Category Archives: rent-to-own

Investors eye rent-to-own strategies as Canadians look for more ways to home ownership

Rent-to-own is becoming an increasingly attractive option for investors. While the practice isn’t as popular with our neighbours south of the border, here in Canada it is a great option to consider especially with tightening regulations, a complex market and new mortgage rules.

With more than 11 billion people across the country renting, and housing prices becoming more unattainable, tenants are looking for more options and investor interest is brewing on what opportunities are out there.

A rent-to-own strategy is an alternative route to home ownership for buyers who aren’t quite able to purchase their new home but are interested in eventually attaining ownership. It could be a great option for someone who is self-employed, new to Canada or has a damaged credit. The tenant would pay a monthly fee similar to rent, but a portion of that goes toward a down payment for that home. In addition, at the end of the agreed -upon term, the tenant would be in a position to qualify for a mortgage through traditional lending institutions and the property title will transfer to their name.

“There are many people across the country who are so close to getting their own home but need someone on their team like Homeowners Now and our partners that can support them through those last few steps,” said Conrad Field, VP Partnership at rent-to-own company, Homeowners Now.

From an investor’s perspective, rent-to-own is a low risk option that can maximize cash flow, target areas with high appreciation and allow for turnkey operations to occur. “Rent-to-own models have the ability to both grow wealth in strong markets, as well as protect it in a correction,” said Field.

According to him, rent-to-own is like a cross between shorter-term development projects and longer-term buy-and-hold properties. You get the benefit of receiving your capital back with profit in a relatively short time period like a development project, but also the security of monthly rent revenue like with a buy-and-hold. “There are benefits for everyone in the eco-system, from our partners, tenants and the rent-to-own company. As a wealth-building vehicle for our partners, some of those benefits include the security of substantial deposits, additional revenue streams under contract, minimal ongoing management, reduced expenses and more,” he added.

Homeowners Now has partnered with some of the most experienced professionals in the real estate industry to put systems and processes in place to maximize the success of tenants and provide security for their partners. The tenant-first approach is a key aspect of that, according to Field. “We find the tenant, qualify them for our program based on a set of financial criteria and then they pick their dream home on the market that is within the price range they can afford. What’s great about this is the tenant truly gets the house of their choice instead of having to select from a potentially very small list of available properties,” said Field. This means the tenant is more motivated to follow through with the program and likely to have years of happiness in their home. Homeowners Now uses a deferred purchase agreement, rather than a lease option, which is able to provide additional security for investors.

In a new whitepaper, Field shares more detailed information on how to maximize return on investments this year through a rent-to-own strategy. “A lot of people don’t have the time to put these pieces in place and are looking for a hands-off way to get involved. They want their money working for them so they can focus on other priorities,” said Field.

Source: Canadian Real Estate Magazine – by Kasi Johnston 30 Jan 2020

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In it for the right reasons: Rent-To-Own

Source: MortgageBrokerNews.ca – by Neil Sharma 16 Oct 2017
A Calgary-based social enterprise that helps families attain homeownership using the rent-to-own model has arrived in the GTA, where affordability has reached crisis level.

Homeowners Now purchases homes its clients choose, rents it to them, and then gives them exclusive rights to purchase it if they choose at the conclusion of the agreement’s terms. According to Dale Monette, Homeowners
Now’s managing director, the organization works on its clients’ behalf to help them save for eventual ownership and augment their credit scores.

“Our mission is to help as many Canadians get into homeownership as possible by using the rent-to-own transaction structure, which allows them to rent a property for a certain amount of time with the option to buy at the end, kind of like leasing a car,” he said, adding that the company did its due diligence before entering the Toronto market, where its services are badly needed.

Homeowners Now is partnered with the North American Private Assets Corporation (NAPAC), which provides financing. NAPAC is regularly approached by real estate investors who use similar rent-to-own structures, but regularly turns them down. However, it approached Homeowners Now because it believes that the nascent company – which was registered in 2015 but investing with this structure since 2011 – is in it for the right reasons.
Moreover, Homeowners Now has a 100% success rate in helping renters achieve homeownership.

“NAPAC got in touch with us,” said Monette. “They’ve been approached by two dozen rent-to-own companies over the years, but they noticed these companies weren’t in it for the right reasons. We mostly deal with people who don’t have major credit issues – although we deal with them too – and that have good incomes but need that extra boost. Most of the time they’re young families.”

