Episode 28: Rent-to-Own Revealed: Unravelling the Mechanics and Benefits of this Unique Real Estate Strategy

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In the latest episode of the Canadian Wealth Secrets podcast, we delve into the fascinating world of rent-to-own agreements, uncovering the strategies for turning past failures into valuable learning experiences. Join us as we explore the intricacies of rent-to-own agreements, shedding light on how they work, when they can be a good fit, and the essential systems necessary for achieving success.

One of the key topics we tackle is the power of learning from scenarios that haven’t worked in your favour. We believe that failures can be invaluable teachers, providing unique insights into what went wrong and how to avoid similar pitfalls in the future. By examining these experiences through a lens of growth and learning, we can transform setbacks into stepping stones towards success.

We also dive deep into the concept of rent-to-own agreements, demystifying their mechanics and shedding light on their potential benefits. Whether you’re a prospective tenant or a property owner, understanding how rent-to-own agreements function is crucial for making informed decisions. We explore the intricacies of these agreements and discuss the specific circumstances in which they can be a good fit for both parties involved.

Furthermore, we explore the systems that are essential for achieving success with rent-to-own agreements. From comprehensive screening processes to clear communication channels, having the right systems in place is paramount. We provide practical tips and insights for establishing these systems, ensuring a smooth and mutually beneficial rent-to-own experience.

Join us in this thought-provoking episode as we uncover the keys to unlocking success with rent-to-own agreements. Whether you’re a seasoned investor or a first-time homebuyer, our insights and strategies will empower you to navigate the rent-to-own landscape with confidence and build a solid foundation for financial prosperity.

What you’ll learn:

  • How can you learn from the scenarios that haven’t worked in your favour?
  • What is a rent to own agreement and how do they work?
  • When might a rent to own agreement be a good fit?
  • What systems need to be in place to be successful with rent-to-own.

Resources:

 

Interested in Partnership Opportunities?

For those interested in potential Joint Venture (JV) Partnerships, reach out to us here.

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00;00;00;15 - 00;00;24;26
Kyle Pearce
But the one other detail that's really important, which makes this harder for people who have typically been renting, is that in many cases you're having to try to encourage a down payment savings because as you may or may not know, I know you know this, John, having your mortgage license, you know that 5% down is sort of the minimum down payment amount that a lender will consider.

00;00;25;05 - 00;01;02;15
Kyle Pearce
So if someone's coming in and they have 5000 to put towards to a property, but that is not 5%, then what we're doing is we're structuring and saying, hey, listen, you want this term to be a three year term. Well, over these 36 months, on top of those other amounts that we're going to collect, we're actually going to collect your monthly down payment credit.

00;01;02;15 - 00;01;09;13
Kyle Pearce
Welcome to the Investing Teacher podcast with Kyle Pierce, Matt Biggley and John or.

00;01;09;13 - 00;01;19;04
Jon Orr
Get ready to be shot as we share our successes and failures encountered during our real life lessons. Learning how to build generational wealth from the ground up.

00;01;19;18 - 00;01;51;09
Kyle Pearce
Welcome. Invest it students to another episode of the Canadian Wealth Secrets podcast. And once again, we are missing Matt. Matt is a busy, busy beaver out there running around and closing deals. So good for Matt. Definitely a positive, of course, for we'll see him and the people he's working with, maybe negative for us because we don't get to see him, but we're going to do our best to try to help the invested students here on today's episode to dig into something that kind of hits close to home for you and I there.

00;01;51;09 - 00;02;11;09
Jon Orr
John For sure. For sure it does. And I think this is going to be kind of an eye opening episode. Maybe it's going to open some options for you when you think this deal went sour or you didn't think of a particular option. This is the scenario for us. We got into a flip deal last year and when we got into that deal, we talked about it on a previous episode as well.

00;02;11;09 - 00;02;31;16
Jon Orr
But when we got into that deal, we had different scenarios. We had Scenario A, which is what we want to see happen. And then we also have the scenario B, which is like, if scenario can't happen, then we want to see scenario B, And unfortunately in this particular deal, scenario B is the path that this one went down and we took possession of this flip and then continued to flip it ourselves.

