerville, December 22-2011, December 22-2015 (4-year deal)
Our goal for 2012 is to complete 10 more TFRTO deals. We have the market, the marketing, the time, the experience, and the team we need to make it happen. All we need are more investors.
There are 3 types of investment/investor we are looking for. In summary,
-Primary Investor: someone with good credit (no money needed) who secures a first mortgage (80% of the purchase price) on a property that is purchased for a tenant-buyer.
-Second Mortgage RRSP Investor: someone with at least $20,000 in his-her RRSP who puts a second mortgage (10% of the purchase price) on a property that is purchased for a tenant-buyer
-Cash Investor: someone who has cash available, or an unused line of credit, who invests cash (12% of the purchase price) in a property that is purchased for a tenant-buyer
Before we proceed to tell you how each works in a bit more details and what the benefits are, let us point out that in all cases, those investments are hands-free for the investors.
We (SASREIG) find the qualified tenant-buyers, we find the houses (with the help of an experienced realtor), we take care of the paperwork, we manage the properties and we do all the banking and bookkeeping so that after a few minutes (for a cash investor) or a couple of hours (for a Primary Investor) of work done at the beginning, the investors can forget about their investment for the duration of the deal (typically 3 or 4 years). We take care of everything!
“In a tenant-first-rent-to-own agreement, since the tenant will ultimately purchase the house, the renter takes responsibility for the repairs and maintenance not just out of a sense of duty; the agreement states that they are responsible for maintenance, repairs and upkeep.”
—Mark Loeffler (aka The Versatile Investor, owner of 50 doors) in his Canadian bestselling book Investing In Rent-to-Own Property
What do you need to invest, and what are the benefits? Here’s a summary;
Primary Investor:
-You don’t need ANY money of your own, just a good credit at your bank or mortgage institution
-Your “investment” is secured by the fact that you have a mortgage on a property and you’re on title
-Your Return on Investment (ROI) is infinite.
Let us explain using as an example the house we have in Bourget. We bought it for $224,000. The Primary Investor (PI) got a first mortgage for $179,200. When the TFRTO deal ends, he will get back the $179,200 “he invested” (the bank did, really) but the bank will only need $164,419 at that point. The PI will pocket the difference (called Paydown) which will be $14,781. Not a bad return for a couple hours of work at the time of the closings… Since he’s making a return of $14,781 on an investment of $0, the PI’s return is infinite.
For our next deals, in recognition of how important the contribution of the PI is to the success of our deals, we have decided to add a little bonus at the end that could put another $1,400 to $2,500 into your pocket. We’ll be happy to explain the details of this new bonus to the interested person.
Now, since the PI gets paid when the house sells at the end of the TFRTO deal, there is no Cashflow in the interval. However, for those who want monthly Cashflow, we now offer a new option to the PI. We’ll be happy to explain the details of this new option to the interested person.
-Second Mortgage RRSP Investor:
-According to Greg Habstritt, one of the most successful Canadian investors there is, and the author of the bestselling book The RRSP Secret, “…the primary strategy that I laid out in this book—arms length mortgages—continues to be one of the greatest investment strategies that you can consider, whether you’re using registered funds or just cash. The unique combination of simplicity, risk mitigation and attractive returns is not offered by any other investment strategy that I know.”
-If you have over $20,000 in your RRSP that is earning peanuts, you can invest that money into a second mortgage on a property we buy for a tenant-buyer. Because the money STAYS in the RRSP there are no penalties, and the return you make is not taxable because it goes automatically into your RRSP. This is a very secured investment because, among other things, it is administered by a trustee.
-We pay 10% annual interest, but there are a couple options that are available—like differed interests for example—that could earn you a higher ROI. We’ll be happy to explain the details of this new option to the interested person (or to email you a 10-page Special Report that explains this strategy in details.)
-Cash Investor:
-This is for people who have cash available that’s not earning nearly enough. The annual rate of interest we pay depends on a few things—like whether you’ll be in second or third position for example—but the minimum you can earn for a cash investment is 11% a year.
FYI:
Regardless of which combination of investors will be used for our next rent-to-own opportunity, we (SASREIG) will form a joint venture between our corporation and the investor(s) to buy the property.
Regardless of the type of investors, all investors who will enter our joint venture will be passive (totally hands-off) investors. We (SASREIG) do all the property management.
Daniel and Laurel (the owners of SASREIG) PERSONALLY guarantee (in writing in the Joint Venture agreement) a generous minimum return for each type of investment (details available on demand).
Because of the aforementioned guarantee, the investment is recession-proof due to the fact that the return is not tied to appreciation.
Guaranteed monthly payment—the rent is always covered by SASREIG.
Now, if for whatever reason,
you can’t do ANY of those investment strategies (that would be
unusual…), you can always refer people to us who could. We offer
generous finder fees for that service. A few weeks ago, we mailed out
over $1,000 in cheques to 3 people who helped us with our 2 TFRTO deals
in December.
“Rent-to-own properties produce positive cash flow in any market. This means that no matter what happens with the economy in the years to come, your rent-to-own property will be generating positive cash flow. It’s as close to ‘recession proof’ as any investment can get, which means more money and fewer sleepless nights for you.”
—Mark Loeffler (aka The Versatile Investor, owner of 50 doors) in his Canadian bestselling book Investing In Rent-to-Own Property
If you have any question, please do not hesitate to contact us by email or by phone (you'll find our contact information here).
Daniel G. St-Jean & Laurel R. Simmons
Professional Real Estate Investors
