How TFLTO Works
Tenant-First Lease-To-Own: The Process from A to Z
We use a strategy called Tenant-First Lease-To-Own (TFLTO). That means we find a qualified tenant-buyer (TB) first, and then the TB, with the help of a realtor, finds the house they really like. We buy it for them, and then they buy it from us at the end of the term. The rate of success with this strategy is almost 100%!!!
We do not do a "traditional" lease-to-own program where a company buys a house (or many) and THEN tries to find a tenant-buyer who will (hopefully) like the house and then will (hopefully) buy the house.
Take a look at the websites where we direct potential TBs in Ontario:
Tenant-First Lease-to-Own: An Overview
- We (SASREIG) find and "qualify" a potential tenant-buyer (TB)
- The TB finds a house they like, and that they want to buy in 3 or 4 years
- We put together a joint venture with passive investors to buy the house
- We rent the house to the TB and give them the option to buy the house in 3 or 4 years
- The TB takes care of the property until it's time to buy it
- We (SASREIG) take care of the property management until the house is sold
- The TB buys the house at the end of the agreement for the pre-determined price
- The investors get their investment back, and they profit from the high interest we pay
"Tenant-first-rent-to-own frees you from the responsibility of repairs, maintenance and other time-consuming duties associated with being a landlord." —Mark Loeffler (aka The Versatile Investor, owner of 50 doors) in his Canadian bestselling book Investing In Rent-to-Own Property
Why TFLTO Is a Good Deal for Our Investors
- We (SASREIG) take care of ALL the property and business management (hands-off for the investors)
- Using the rent money from the TBs, we pay the mortgages, the insurance, the taxes and all the utilities
- The TB pays all repair & maintenance (up to $750 per event / up to $2,000 per year)
- SASREIG covers the costs of repair & maintenance above and beyond those amounts
- SASREIG covers most of the costs incurred by the investors so no (or very little) out-of-pocket disbursement for the investors (and NO cash calls) occur during the 3 years of the deal)
- The property is fully inspected prior to completing the purchase
- The property will be sold in 3 to 4 years at a predetermined and agreed-upon price
- Bottom line, the investor benefits from all the advantages of being an investor and a landlord without any of the problems, hassles and headaches of managing tenants and properties
"Here is another perk to a tenant-first-rent-to-own system. Not only do the tenants gladly perform repairs and maintenance, they will also upgrade the property and enhance the curb appeal and the interior of the house. They take pride in how the house looks, inside and out—because it will soon be theirs! Instead of midnight phone calls from tenants complaining that the water heater is broken, imagine having your tenants call you to ask if it's okay to replace the old carpet with hardwood flooring. My tenants have done all of the upgrades on my investment properties, everything from replacing floors, renovating kitchen, installing double-paned windows and low-flow toilets—you name it, they've done it. Are these not the types of phone calls you'd like to receive? Any investor would happily answer, 'YES!'" —Mark Loeffler (aka The Versatile Investor, owner of 50 doors) in his Canadian bestselling book Investing In Rent-to-Own Property
Why TFLTO Is a Good Deal for the Tenant-Buyer
TFLTO gives TBs a chance to repair their credit and purchase a home that they may not otherwise be able to buy. The sad fact is that in Canada right now, more than 25% of Canadians who can afford a mortgage cannot qualify for a mortgage... and it's getting tougher all the time.
This is what we look for in a TB. A good potential TB has the following characteristics and needs help to be able to qualify for a mortgage in 3 to 4 years:
- Can provide an up-front fee of at least $12,000 (minimum requirement)
- Wants to work on repairing their credit
- May have been through one or more life-altering events such as bankruptcy, foreclosure, lay-off or divorce
- May have no credit history (for example, a recent immigrant or someone who has always paid their bills with cash)
- Has a good income (minimum $80,000 total household income)
- Is often self-employed or an entrepreneur
- Is doing everything they can to get their "foot in the door" for home ownership and they need some help!
How We Find a Good Tenant-Buyer
What follows is the process that we follow to find a suitable TB. It's here so that you know how thorough we are in our processes.
- Potential TBs either contact us directly or are referred to us from a mortgage broker or other third party.
- After a couple phone conversations, we refer the potential TB to our credit repair specialist who assesses them and gives us a green light (or red light).
- We meet with the potential TB to review with them the details of the TFLTO process in general, and of their particular deal—amount of the option consideration fee, length of the agreement, amount available for monthly rent & other details.
- We thoroughly check out the references of the TB.
- The potential TB works with a realtor to find a property that meets their criteria and ours.
- Before any offer is made or accepted for the property, we fill out the various agreements with the potential TB and receive a non-refundable fee from them.
- We make the final arrangements regarding the closing date and the moving in date with the TB.
- We review what the TB must do to meet the requirements of the house inspection report. This is non-negotiable—if they don't get things done, we'll do it for them (and charge!)
- Our credit specialist sets up the process to help the TB improve their credit rating so that they can get their mortgage in 3 years to buy the property.
- The TB moves in, and we all celebrate!
The Closing Process When We Sell the Property to the Tenant-Buyer
- Six months before the expiration of the agreement, the TB tells us whether or not they will exercise their option to buy the house they're living in.
- If the TB opts to buy the house, they take the steps over the next six months to secure financing, with the help of our mortgage specialist, or with another specialist of their choice.
- We close the deal with the TB on the prearranged date at the predetermined price, and the house is theirs!
- All monies are disbursed as per agreement to the investors.
Feel free to contact us by email or by phone to ask any question you want.
"I've gotten to know Daniel over the last few years in a business context. During that time I've noticed that he is a man of his word and consistent in what he does. I'm a little surprised at times at the things he commits to, but true to his nature he is able to do what he commits to, overcoming whatever âobstaclesâ he encounters along the way. He always seems full of energy and life, even when things don't appear to be running as smoothly as planned. It's been a pleasure to work with Daniel and I think I enjoy his off the wall humour the most."
John R. Walsh, B.Eng, Mortgage Agent with Mortgage Alliance Partners