00;02;31;16 - 00;02;50;16
Jon Orr
We weren't flipping it ourselves. That's kind of where the B scenario happened. So we took possession of, well, I guess we had possession of this house all along and that was part of the deal. So that episode we chatted about that you can go and learn about that scenario, but we've got this house and then we continue the actual flipping ourselves, found someone to kind of keep that flipping alive.

00;02;50;27 - 00;03;23;20
Jon Orr
But we're in a situation where do we sell? Do we rent out the original plan? A was to sell this property for a profit and move on, but our Plan B was to rent it out, and that's where we were. But we've actually been pursuing another option, which is where we want to give you this option, because this can be the backup plan that if this plan A and plan B don't necessarily go the way you want, you could have a plan C, And knowing the details of Plan C can be rewarding for you.

00;03;23;21 - 00;03;42;00
Jon Orr
You can kind of lift the weight off your shoulders knowing that you have another avenue to pursue when you need to. And that's what we're talking about here. And that avenue for us, we're exploring. We're not we haven't actually decided, right? Kyle We don't know if this is exactly where we're going to go, but we're going to go down this avenue for a little bit and see if the total rewarding it.

00;03;42;00 - 00;03;46;27
Jon Orr
Yeah. And that is to take this property and do a rent to own on it.

00;03;46;27 - 00;04;05;14
Kyle Pearce
I want to back it up too and just sort of preface as well that this deal was actually supposed to be a private money deal. We get a lot of people reaching out to us, talking about how private money and the high rates of return, especially if you go direct to the borrower, high rates of return. Right. So that seems really exciting.

00;04;05;14 - 00;04;21;03
Kyle Pearce
And for us, we saw the deal, we saw the property. And the one thing that we've discussed before is that you, myself and Matt, we're not necessarily the most, say, physically able to fix properties, Right. And so.

00;04;21;18 - 00;04;22;09
Jon Orr
We just don't want.

00;04;22;09 - 00;04;48;20
Kyle Pearce
You. Yeah, we don't want to and I don't want to learn about that right now anyway. My dad is very, very disappointed if he's listening right now. But so we went into this thing and the price of the property at the time made sense. But the big piece that was unknown for us was sort of like, how much money is it going to take in order to put this thing into a position that it's going to then be able to fetch a high enough return right out the door?

00;04;48;20 - 00;05;10;23
Kyle Pearce
It's like if it was ten grand or work that, Wow, this is going to be great. If it's going to be 80 grand of work, then this may not be so great. So that got us a little concerned and that is why we put this property into our name. So once again, thinking ahead, if you're doing private money, if you're exploring those options, just make sure that you know what you're getting into.

00;05;10;23 - 00;05;33;21
Kyle Pearce
Because in this particular case, I don't want to know what may have happened if let's say we just sort of let this thing go as a private money deal. I'm guessing that we would have some pretty high legal costs and who knows if anything would have came from it. So properties in our name, our backup plan was, hey, we're going to have a single family home that we're going to put a little bit of money into and we will rent this property.

00;05;33;21 - 00;05;56;11
Kyle Pearce
And at the end of the day, no harm done. We love real estate. The one thing that we're not huge fans of is necessarily having a ton of single family properties, because as folks who are listening to the podcast know, we have sort of shifted to multifamily and more units than less. So where our sweet spot is, four Plex is still kind of tough because the numbers still are difficult to cash flow.

00;05;56;11 - 00;06;25;10
Kyle Pearce
So we tend to look at more than four units, well, kind of maxing out in the low teens, that seems to be our sweet spot right now. And as we were coming up down the stretch, Jay is an amazing contractor, good friend and an amazing contractor who has taken over this project eight months of almost nothing happening. Then we got rid of that particular contractor who was supposed to be the borrower, got rid of them, changed the locks and moved on to the next one.

00;06;25;10 - 00;06;46;22
Kyle Pearce
And Jay's been in there just slugging it, doing an amazing, crushing, crushing six weeks in maybe something like that. We got a couple more weeks to go. He had actually undo some of the work. It was a real mess. However, we're now coming up and we're going, okay, let's get ready. We're looking at comps and we're going we could put it on the property, on the market and maybe break even.

00;06;47;18 - 00;07;06;19
Kyle Pearce
We could do that. But then there's costs associated with that realtor fees and so on. And we thought maybe we'll do the renting like we had said. And that kind of got me thinking about, wait a second, Matt and I had tried the idea of a rent to own program. This was many years ago, and we had interviewed some people.

