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Are Calgary Rent to Own deals SCAMS?I always get calls from friends asking me if Calgary Rent to Own deals are scams. The rent to own or lease option information on my site applies to all area's in Canada and the US- I specifically discuss Calgary because I live here and know the market You will find numerous so called deals in Calgary- that proclaim to be "Rent to Own"- some will be, and most will only be inflated rental properties, with owners looking for new tenants that will pay 15-25% higher rents and never be in a position to close the deal- obtain a mortgage. Buyers looking for a Rent to Own: You will learn the fundamentals of a rent to own or lease option (you can buy a house with as little as $5,000 and poor credit) Sellers/Owners You'll learn how you can sell your house above market value, in any market, with little or negative equity without using a Realtor or having someone steal your house. This webpage is not legal advice and you should be aware that there are books and courses dedicated to rent to own (there is a book I recommend reading at the bottom of the page). I'm tell you this upfront because this is a stripped down version, so you get the basics of a deal. If you need more information, contact me and I'll give you some books on the subject or links to other sites. 3 Critical steps in a true Rent to Own. #1) The Lease Agreement (or rental contract). The lease is signed the same as most rental agreements. The major differences would be that the tenant (buyer) is responsible for more maintenance on the house. In most of the Rent to Owns that I am involved with, the tenant (buyer) is responsible for anything in the house that requires fixing under $3,000. This puts more control in the hands of the tenant and shows the landlord that in fact the tenant is prepared to buy the house as soon as they are able to qualify. #2) An Offer to Purchase. This is a purchase agreement where the tenant (prospective buyer) and the landlord (prospective tenant) sign an agreement, whereby if the tenant does not break the lease agreement (signed in #1) then the landlord agrees to sell the property to the tenant for an agreed price within a specific time frame (which is set out in the Option Agreement in 3). #3) The Option Agreement. This is an agreement where the tenant has the RIGHT not the obligation to buy the property within a specified time frame at an agreed upon price. This is called a Unilateral Contract, because the buyer has the control as to whether or not they want to close on the house (so long as they have met all the prerequisites of the contract). An example might be useful to illustrate what happens in a rent to own. Example of a Rent to OwnI'll give you a prime example of why a landlord (home owner) and tenant (potential buyer) would ever want to enter into this agreement.Right now I am currently working with B.F who is starting a new career (computer software consultant). He's self-employed and looking to move his family into a house, as they just got an eviction notice from their landlord (landlord is looking to do a complete fix-flip, so he needs them out). B.F calls me and asks about my rent to own program. I explain what it is and how he will benefit from such a program. B.F is dialed in- ready to go. So now, I need to find a house for B.F and his family to move into. (At the time I had all of my own houses already filled with Rent to own buyer/tenants). I go out to my list of sellers and find a guy (L.N) who needs to sell. He has no equity in his house, as he built it new 6 months ago. L.N is being relocated to Regina (were houses are much cheaper) and needs to sell fast. I go over all the options with L.N and show him how a rent to own is his best solution. L.N will get full value for his house; have someone pay his mortgage until they qualify for the loan. B.F (tenant/buyer) is responsible for all repairs on the property under $3,000 (so L.N doesn't have to babysit like most landlords). If B.F is unable to qualify for a loan in the 18 month lease agreement; - B.F losses his option money that he put down to secure his right to buy the property. - L.N is able to take the house back and sell it the conventional way, or - enter into anther agreement with B.F (so long as B.F is a good tenant, then in almost all cases L.N will write up anther rent to own). There are obviously many factors and 'what ifs'- at the end of the day this type of arrangement can be good so long as both parties are honest and doing business on the up & up. These deals aren't for everyone. It is just one of about 10 creative ways that you can buy or sell a house (having options is always a good thing). Why a Seller would use a rent to own to sell their house?- Eliminate the need for a Realtor. You can lease option your house without having to pay a Realtor commissions.- Attract many more buyers. You open the door to the majority of the population who may not be able to qualify for a conventional bank mortgage.
Examples of buyers who need Rent to Owns: People moving from one city to anther for a new job (changes in careers can disqualify a person from getting a loan) Self employed Service Industry- were the majority of their income is in the form of tips People with had poor credit due to over due accounts, high visa balances, Investors who have numerous properties are candidates. It has always fascinated me when talking to a home owner or landlord about 'Rent to Owns' they all seem to think that if someone could afford to put down $5,000-10,000 as a deposit on a rent to own then why can't they qualify for a mortgage. Well, in reality Banks are very conservative by nature. Just look around at the current foreclosures in this market (both in the US and Canada) and I think you can appreciate why Banks are so thorough when it comes to lending money. With 95% to 100%+ mortgages, a banker’s job is dependent on their ability to analyze risk and make sure that their books stay clean.
Have Questions Regarding Rent to Owns?I try and educate every possible lease option buyer and seller fully so they know exactly what is going on- the pro's and con's of rent to owns.Thanks, Shane Melanson Real Estate Agent, First Place Realty Please fill out the form if you are interested in finding a rent town in Calgary.Good news! I have finally located a company that specializes in Rent to owns. I have agreed to begin a working relationship with them. If you are interested in a Rent to Own in Calgary, I am now in a position to help you find a home. I apologize for having taken this long to find a company that is able to find the properties, but it was well worth the wait. July 17, 2008 update- I have met with the a Rent to Own company and am very impressed. This is the only business that I have met with that is actually doing rent to owns the way I think they should be done (good for the seller and the Buyer). I look forward to hearing from you. P.S I've also found a great source for information on how rent to own's work (whether your an investor or first time home buyer)- you can use this information. They are providing you with a service and spending a great deal of time finding the properties to do these deals. So long as they are operating ethically and with your best interest in mind (which the 1 company I found is), then I urge you to speak to them. Everyday there are about 8-12 Rent to Own newspaper ads with investors looking to take your $5,000-10,000 deposits. I have no idea whether their systems work or not- all I will say is this- "Make sure you fully understand what you are getting into. I recommend talking to a Mortgage Broker, a Lawyer (before signing documents) and educating yourself on rent to own deals (reading this website and especially speaking to a lawyer)".
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