Tag Archives: rent to own

IN FOCUS: REAL ASSETS | REAL RETURNS Dispelling three common rent-to-own myths


Few investment strategies are as misunderstood as rent-to-own. The complexity and length of most rent-to-own agreements can be enough to get investors out of their comfort zone , while others have outdated notions about the operators, the quality of the tenant buyers and the overall viability of rent-to-own itself.

As co-founder of Homeowners Now, Canada’s leading rent-to-own company, Dale Monette has fielded every conceivable question about the industry, educating investors about the remarkable returns on offer, and altering their perceptions about a strategy too few of them have fully investigated. CREW asked Monette to help dispel three of the most commonly held myths around rent-to-own.

1. Rent-to-own tenant buyers are too fiscally irresponsible or not trustworthy enough to to secure financing from a lender.

This misconception may provide the greatest barrier between investors and the sizeable returns offered by rent-to-own transactions. Rent-to-own clients are often assumed to be desperately poor or living on the margins of society, but at a time when more Canadians than ever are struggling to find financing, this antiquated notion just doesn’t hold up to scrutiny.

“Most of the tenant buyers that join our program are families, new arrivals or divorcees who have a ‘lock-up’ period for their assets and purchasing power,” says Monette. “Whatever their situation, our typical buyers have saved a considerable amount of deposit money – the average for our clients is $16,000 – but for a combination of unique of reasons they are just shy of being able to purchase the home they require. Across our portfolio, the average dual income family earns an average of $111,000, so these are not desperate people. But they don’t want to rent, they don’t want to move and they’re ready to give their life savings in order to buy a home for their families.”

Monette admits that some applicants do fall into the stereotypical “credit mess” category, but adds that Homeowners Now’s 29-point screening process has proven effective in finding the best candidates for homeownership.

“We focus on the lowest risk, highest quality clients that we can find.”

2.  Rent-to-own is an unregulated industry, which leads to inconsistent rules, legal uncertainties and a slew of potential problems.

Most of us have seen a photocopied sheet of paper, hastily taped to a lamp post and flapping in the wind, advertising rent-to-own opportunities. Such “advertisements” rightfully raise questions about that particular operator and his ability to provide the legal and fiscal stability a successful rent-to-own transaction requires. They also raise legitimate questions about the lack of standardization typically seen across the industry.

“There are probably thousands of mom-and-pop investors who do one or two rent-to-own deals a year – maybe only one or two deals in total – who might not have legitimate documentation, who might deal in handshakes, and who might take the tenant buyer’s deposit,” Monette says. “These small operations inevitably suffer from a lack consistency and a lack of sophistication.”

Monette encourages investors worried about inconsistencies across the space to ensure any company they partner with belongs to both CAROP, the Canadian Association of Rent-to-Own Professionals, and the Better Business Bureau. Monette, who was recently elected CAROP’s Vice-President of Finance, says being recognized by both organizations, as Homeowners Now is, ensures a company’s adherence to legal standards and its use of certified professionals.

“Rent-to-own is not the wild west it once was,” he says. “There are organizations out there dedicated to holding rent-to-own operators to high standards of professionalism. CAROP and BBB bring a level of accountability to the space that has had an undeniably positive impact.”

3. Most rent-to-own transactions fail.

As one of the leaders of a company with a 100% success rate, Monette knows why so many of his competitors’ deals fall through. It often comes down to a few simple words.

“Most other operators use what’s called an Option to Purchase agreement. It’s quite standard, but it has a lot of risks inherent for the investor and the operator.” Monette explains that, because it’s an option, tenant buyers can actually demand their deposit back if they don’t purchase the house, thereby torpedoing an investor’s returns.

Monette says Homeowners Now requires their tenant buyers to sign a Deferred Purchase agreement, which legally obliges them to either purchase the house at the end of the lease term or lose their deposit.

“We want to show the tenant buyers that there is risk involved. We find that they are more motivated and more engaged in the program when they’re compelled to buy. It helps simplifies things, too, which is another benefit to investors.”

By addressing the rent-to-own sector’s biggest failings, Homeowners Now has created some of its greatest success stories.

Source: Canadian Real Estate Wealth – Mar 13, 2018


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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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The average cost of rent in major Canadian cities in September (MAP)


Although there has been a little fluctuation in prices, the ultra-hot Canadian rental market continues to increase across the board.