00;07;06;19 - 00;07;26;07
Kyle Pearce
Really what I realized in the process is we went about it all wrong and we sort of went, You know what? This isn't for us. It just was very time consuming. We didn't have systems in place is really what it came down to. So we experimented with it and we thought, we're going to put this in the too hard pile, not in the garbage, because we can always come back to it.

00;07;26;07 - 00;07;49;19
Kyle Pearce
And that's what got me thinking. And I pitched to you. I said, You know, why don't we at least spend some time re exploring the idea of a rent to own because this property actually might be a perfect fit for a family or a person or a couple who has had a hard time getting a traditional mortgage, but they really want home ownership.

00;07;49;19 - 00;08;07;09
Kyle Pearce
So we thought, you know what, let's give this a new world. Given the fact that we now have much better systems in place, we know a lot more about how systems work and we have the tools at our fingertips to try to make this process as slick and smooth as possible.

00;08;07;09 - 00;08;28;04
Jon Orr
All right. So when you say we have systems in place, let's give a window into the changes we made. So I want you to think about your old self before you put that option from a while ago into the too hard pile. You were trying to make a rent to own option work. And then I want you to think about, say, an initial step that you did back then.

00;08;28;04 - 00;08;33;21
Jon Orr
And then what change did you make to make it seem more manageable now?

00;08;34;00 - 00;09;07;12
Kyle Pearce
Yeah, back then this would be probably in 2017, maybe 2008. And I started thinking about this and going, this was back when I had my mortgage license. Still again, regretful that I let that thing expire because I think it's a really great asset to have. But knowing all of those details, I was thinking we might have some opportunities here where we could go in, find some properties, potentially do some fixing to the properties, and then also on the back end, be able to help individuals who are struggling to get in.

00;09;07;12 - 00;09;30;19
Kyle Pearce
So rather than just renting it, you're actually offering an opportune D to them. And of course there's a benefit associated with it to us, right? So that we'll talk about some of those things that come in as well. But one of the reasons for me that I think really got us thinking maybe this isn't a great idea was we didn't have a system of filtering whether people were a good fit or not.

00;09;30;19 - 00;09;47;27
Kyle Pearce
So if you can imagine this, right, you throw it out there to the world and say, Hey, are you a renter? And renters are going, Yeah, do you want to own a home? And the answer is, yes, of course I do. And it seems like everybody wants to own a home rather than renting. So that was the process.

00;09;47;27 - 00;10;06;10
Kyle Pearce
We had a form, so it wasn't online form, but the problem was we didn't ask the right questions. We didn't go deep enough in the questioning to really get a sense of do they have the right pieces that make it a good fit. Now for those people are thinking to themselves, they're going, well, wait a second, what is a good fit?

00;10;06;11 - 00;10;30;09
Kyle Pearce
What isn't a good fit, surprisingly to many, is like, actually credit has very little to do with it. So poor credit or no credit or a past bankruptcy. Actually, these are the types of people that can actually be it can be a good fit for them. And your goal is to help ensure that if they enter into a rent to own agreement, that they're putting some skin in the game upfront.

00;10;30;09 - 00;10;52;22
Kyle Pearce
Right. Which is really important and that you're helping to ensure that they can get to that place, which is homeownership, whether it's two years from now. Three years is the sweet spot, but sometimes people will go up to five years or even further in order to try to help guide people towards homeownership so they get to lock in this home.

00;10;52;22 - 00;11;27;29
Kyle Pearce
Now, picture it like a lease, but then they have the option to buy at the end of the term. And my biggest downfall was I would hop or I would go to Tim Hortons to meet with anyone interested and explain the process. That's the teacher in me, right? Any students like Ed, can you help explain this? I was like, Sure, I'd love to, but when you really think about how many times I went to meet with people for coffee and at the end of the conversation and an hour later, highly caffeinated after drinking coffee and then going to the next meeting and drinking another coffee, we find out that these people, it's actually not a

00;11;27;29 - 00;11;39;11
Kyle Pearce
good fit for them. And here's why. So we wanted to make sure that now we've got a better process so that we're not wasting their time and we're obviously not wasting our time in the process.

