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What is Rent to Own/Lease Option?

How to make money with it?

Crazy Thomas Thomas Wong Your rent-to-own

specialist A real estate

investor with a process improvement background

Have done over 40 rent-to-own projects in the last few years

Rent-to-own your homeLease with option to purchaseThe program

Small initial deposit (part of down payment)

Monthly payment (partly rent, partly toward down payment)

Option to purchase the house at the end of the lease term

There are no regulated way of Rent-to-Own

Potential variations: Initial deposit requirement from tenant Amount of credit toward down payment each month How to establish future purchase price How to handle expenses during the term Types of contract:

▪ Lease with option to purchase▪ Co-occupancy contract

Opportunity to buy a house under difficult circumstances: Not enough down payment Bad credit or no credit history

Lock in purchase price when saving up for the down payment

Pride of ownership and flexibility in upgrading the property

More or less worry free tenant Option premium Tenant pride of ownership

Saving in selling costLock in profit and cash flow Improve cash flowSecure investmentHelping people and earn money

(Feels Good AAh!)

Tenant moves out during lease term Non-refundable option premium Contingency funding in place Property at good location and value

Market condition changes – drop in value/not appreciate enough Buy below market value Work with tenant to facilitate

purchase/extend lease term Non-refundable option premium

Tenant or Property First? (Chicken or Egg)

It is dependent on: Market conditions Investor preference Investor financial capability

To put a Rent-to-Own Project together, you need: A qualified Rent-to-Own tenant A good property Investor or investors to buy the property

There are 3 Key elements: Buy below market value (aimed at about

10% below market value) Rental income during lease term (look

for property at a good capitalization rate, market rent v.s. market value)

Property appreciation in value during lease term (look for property at good areas, target at close to 5% on average, set realistic expectation)

We have many tools in our “Bag of Tricks” from finding tenant, finding investor to pull it all together.

Let’s look at a few of them

Advertising: Kijiji, classified ad, signs, landing page/squeeze pages Tips for Kijiji ads:

▪ Pictures▪ Be specific about a property▪ Drive them to take actions (call NOW)

Referral, Referral, Referral Current tenant Potential tenant Real Estate agent, Mortgage agent Hair dresser Tim Horton, Country Style…

Technologies: Iphone app, Youtube, Google adword

100-10-1 (100 people see your information, 10 people contact you, 1 resulted project)

A good Kijiji ad can expect about 300 people looking at it in 3 days

Focus on establishing a rapport with the client Clarify their understanding of Rent-to-Own Gather as much information about them as possible

Current family situation Current rental situation Family gross annual income Type of houses that they want How much can they afford (monthly & down)

Set their expectation (realistic expectation) Listen carefully and aim at providing them the benefits that

they are looking for Remember to ask for follow-up contact information and

referral

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Mortgage Calculator Rent-to-Own Budget

Annual Family Income $70,000

Current Value of property 333,753.91$

% for mortgage payment 32% Appreciation rate 5%monthly mortgage paymentamount $1,867 Term of program 3 year

Interest rate 5.00%

Future purchaseprice (at the end of term) $386,362

Amortization years 30 Target down payment $38,636 10%Allowable mortgage amount $347,725.69 Client initial deposit $10,000

% down 10%

monthly option premium required $795

Value of the house that can be bought at end of lease term (3 years) 386,361.87$ monthly market rent $1,800Appreciation rate of the house 5% monthly RTO bonus $200current value of house for Rent-to-own 333,753.91$ monthly RTO payment $2,395

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Good cases: Guelph St, Oprington, Ecclestone

Bad: City Place – Bad to Great Wexford – Bad to Good, Thank God! Hallen Rd – Bad to Not bad

Ugly: Hansen Rd – Learning experience Bramalea Rd – Turn Ugly to beauty Bryant Crt – Ugly recovering in progress

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Cash investors (get 20% return per year for 1- 3 year terms)

Mortgage partner (get >50% return per year) RRSP 2nd Mortgage investor (get 14% interest

only return per year) Assign contract with confirmed rent-to-own

tenant from Thomas Ask Thomas to help you to structure your own

deals Let Thomas mentor you on doing rent-to-own

deals

Call us at 1-866-878-6884 ext 1 or 416-806-9568 and talk to Thomas for more information

You can also email thomaswong@rogers.com

Check out our iphone app http://www.app.cat/crazythomas