Recently I’ve been talking more about rent to own since I am pretty well sold on this being the best investment strategy for me at the moment. To demonstrate why I am such a fan of rent to own investing, I want to share 3 real life reasons based on my experience over the first couple of months for the last deal I put together.

The moral of this story is that investing in rent to own is a little more work up front, but it makes life much easier for the investor. Most of us are looking for the most profitable and passive strategy, so read on to learn more about why I <3 RTO!

Reason #1 – Tenant-buyers don’t call me

Shortly after closing my last rent to own deal, some of the tenants in my buy-and-hold properties started to call about little problems that popped up. My property manager got calls about various issues such as roofing, clogged plumbing, a furnace that wouldn’t cycle, and an emergency hot water tank replacement. All this action at my buy-and-hold properties was in direct contrast to a peaceful month with my new rent to own property.

The reason for this difference is that rent to own tenants are responsible for their own repairs and maintenance. Not only does this setup add to the cash flow, it saves time and hassle for the investor as well. Having tenant-buyers cover their own repairs and maintenance prepares them for home ownership because when their term is over and they take title, there won’t be a landlord to call when they clog their drains or their hot water heater starts leaking. They are learning to deal with problems themselves like a real homeowner.

Reason #2 – Tenant-buyers improve the property

Opposite of buy-and-hold tenants who will call to have the landlord fix problems they may have caused themselves, tenant-buyers will fix problems regardless of the cause and even make improvements to the property. With buy-and-hold we usually spend a couple thousand dollars to get the property “rent ready” but with rent to own the tenant-buyers take responsibility for the condition of the property from day one.

When putting together each rent to own deal, we make sure the tenant-buyer is present for the home inspection and ensure they are fully aware of any issues with the home. If they want to address any of the deficiencies outlined by the home inspector or make improvements to the home, it is up to them to do so.

My tenant-buyer decided the existing walk-in garage door was too flimsy to protect his belongings so he decided to upgrade it to a steel door at his own expense. For a regular buy-and-hold investment this would seem strange, but with rent to own this type of thing is the norm. At the end of the day, the tenant-buyer is purchasing the home so they feel comfortable making it their own and have a real incentive to take great care of the property.

Reason #3 – Tenant-buyers want to pay (on time)!

Tenant-buyers have a different mentality than regular tenants. They are looking to achieve home ownership at the end of the day, and that means doing whatever it takes to complete the deal. Instead of rent being another annoying bill, it becomes a financial priority for the tenant-buyer. As a landlord, this is good news.

Our option agreement states that the tenant-buyer will earn rent credits for every month the occupancy payment is received on time. If payment is late, no option credit is earned in that month. This simple term means tenant-buyers want to pay, and especially want to pay on time so they do not lose out on any monthly option credits.

With my recent rent to own deal , the tenant-buyer requested that we setup pre-authorized debits from his account to make sure his rent would always be received on time. Not having to chase cheques, wait for them to clear, or even make deposits is a huge win as a landlord so I was thrilled to work with the tenant-buyer to get this setup.

Rent to Own is a Different Game

These 3 real life examples are a good sample of the differences between rent to own and traditional buy-and-hold tenants. Sure, there is more work involved upfront to put together a rent to own transaction, but the ease of management and financial benefits justify that extra work in my mind. Tenant-buyers come into the transaction with a much different mindset than tenants, and that is a game changer. When is the last time your buy-and-hold tenants took care of all of their own maintenance, made improvements to the property and requested to setup pre-authorized debit to ensure prompt payment of rent?

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Win-win sounds so cliché these days, but in my mind there is no better way to describe rent to own.

The simple truth is that when properly designed and executed, rent to own programs present a winning scenario for both the tenant-buyer and the investor. Of course, rent to own won’t work as an ideal solution in every situation, but with the right tenant-buyer everyone wins. This article explores the win-win nature of the rent to own strategy.

Continue reading “The Win-Win Nature of Rent to Own” on my blog at BiggerPockets to learn about 3 common situations where rent to own can be an ideal solution. You’ll also find out how the investor benefits in the transaction while helping others achieve the dream of home ownership.

For full details, download your free Issue of the Homeowner Herald:

Issue #1 – “How Everybody Wins in a Rent to Own Program”

In this issue we explore the win-win nature of rent to own programs by covering: 3 common barriers to home ownership The solution to each problem Why rent to own can provide the solution How investors benefit to make rent to own a win-win solution for all parties involved

You might be facing one of these common situations and will discover how our program could help you get started on the journey to home ownership today.

Click Here to Download your free PDF now.

photo credit: Gamma Man

In my first post I discussed the parallel between the most important rule in scuba diving and real estate. The most important rule is to breathe continuously and never stop breathing. In real estate, cash flow is like oxygen – it is what keeps us going.

In this article I will explore another parallel between scuba diving and real estate investing. In either endeavor, planning is crucial.

Continue reading “Scuba Diving Principles for Real Estate Investors – Part 2” on my blog at BiggerPockets for more on how planning is important in both diving and real estate investing. I’ve also included some questions to help you brainstorm and get the ball rolling on your own real estate investing plan.

photo credit: Adriaan’s Angles

This weekend I started my SCUBA training and as an investor couldn’t help but draw a few parallels between the principles of SCUBA and those of real estate investing. Believe it or not, diving and real estate have plenty in common. In fact, the most important rule in scuba diving is very similar to what I feel is the most important rule in real estate.