00;11;39;11 - 00;12;06;20
Jon Orr
So what key questions did you put in your form to immediately rule out those people that were like, Look, this is not a good fit. We don't even have to even contact them, or it's a quick email to say thanks for your interest. Obviously, as some folks who are interested in lending money, borrowing money, getting into investment deals, obviously looking at potential income, their debts, looking at a credit report, getting all of those documents in order.

00;12;06;20 - 00;12;25;11
Jon Orr
You're not doing that on the form. That's probably step two or three down the line if they're a right fit. Let's go and actually look at confirming trust these people, but verify the data that part happens. So are you just asking income? Are you asking debt? Are you asking what or how much they're putting down? And it's like, hey, these are the key questions.

00;12;25;11 - 00;12;30;14
Jon Orr
Give us a couple of key questions so that if someone's listening, that they're also thinking about this, that they can build their own.

00;12;30;17 - 00;12;53;04
Kyle Pearce
I'm going to give you some key pieces of information that you want, and I'm going to recommend that if you're curious about it and let's say you're thinking like, hey, what questions specifically should I ask? More questions is better. And the reason why more is better now in some marketing and sales strategy, you would think anyone who knows marketing and sales strategy, especially online, less is more to get a lead.

00;12;53;18 - 00;13;08;21
Kyle Pearce
But in this case it's actually like what you want is you want to lose people who aren't really committed, right? So I would much rather them not make it to the end of the form because like, this is too much work and if you think this is too much work, you're probably not a good fit. And then they're off to the races.

00;13;08;21 - 00;13;30;09
Kyle Pearce
So more questions is better. If you want to know the exact questions, you should head over to North Shore Properties. Dot CEO forward slash rent to own and that will get you there. Just get to that North Shore Properties website and you can check out our rent to own section and that will actually explain a lot of the pieces of the process as well.

00;13;30;09 - 00;13;51;09
Kyle Pearce
But there's a button there and you can go ahead and click on it and check out the form. If you do submit the form at the end, let us know that you're just curious and you're from the podcast versus me actually analyzing your application. However, I would say what I really want to know is some key details. The key details that I want to know is right away, what is your income?

00;13;51;15 - 00;14;13;11
Kyle Pearce
Okay. And your income is going to tell me a lot about whether they're a good fit for a specific property right now. It also will tell you which properties, if you're willing to go and buy a property with this person. Right. Which is a big commitment. Right. There's a lot of work to be done there. But with us, we know the property, we know the price point, we know those pieces.

00;14;13;22 - 00;14;42;03
Kyle Pearce
I can very quickly look at their annual household income and I could get a sense right away whether it's going to be a good fit or not, simply because I can estimate what is that net income going to be like? What's that monthly money coming through? How many people live in the household is another question. And then right away, I'm super curious to know how much of a down payment or savings for a down payment do they already have?

00;14;42;13 - 00;15;07;14
Kyle Pearce
And the questions we usually make it a multiple choice just ranges is good enough. It's like I don't have one. Right. That's a big flag if you don't have anything, because then the next ranges between I think it's $500 and 5000 or something along those lines between 5010, ten and 15, 15 and 20 and then above 20. And when you see all these coming in.

00;15;07;14 - 00;15;25;11
Kyle Pearce
So first of all, income comes in super low income for this particular property. I know right away I do respond to them and I say, Hey, listen, doesn't mean that you're not a good fit for rent to own in general, but for this particular property, here's what we're after and I've got a copy and paste email I can send back to them.

00;15;25;11 - 00;15;53;22
Kyle Pearce
Right? For people who do have a decent income, then what we can do is then look at the next step. And for me is that down payment piece, because I'm going, if you haven't saved up anything, then you basically decided today that you want to own a home. And that's not really the person we're looking for. We're looking for someone who's been working towards it, because if you haven't been working towards even saving up a bit of a down payment, you don't have any savings available to you.

00;15;54;00 - 00;16;08;10
Kyle Pearce
My guess is going to be that you actually are not going to have the budget or the cash flow to be able to try to do something like this, which will require some sort of down payment commitment.

