Investing in Rent-to-Own Property: A Complete Guide for Canadian Real Estate Investors PDF
Preview Investing in Rent-to-Own Property: A Complete Guide for Canadian Real Estate Investors
INVESTING IN Rent-to-Own PROPERTY INVESTING IN Rent-to-Own PROPERTY A Complete Guide for Canadian Real Estate Investors Mark Loeffler Allrightsreserved. No part of this work coveredbythe copyrighthereinmay be reproduced or used in anyformorbyany means—graphic, electronic or mechanicalwithout theprior writ ten permission of the publisher. Any request for photocopying, recording, taping or informa tion storageand retrievalsystems of anypartofthis book shall be directed in writingtoThe Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright license, visit www.accesscopyright.ca or call toll free 1-800-893-5777. Care has been taken to trace ownership of copyright material contained in this book. The publisherwillgladly receiveany informationthatwillenablethemto rectifyany referenceor credit line in subsequent editions. Library and Archives Canada Cataloguing in Publication Data Investinginrent-to-own property:acompleteguide forCanadianrealestateinvestors / Includes index. ISBN 978-0-470-73759-0 1. Real estate investment. 2. Renting to own. I. Title. HD1382.5.L62 2010 332.63'24 C2009-906210-0 Thematerialinthispublicationisprovidedfori nformationpurposeso nly.Laws, regulations, andproceduresare constantly changing,and theexamples givenare intended to be general guidelines only. This book is sold with the understanding that neither the author nor the publisherisengaged in renderingprofessionaladvice. It is strongly recommendedthatlegal, on any information contained in this book. If such advice or other assistance is required, the personal services of a competent professional should be sought. Production Credits Cover design: J. Vieira Interior text design: J. Vieira Typesetter: Natalia Burobina Printer: Friesens John Wiley & Sons Canada, Ltd. 6045 Freemont Blvd. Mississauga, Ontario L5R 4J3 Printed in Canada 1 2 3 4 5 FP 14 13 12 11 10 Table of Contents Acknowledgements vii Introduction 1 How to Use This Book 5 PART 1: GETTING STARTED WITH RENT TO OWN Chapter 1: Rent to Own: An Overview 9 Chapter 2: Traditional Rental vs. Rent to Own 15 Chapter 3: Tenant-First Rent to Own: An Overview 27 Chapter 4: Building Your Network 35 PART 2: FINDING A TENANT Chapter 5: Who Are the Candidates for Rent to Own? 57 Chapter 6: The Secret Is the Tenant-First Strategy 67 Chapter 7: The Tenant Application Form 81 Chapter 8: Qualifying Applicants 87 Chapter 9: Doing Your Due Diligence 103 Chapter 10: What Credit Bureau Information Can Tell You 109 Chapter 11: The Financial Analysis Spreadsheet 121 PART 3: FINDING AND PURCHASING THE PROPERTY Chapter 12: The Tenant Finds a Home 131 Chapter 13: Financing the Rental Property 137 PART 4: THE PAPERWORK Chapter 14: Various Agreements and Option to Purchase 145 Chapter 15: The Deal Closes 167 Chapter 16: Tenant FAQs 169 Chapter 17: Worst-Case Scenario 173 Appendix 1: Checklists 179 Index 181 Acknowledgements Writing this book was something I never thought I would do. It just wasn't in the realm of possibilities that I had envisioned for myself. It was a chance workshop, with Philip McKernan, where I announced I was going to write a book, after which I was introduced to Don Loney from Wiley, and he and his colleagues have been incredibly helpful and supportive through this whole or deal. In addition I would like to thank Don R. Campbell and the team from the Real Estate Investment Network for supporting me over the years and helping me to grow from a beginning investor just getting my feet wet to speaking to large groups of investors and sharing my strategies. This whole book could not have happened if not for the support and love of my family, especially my wife Mary, who has supported me in every decision I have made, good and bad. To my daughter Eleanor, I hope I can teach you the lessons that have been so expensive for me to learn. Introduction Congratulations for picking up this book! Chances are, if you’re reading this you’re interested in getting started in real estate investing, or are already an investor who is looking for a new vehicle to help maximize your profits while freeing up your personal time. Before we start, I would like to encourage you to seek something known as “ILA,” or independent legal advice, not just when practising the strategies I put forth in this book, but also when drafting contracts, embarking on new investment strategies, and most definitely before signing anything in relation to deals. Never take what someone else says as fact until you have done your due diligence (which we discuss in Chapter 9). You should always look out for your own interests first and foremost, and take the necessary steps to protect yourself in any real estate dealings. Speaking of legalities, remember that the documents I have provided are examples only and are presented “as is” without warranty of any kind. Be sure to consult an attorney or other qualified professional to develop documents ap propriate to your specific circumstances. People typically get into real estate investing to experience a sort of free dom. But whether real estate investing is a full-time endeavor or part-time side business, many people quickly realize the investment vehicle meant to provide financial and personal freedom quickly takes over their lives—and not in a good way. Traditional real estate investing involves either flipping a property or deal ing with tenants in some capacity. We will not talk about flipping in this book, so read on presuming my references are to tenant-related investment oppor tunities. The most common reasons so many people fail in real estate investing: frustration, exhaustion, and negative cash flow!
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