Entrepreneurs are particularly maligned by the current mortgage rules, and Monette says they also comprise part of Homeowners Now’s clientele.

But families for whom money is precarious receive particular care and attention by Homeowners Now. Monette recounted a story in which a client’s gas bill was mixed up and unpaid for to no fault of their own. Homeowners Now stepped in and lent them around $2,500 interest-free to be repaid in 25 installments. Another client had a broken dishwasher, washer and dryer, and Homeowners Now granted them half of the money to replace the appliances.

“Because we’re a social enterprise, whenever a client gets into strife, we help,” continued Monette. “If this client misses a rent payment, they default, but we genuinely want to help.”

GTA residents, specifically, could benefit from this rent-to-own structure. Homeowners Now only entered the market a month ago, but it already has three clients and about 75 applicants. Its goal is to oversee 15 projects a month by the end of 2018.

“What we’re seeing in the Greater Golden Horseshoe is a lot of people are moving further out while a lot of newcomers are arriving,” said Monette. “A lot of people might only have $15-20,000 in savings and that usually falls short of a down payment. There’s a huge need for individuals to get into the market as quickly as possible before being priced out of the market.”

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Mike Holmes: Asbestos is like a sleeping monster best left undisturbed lest danger ensues

Many building materials, including some drywall compounds, can contain asbestos, which is why it's important for all crews working on older homes to wear protective safety gear, including respirators.

Mike Holmes: Asbestos is like a sleeping monster best left undisturbed lest danger ensues | National Post

The National Day of Mourning is on April 28 — that’s a time to remember those people who have been affected by workplace injuries or death. It serves as a reminder for all of us to make sure we have the right processes and systems in our workplace to prevent illnesses, injuries and even deaths.

Some of the biggest threats on the job site are the ones you can’t see, such as asbestos.

What makes asbestos so dangerous is its fibres.

Asbestos is a generic term that refers to a number of different mineral fibres. Because of their strength, durability and resistance to fire, these fibres were used widely in building materials and added to residential construction products.

It wasn’t until the late 1970s when it became known that asbestos posed a serious health risk, and since then it has been banned from building materials. It was used in vermiculite insulation, insulation around pipes and water tanks, roofing compounds, shingles, sealants, caulking, adhesives, vinyl tiles, drywall compounds, even some electrical parts.

When asbestos fibres are disturbed, they are released into the air, and if they’re inhaled they can get trapped in the lungs and cause serious health issues, including cancer.

Canada has one of the highest rates of mesothelioma, which is a type of cancer caused by asbestos.

Although asbestos isn’t currently used in construction materials, there are many older homes that still contain it. Any home built before 1980 should be professionally checked for asbestos, especially if a renovation or home improvement is planned. (Getting these materials properly removed by a professional company through remediation can drive up the cost of your reno.)

Canada has one of the highest rates of mesothelioma, which is a type of cancer caused by asbestos.

Professionals can take samples from suspect materials, such as walls, ceilings, vinyl floor tiles, siding, insulation and roofing materials. These samples are then sent to a laboratory for analysis. If the presence of asbestos is confirmed in any of the samples, don’t disturb the materials —­ whether by sanding, cutting, sawing or removing it; leave it to the professionals.

Some people might panic and start ripping out the material and products themselves, but that is not at all advisable. Disturbing asbestos and materials that contain asbestos is what makes it dangerous. That’s why contractors and their crews should always wear protective clothing and gear, especially during demolition. You never know what might be found, and what might be a hazard.

If a material that contains asbestos is in good condition, it might not need to be removed; however, it’s important to monitor it for signs of deterioration, because as soon as any fibres get loose, issues can start to arise.

There are some temporary fixes to prevent asbestos-containing materials from getting damaged and fibres getting loose, but they should only be done a professional contractor. Dealing with asbestos-containing material is never DIY.

Whenever hiring a pro to work on your home, always make sure they’re qualified to do the job right, which includes taking the proper safety precautions and knowing how to deal with potentially hazardous materials, like asbestos, the right way.

Ask what type of safety gear they normally use during demolitions, and the course of action they would take if they suspect any material contains asbestos. A contractor who doesn’t make the health and safety of their own crew a priority will likely not care about yours either, so do your homework. Ask if they have a professional asbestos abatement company that they normally work with. Who are they and what are their credentials? What’s their track record? Your contractor should be able to talk to you, not just about doing the job right but also about proper cleanup and safe disposal of materials.