00;16;08;14 - 00;16;40;12
Jon Orr
Yeah, those are all great questions to kind of help filtering and find the right folks. Now, here's a wonder I think folks might have as well. And this is definitely part of your qualification on your end, because if you think about looking at their potential monthly income and then comparing that to what we would perceive as the payment they would need to make to cover the house expenses, to cover the mortgage, to cover all of these things, this is what an underwriter is going to be looking at when they're deciding, are you the right fit to borrow money from a particular lender?

00;16;40;12 - 00;17;06;18
Jon Orr
And thinking about some of the ratios that have to go into that being the total debt service ratio, the gross debt service ratio? These are all important numbers to look at when qualifying potential borrowers with lenders now. But Kyle, in order to do that, you knew what the mortgage value was going to be on your end. Did you share that information upfront with these potential renters so they know what they're getting into?

00;17;06;20 - 00;17;26;28
Jon Orr
I don't think you shared the details of the actual house, the location, all of that. But did you give them a sense of like this is what the value of the house? Yes. And so they can actually sell filter by going like, that's too much for me. I don't even know. They'll give me a snapshot into that. And also, I kind of want to get into your reasoning or the numbers side of things.

00;17;26;28 - 00;17;40;07
Jon Orr
On how did you come up with the right number thinking like you're going to rent to own this? Eventually I'll be pricing the mortgage and the purchase price on today's value or the future value down the road.

00;17;40;11 - 00;18;09;01
Kyle Pearce
These are all great questions, John. And one thing I do want to also mention, because I feel like we sort of glossed over it, is what is typically any rent to own program. You get to decide what it is, what you want. You're the person who's running the program, so you get to decide. So how I've seen them in the past and how I see most people doing them is really what you want to do, is you want to have some sort of we'll call it a rent amount, which would be like a mortgage payment, so to speak.

00;18;09;10 - 00;18;33;06
Kyle Pearce
And then on top of that, the difference between a rent to own and renting is that typically rent will include property taxes, property insurance and any repairs or any issues that come up in the home. Like the furnace stops working. They call the landlord. Write in a rent to own. You are the owner. Even though your name is not on title yet.

00;18;33;15 - 00;18;57;05
Kyle Pearce
So it's almost like you're trying to slowly pass that baton on. You pass the responsibility baton on to them. So there's some benefits. Some people love rent to own and hate being the landlord because again, now it's like you're not actually the landlord, you are collecting the whatever that rent amount is right for them to live there, which you could call it a mortgage payment, right?

00;18;57;24 - 00;19;21;09
Kyle Pearce
You're collecting and you don't have to do this. You could say, Hey, you guys pay the property taxes, right? Just like the utilities are in their name, they pay it directly. Well, the way I like to do it is I go, No, no, you pay me the property taxes and you pay me the property insurance because I want to make sure that those things are being paid and that I'll know right away if they're not.

00;19;21;19 - 00;19;45;06
Jon Orr
And that is actually a key move, because if the taxes aren't paid, then the municipality has the right to take that property right. So we want to secure our assets by making sure that those things get paid. This is why, say lenders, if you have a mortgage on your property, why lenders will encourage you to have the taxes paid through them because then they can secure the property to make sure that their asset is getting.

00;19;45;07 - 00;20;02;02
Kyle Pearce
Exactly. And you still probably want to have I say probably we will. And I would encourage you to as well anyone listening, you would want to have the same stipulations for a rental where you can walk through, give the 24 hours notice, Hey, I want to walk through, make sure batteries on the fire alarms are taking care of that.

00;20;02;07 - 00;20;45;01
Kyle Pearce
The house in general isn't in disrepair, right? If you show up in a windows completely broken, they're violating the contract that says you will keep this home air tight and you will make sure that the maintenance is being kept on the property. So all those details are there. But the one other detail that's really important, which makes this harder for people who have typically been renting, is that in many cases you're having to try to encourage a down payment savings because as you may or may not know, I know you know this, John, having your mortgage license, you know that 5% down is sort of the minimum down payment amount that a lender will consider.

00;20;45;09 - 00;21;08;07
Kyle Pearce
So if someone's coming in and they have 5000 to put towards to a property, but that is not 5%, then what we're doing is we're structuring and saying, hey, listen, you want this term to be a three year term. Well over these 36 months, on top of those other amounts that we're going to collect, we're actually going to collect your monthly down payment credit.