This weekend I started my SCUBA training and as an investor couldn’t help but draw a few parallels between the principles of SCUBA and those of real estate investing. Believe it or not, diving and real estate have plenty in common. In fact, the most important rule in scuba diving is very similar to what I feel is the most important rule in real estate.

Continue reading “Scuba Diving Principles for Real Estate Investors” on my blog at BiggerPockets for more on the most important rule in scuba diving and how this applies to real estate investing. The two activities have more in common than you might think.

photo credit: Serge Melki

One of the first tasks landlords choose to outsource is property management. This is really the nitty gritty of being a landlord and if you don’t enjoy dealing with tenants or the day to day operation of your property, you might quickly look for some help from a property manager.

Often times investors will just hire someone based on the fees without much discussion on what is included or what the expectations are. To have a good working relationship with your property manager, it is important to be clear on the expectations on both sides of the table.

Continue reading “Getting Clear on Property Management Expectations” on my blog at BiggerPockets to learn more about expectations with respect to pricing, services and investor involvement that will help you ensure a harmonious relationship with your property manager.

For more details on selecting a property manager see Building Your Real Estate Investment Team – Part 7: Selecting a Property Manager. Be sure your manager has experience working with investors and look for referrals from other investors as the easiest way to locate the best managers.

photo credit: Walt Stoneburner

When starting out as a real estate investor, just selecting the “right” strategy can seem like a daunting process.Where do you invest? What type of property should you buy? Which strategy is right for you?

For many new investors it is tough to know where to start. In this article we’ll go over 4 steps that will help you choose the right investment strategy for you to get started with confidence.

Continue reading “4 Steps to Choose Your Investment Strategy” on my blog at BiggerPockets to learn how to select the right strategy to meet your personal objectives.

photo credit: Steven | Alan

Call it rent to own, lease to own, lease options, or whatever you like. The strategy has been gaining popularity thanks to the numerous benefits of rent to own for each party in the transaction.

There are two fundamental approaches to putting these deals together; the tenant first approach or the property first approach. There are many investors using each strategy and each has its own advantages and disadvantages.

Tenant First Rent to Own

As implied by the name, the first step in the tenant first strategy is to find a qualified tenant-buyer who is going to rent to own a property and intends to buy it out at the end of the lease term.

Property First Rent to Own

Again as the name implies, property first rent to own means you start out with a property and then find a tenant-buyer.

Continue reading “The Two Types of Rent to Own: Advantages & Disadvantages” on my blog at BiggerPockets to learn more about each type of rent to own as well as the pros and cons of each.

photo credit: House of Joy Photos

When we first start out as investors we just worry about getting our first deal done. Then we start to worry about getting our next deal done and often forget to consider the tax consequences. If you do different types of deals, you may want to separate your real estate income to net more dollars in your pocket at the end of the day.

Creating separation is simple, it just requires a little forethought.

Continue reading “Separate Your Real Estate Income” on my blog at BiggerPockets to learn about the two types of income and why keeping them separate can save you thousands of dollars.

photo credit: Images_of_Money

A survey of property tax rates of major urban centres all over Canada has been announced by REALpac and Altus Group. The results of the 2011 Property Tax Rate Analysis are being used by REALpac to promote tax fairness and to be able to find out which cities maintain equitable rates. They are hoping that the continued reduction of excessive property tax burdens on both industrial and commercial tenants and landlords can improve the competitiveness of the cities, and thus promote jobs and investment. The overall aim is a stable and sustainable revenue, and survey of the eight Canadian municipalities has provided both encouraging and worrying statistics.

Results have shown that the places with the highest commercial and residential tax ratios are Toronto, Vancouver and Montreal. These are well over 4:1, putting these areas up at the high end of the spectrum. People who like to keep track of the financial world and tend to visit sites like lovemoney.com will find the results of this survey really interesting. These ratios have concerned REALpac, however they have been pleased to see that both Toronto and Vancouver are continuing to trend downwards for the fourth year in a row. They have seen significant reductions and are being praised for working towards creating a more favourable business environment.

On the other hand, Montreal is continuing to trend upwards at a worryingly high rate. This means that it are likely to become similar to Toronto and Vancouver as early as 2012. There is a danger that Montreal may even surpass them if the ratio stays at this level. There have been more positive results, with REALpac praising the cities of Edmonton and Winnipeg These areas have continued to promote favourable business environments and currently have the three lowest commercial to resident tax ratios throughout all of the major Canadian municipalities.

If you ask people why they invest in real estate, one of the top answers you’ll get is freedom. Contrary to this driving force of wanting more freedom, many investors self-manage and end up instead limiting their own freedom.

In my article Building Your Real Estate Investment Team – Part 7: Selecting a Property Manager, I discussed some of the items a property manager would normally be responsible for. If you self-manage you may find yourself spending a lot of time with tasks such as:

• Advertising
• Showing the property
• Interviewing tenants
• Tenant screening (including credit and background checks)
• Filling out leases
• Collecting rent
• Handling evictions and other tenant issues
• Managing trades for repairs and maintenance
• Coordinating lawn care and snow removal
• Regular property visits

As a landlord, how many of these items take away your free time and limit your freedom? If you self-manage, the answer is probably most or all of these.

Continue reading “Real Estate Investors: How to Buy a Little Freedom” on my blog at BiggerPockets to learn why you should put a price on your freedom and how you can buy a little freedom if that is your goal.

photo credit: jordandelion