While some city’s prices for one-bedroom rentals remained unchanged since last month, the most expensive in Canada has now surpassed $2000, according to the latest report by PadMapper.

Not surprisingly, Vancouver and Toronto continue their domination as the top two cities with the most expensive rental markets in Canada.

Last month, Vancouver’s median rent for one-bedroom showed a decline of 4.8%. But one month can change a lot in this market, and the price of a Vancouver one-bedroom has jumped up 1.5% from last month bringing it to $2,020. Two bedrooms have also gone up in the city, and are now renting at $3,160.

In Toronto, rent continues to increase every month as the city saw a 4.3% hike in one bedroom rentals, which are now $1,930. Two bedrooms also increased to $2,440. The most shocking part about rental costs in this hot city is that one-bedrooms in Toronto are up 15.6% since this time last year. Let that sink in for a minute. Actually don’t, time is money…


Trailing behind Toronto is Barrie, which also experienced a massive 15.4% annual growth rate over the past year. One and two bedrooms have settled this month with medians of $1,200 and $1,450, respectively, in the Ontario city.

Meanwhile, Montreal remained in fourth place. Rent in the popular Quebec city has experienced a 3.5% hike to $1,190, with two bedrooms now renting at $1,520.

Back to the west coast, where Victoria remains in fifth place with its median one bedroom costs increasing by 4.5% to $1,150, and two bedrooms growing slightly higher than last month to $1,490.

The largest drop in rental in Canada was in Quebec City, where one bedrooms dipped to $810, and two bedrooms went down 5% to $1,130.

But in Ontario, Hamilton climbed up three spots on the list to become the 11th most expensive rental market in Canada. This city’s growth rate for one bedroom units is up 5.3% to $1,000, and two bedroom rent grew 2.6% to $1,200.

Calgary remains steady, as one bedrooms are $1,020 just like last month, and two bedrooms also remain unchanged at $1,300.

The cheapest city to rent on the list is still Quebec’s Saguenay, which jumped a little to $640 for a one-bedroom, and $730 for a two bedroom. It’s probably one of the only cities in Canada where you never have to think about having a roommate these days.


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5 ways to tame your landlord


Here’s how to keep the ‘lord’ out of your landlord

It’s the age-old question: Should you rent or buy? With housing prices still sky-high in Vancouver and Toronto, many are looking towards renting as a permanent solution. Michael Thiele, an Ottawa-based lawyer, suspects the new minimum down payment rules are pushing even more people to rent, making it a landlord’s market. Here’s how to keep the ‘lord’ out of your ‘landlord’.

1. Make your case

If you point out to your landlord that something needs fixing, make sure you get it in writing. That way, if it goes unrepaired, forcing you to take the case to a tenancy board, you have evidence that the landlord was told. Keeping pictures of the unrepaired area is also important, says Karen Andrews, a lawyer with Advocacy Tenant Centre of Ontario. A successful case may result in a reduction in rent, if the tenant can make the case that they’re not getting what they are paying for.

2. Knock first

“Tenants have to be careful that they are covered by their provincial tenancy legislation,” says Thiele. For instance, shared apartments or renting a room in someone’s house may not be covered. To be sure, call your provincial tenant’s board.

3. ‘No girls allowed’ is not allowed

So you see a sweet apartment that you’d like to rent, but notice the listing forbids people of your gender or race? The law is clear: If it’s considered discrimination under the Human Rights Code, it’s forbidden for the landlord to do it. That includes rejecting you based on sex, age, religion or marital status.

4. Law trumps lease

Rental agreements and leases don’t reign supreme in the renting realm. It’s tenancy law, not contract law, that matters, explains Andrew Sakamoto, executive director of the Tenant Resource and Advisory Centre. Next time you see something unfair in your rental agreement, check with a free community legal clinic to see if it’s allowed under provincial legislation.

5. Heat, please

There’s a requirement to maintain heating, but not for providing air conditioning. Still, if there is air conditioning, it can’t be taken away, as the landlord is also expected to maintain the services that were provided when the tenant moved in.

Source; Money Sense – by 

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Is rent-to-own the future of housing?

For rent sign large

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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