00;21;08;15 - 00;21;27;07
Kyle Pearce
So this is money that is going to get applied at the end of the contract as the down payment. So this removes their responsibility from having to put it in a side account. We don't actually want them to walk away. Now, if they do walk away, you are going to hang on to those down payment credits. That is not the end goal.

00;21;27;07 - 00;21;43;24
Kyle Pearce
It shouldn't be your end goal. If you want to do a rent to own, we really want to do this. So we're helping someone get in to the market, but at the same time we're not doing it and like donating our funds to these people for that duration of time, right? So you have to still look at it as an investment.

00;21;44;06 - 00;22;12;17
Kyle Pearce
How are you going to win and how are they going to win in the end? And that's how we've been structuring it. So there's a lot of moving parts here. We're giving them the responsibility of this home, but we're sort of taking some of that financial responsibility off of them. It's like, Hey, can you make this amount each month for 36, 48, 60 months, whatever the term is, that you've come to agree to, and is this going to work for them?

00;22;12;17 - 00;22;41;15
Kyle Pearce
So that's where these questions in this form become really important and you can get more targeted when you know the specifics of the property. If you're just shopping for any old property, then the details become a little bit harder to kind of analyze. But for us, we're going what we know the purchase price is going to be this, which means with 5% down in X number of years, that means their mortgage payments are going to be blank check, assuming interest rates are similar to what they are today.

00;22;41;15 - 00;23;03;05
Kyle Pearce
Can they afford this? Can they afford the rent payments now? The rent own payments now? If the answer's no or it's too close or it's tight or it's unethical, in my opinion, you just don't want to go there and you just want to let them know and say, here's why, and then here's a link to our website that will help explain the process even further so that you can get on the right track.

00;23;03;05 - 00;23;20;21
Kyle Pearce
And if you come back to us, what we always say is we are willing to work with you, but you need to show us some sort of improvement. Otherwise we're not going to commit the time. Now just because you want to learn more about it, do the learning come back to us and then we will continue engaging in this conversation.

00;23;20;28 - 00;23;43;14
Jon Orr
Yeah, I like that we're educating this potential family that's coming into the home on how to restructure their finances so that they can build their generational wealth too, and they just might need that extra hand. Now, why don't we give a little bit of insight into why an investor would pursue this option? Because remember, our our path A was to flip for a profit and get out our path.

00;23;43;14 - 00;24;03;15
Jon Orr
B was if it went sour and we couldn't flip because obviously maybe the price was too high in the market. This is where we got to where it's like, okay, well, the money we've sunk into this at this point, markets fell a little bit. It doesn't make sense to sell. We'd be selling at a loss. We thought, Hey, why don't we rent this to a possible renter?

00;24;03;25 - 00;24;13;18
Jon Orr
But what was the tipping point in your mind that pushed us to this third option? And why does the third option work for us versus the other part? Yeah.

00;24;13;26 - 00;24;37;25
Kyle Pearce
It's a great question here. And I think what I've recognized now, which I don't think I recognized earlier in the process, the first time we explored this, Matt and I, is the idea that you're kind of in a rent to own, you're sort of frontloading the work in sort of filtering and finding. And of course you have to do the same thing when you're looking for a tenant, but it's a harder find finding that ideal person.

00;24;38;03 - 00;25;20;00
Kyle Pearce
It's going to be a harder find. But after the fact, you have a more predictable sort of view forward, whereas with rent, if I'm renting to someone, there is some unpredictability there because now if the furnace does go, that's an unexpected expense on me. The investor Right. If the roof needs to be repaired, if the tenants stop paying rent and then you have to do the landlord tenant board, all of those details, there's a lot of management pieces that sort of make that more work ongoing, whereas once you sign a rent to own agreement with an ideal candidate, with an ideal client, who is the right fit, who is committed to doing this, who has

00;25;20;10 - 00;25;44;00
Kyle Pearce
the right numbers financially, where this is a legitimate good move for them in the long run, then what you're doing is you're putting yourself in a position where going, okay, so I'm limiting my sort of cost here moving forward because now the costs are all associated to them. You have a little bit of protection in that down payment, whatever that initial down payment amount is.

00;25;44;00 - 00;26;05;24
Kyle Pearce
Some people are like, I won't even enter into this for under a $15,000 down payment. Right. And maybe that's someone listening, maybe for somebody else. Like you need 25 down and because you're living in a really expensive market and they're going to work towards 50,000 down, whatever it might be, you get to decide what is that thing. And that's sort of like your safety net.

