For many people, the prospect of using rent-to-own real estate as an Investment transaction sounds like more trouble than it could ever be worth. They think about homes that aren’t selling, owners desperate to dump the property in exchange for as much equity as they can get, and they usually associate it with properties that are in undesirable parts of town that need a lot of work — especially when the market is as hot as it is right now. So why would someone want to invest in Rent to Own Opportunities if it has such a downside to it?
That sort of stigma is one reason why HOS came about. There are so many people in the Canadian real estate market who are looking to rent with the option to buy a house. The banks right now are being conservative with their money, insisting on income verification metrics and credit scores that leave a lot of potential borrowers who could pay for the mortgages they are applying for high and dry without that credit. Some turn to the private lending industry, but there you often face down payment requirements at or above 20 percent of the value of the property — a number that keeps many consumers from qualifying.
That’s why so many people are looking for a rent to buy option. They have the fiscal discipline and the income stream to make a future mortgage workable but want to live in the home today. However, because of issues from their past, their credit history may be more than a little checkered, and they haven’t saved up that sizable down payment yet.
Here’s where you can come in as an investor and take part in a win-win scenario: solid returns for yourself, at a much higher return than what you would get from government-backed investment vehicles with significantly less risk than what you would get from investing in the stock market.
Potential borrowers come to us either with a house that they have already picked out or an idea of the sort of house that they want. We qualify the consumer to ensure they are a good Rent to Own tenant for any potential Investor, issue a letter of intent to work with the potential tenant, match them with interested Rent to Own investors and connect them with a realtor to help them seal the deal.
The Investor will purchase the home and will enter into a lease-purchase agreement that arranges for rent with option to buy at the end. It actually takes the form of two contracts: a standard lease and a purchase option contract. We agree on a “future” purchase price with the potential tenant, who pays an initial deposit (usually 5% of the home value) and then starts paying monthly rent plus an additional amount that goes toward an eventual “final” down payment. We also work with the borrower to help ensure that his or her borrowing profile is where it needs to be for the bank to approve a mortgage at the end of the term.
So where do you come in? We are looking for Socially conscious investors to work with pre-qualified tenants to help them achieve the dream of Home Ownership. Even if you don’t have enough money sitting around to buy an entire house, you can leverage your investment or Joint Venture with another Investor to fund a home purchase for a borrower.
At closing you, as the Investor, receive 5% of the Property Value as your security Deposit as well as the monthly rent and the additional payment that will eventually go toward the final down payment when the tenant purchase the home. When the lease comes to an end, and the borrower gets approval from the bank and buys the home outright, you will then realize your Profit from sale. You’ve basically bought and sold a house (at a profit) as well as drawing rent. Also, since it’s Rent to Own Investment instead of a traditional lease, during the term you not on the hook for any maintenance.
That’s just the first benefit, though — rent income without any of the maintenance hassles that are part of life as a landlord. You also don’t have to deal with vacancy issues. If you were a landlord, you’d have to worry about tenants vanishing in the middle of the night and leaving you high and dry without any rent income. You’d have to worry about an eviction process if the tenant failed to pay rent on time, and you’d also have to worry about damage the tenant would cause during his or her time in the property. When the lease came to an end, you’d have to go out and market the property, screen new tenants and get a new lease signed, or you’d have to pay a management company to do those things for you. You’d also have to pay to put up new paint, possibly change the carpets and make other aesthetic alterations to the property for your new tenant.
With the HOS Real Estate Investment system, you have none of those hassles. It’s true that there is a small risk that the borrower will default during the Rent to Own Term, but, as the borrower is committed to becoming the future owner with 5% down and additional payment for Option Credits, the default rate with our structured system is greater reduced. At the end of each Rent to Own Program, you, as the Real Estate Investor can either walk away with your money or reinvest in the next borrower’s journey from renting to home ownership.