Asbestos in homes and on the job site is a health risk. Too many contractors have years taken off their lives because they didn’t protect themselves with the right safety gear, such as gloves, safety glasses and of course respirators. Doing a job right means doing it safe. It protects homeowners and pros, too.

Source: National Post. Watch Mike Holmes in his series, Holmes Makes It Right, on HGTV. For more information, visit makeitright.ca.

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Is rent-to-own the future of housing?

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With rising rents making it more difficult for many to even save the 3% down paymentthey now need to buy a home, and with some borrowers still struggling to get a mortgage, a new option is emerging as an avenue for consumers to live in the home they want and save money to buy it at the same time – rent-to-own.

A new report from Moody’s Investors Service highlights Home Partners of America and its“unique” blueprint for property acquisition.

Home Partners of America then rents the property to the consumer with a goal of selling the property to the tenant at some point down the road.

Home Partners of America purchase philosophy runs counter to many companies that have seen success in single-family rentals, buying distressed properties, renovating them, and then renting them out.

Home Partners of America purchases properties chosen by the tenant, with the consumer-selected properties more likely to be “higher quality and in more desirable locations (such as those with better school districts)” than properties purchased through bulk foreclosure sales, Moody’s said in its report.

So here’s how Home Partners of America’s program works, from the Moody’s report:

Under its Right to Purchase Program, HPA leases single-family properties to people who are looking to buy a property but have limited access to mortgage credit. The prospective homeowner chooses a property that he would like to eventually buy, and if the property fits HPA’s criteria and the tenant qualifies, HPA buys the property and the tenant enters into a lease and Right to Purchase Agreement that allows the tenant to buy the property at a pre-determined price during the term of the lease, which is typically between three to five years. The purchase price typically increases by 3.5-5% per year throughout the term of the lease.

According to Moody’s, Home Partners of America isn’t simply buying whichever house a consumer chooses. Moody’s states that Home Partners of America has its own underwriting and investment criteria that must be met before a purchase is made, including only in select communities whose school districts achieve high average test scores, for example.

And according to Moody’s, this program has advantages for the consumer, Home Partners of America, and investors alike, especially considering that Home Partners of America just went to market with its first single-family rental securitization.

Moody’s said that the securitization, Home Partners of America 2016-1, should be attractive to borrowers because of Home Partners of America’s model.

“HPA acquired the properties backing the transaction based on requests from prospective homeowners who desired to rent the properties with eventual options to purchase,” Moody’s writes in its report.

“As a result, the transaction is likely to delever faster than will other single-borrower SFR transactions because HPA will prepay the loan at a premium to release the properties from the transaction if and when renters exercise their options,” Moody’s continues. “Furthermore, the strategy could benefit property recovery values because renters with purchase options are incentivized to maintain their properties well.”

The properties that Home Partners of America purchases also tend to be higher quality than other single-family rental operators, requiring lower rehab costs, but also requiring more money to be laid out initially.

By comparison, Moody’s states the average value of the 2,232 homes that make up Home Partners of America’s securitization is $247,483, while the average value in recent securitizations from Invitation Homes and American Homes 4 Rent was $167,631 and $143,066, respectively.

On the other hand, the average rehab cost for Home Partners of America is $6,669, while the average rehab cost for Invitation Homes was $22,984 and the average rehab cost for American Homes 4 Rent was $15,209.

If a borrower exercises their option to purchase the property, Home Partners of America must purchase it out of the securitization at a premium, which represents a “credit positive” for investors, Moody’s said, adding that it expects some tenants to do just that, using their time as a renter to build credit and save up money for a down payment.

And that turns renters into buyers, which is still advantageous for consumers in much of the country.

Source: Housing Wire January 14, 2016 Ben Lane

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Home – Life – Auto Community Education Session

HOMELIFEAUTO new-page-001

Get the facts on:
– Buying and Financing Real Estate
– Repairing Credit & Mortgage Crisis
– Mortgage & Life Insurance
– Auto purchases, loans ad leasing
– Self Employed Individuals and borrowing
– Government Funded Programs
– Other options you may not know about
– Rent-to-Own and other home buying options

This event is sponsored by:
Barrington Lewis – Realtor
Jelani Daniel – Check List Auto
Andrew Stewart – Insurance Advisor
Ray C. McMillan – Mortgage Professional

Seating is limited.
R.S.V.P by email to homelifeauto@gmail.com or by phone to 905-813-4354