00;26;05;24 - 00;26;27;21
Kyle Pearce
If the person does violate the terms, they walk away. Other things have happened in life just like what might happen if a mortgage isn't paid anymore. They're going to walk away from that property and you have at least that down payment to move on to the next and then go through the process again. So I'd say the big piece here is two things.

00;26;27;21 - 00;26;51;06
Kyle Pearce
If you're doing a rent on your kind of front loading a lot of the work in the effort. The other thing is you are sort of getting a more predictable sort of outlook in terms of the financials because you're going to decide on a purchase price ahead of time. For us, we try to put a fair appreciation amount some people might use the average of over the last ten years, which was 6.8% for us.

00;26;51;06 - 00;27;10;08
Kyle Pearce
We go with the same thing we use for our deals, which is typically 3%. So we're not trying to make a ton of money on the appreciation of the property. We're trying to be fair so that someone can sort of feel like they bought the property. Now we know what that agreement is at the end. It's all documented legally.

00;27;10;16 - 00;27;35;05
Kyle Pearce
And I guess the last piece, there's an opportunity if you find a property that does need work and attention, you might be able to if you have a system, if you friends listening have someone like Jay like we now have, you might be able to add 25,000 in renovations and be able to make that property worth more and then engage in this rent to own process.

00;27;35;05 - 00;27;55;22
Kyle Pearce
So it really depends on who you are. If you have maybe a social goal of helping more people attain home ownership, you just really have to figure out what is your niche. And for us, we're using a scenario where we got lemons, we're trying to turn it into lemonade and use it as a learning experience. So we're like kind of testing ourselves to see maybe we do like it.

00;27;55;22 - 00;28;19;09
Kyle Pearce
I don't know. Jury's still out for us, but we're at least going through the process. And we've had about 42 people complete the process or complete the application with about four that are ideal earmarked good candidates. So it's not like a massive ideal candidate rate. But ultimately, at the end, we're learning a lot about this process and we're happy to share it with everyone listening here today.

00;28;19;23 - 00;28;51;10
Jon Orr
Yeah. So rent to own not being are original plan here. Actually, like you said, it took these lemons. We're trying to make some lemonade out of it. We're trying to make a flip that kind of didn't go our way into a rent option or say getting tenants in there that might wasn't going to cash flow for us. But now kind of moving into a rent to own kind of brings us up to at least cash flow neutral for a temporary time moving into, say, offloading that to a potential owner in there's rent to own option.

00;28;51;10 - 00;29;01;16
Jon Orr
So if you want to kind of see that process and get your hands on some of the system that we worked through, you're going to head on over to North Shore properties. Oh.

00;29;01;25 - 00;29;07;04
Kyle Pearce
We'll make a short link. It's rent to own and you'll find it and we'll get that going for you.

00;29;07;05 - 00;29;25;06
Jon Orr
You got it. All right, folks, thanks for joining us here again on the Canadian Wealth Secrets podcast. If this was the first episode you listen to, we are always welcoming of new listeners. However you found it, this being the first time you've listened. Did you find it on social media? Did you find it because someone mentioned it, share it the exact same way?

00;29;25;06 - 00;29;39;20
Jon Orr
So if you've been on social media, please share it on social media. If you found it from a friend, share it with a friend. We want you spread building generational wealth information to as many people as we can so we can change trajectories of many of you.

00;29;39;20 - 00;30;03;29
Kyle Pearce
Awesome stuff. Hey, head over to invest in teacher dot com. Check out all the resources again, show notes, links to resources, transcripts, all those good things. In particular, though, the one I'm most excited about is our what we call the best list of investment books. And you can actually download it and take it away with you, print it off, put it on your nightstand and order them out like, I'm going to go one on this one.

00;30;03;29 - 00;30;30;27
Kyle Pearce
I'm going to do this one first, this one second. All kinds of amazing books there for you to grab once again that's Canadian Wealth Secrets dot com forward slash books and hey, friends until next time class dismissed.

00;30;30;27 - 00;30;43;29
Jon Orr
Just as a reminder, folks the content here you heard today is for informational purposes only you should not construe any such information or other material as legal tax, investment, financial or other advice.

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