The concept of rent to own is a great idea, especially if you’re trying to be a homeowner again after foreclosure. You would move into a home for an agreed upon monthly rental amount for a specific lease period. At the end of the lease, you have the option of buying the home with a portion of the monthly rent being considered a part of the down payment. While many rent to own ventures are legitimate, there are some that can be deemed outright scams. In order to avoid being taken over by such a rent to own scam, it is well advised to be on the lookout for these scams.

The way a rent to own scam works is that the “landlord” will research listings for foreclosed homes that have been vacated for many months. Since the home has not sold for a long time, they assume that it won’t be sold for a few more months. The rent to own scam players will literally break into the home, change the locks, and then place an advertisement online for renting to own the property. Anyone that takes advantage of the “offer” moves into a home and pays rent to someone that does not own it. In time, the renter is discovered and evicted. Obviously, the rent to own agreement is not honored.

To avoid falling into such a trap, it is best to look for a few common red flags identifying a rent to own scam.

Many of these advertisements are merely cut and pastes of other ads. Run a search of the advertising copy online to see if duplicate content turns up. If it does then you may have a scam on your hands.

Very cheap rental rates are not always a good deal. Frequently, they are signs of a possible rent to own scam. Be wary of rental prices that just seem unrealistically low.

Does the ad list a landline number? Commonly, the phone number listed in the ad is a cell phone. Worse yet, the cell phone might be a “pay as you go phone” that was being operated under an assumed name. Unless you can confirm a landline number, you have to take the ad somewhat suspiciously. In some instances, communications is solely through email which is among the reddest of rent to own scam red flags imaginable.

If you are shown the home and it looks as if the locks on the doors have been tampered with or the condition of the home looks if it has not been lived in or abandoned, it may be a foreclosure and not a home that someone is currently living in. Once again, a rent to own scam often involves foreclosed property.

There are even advance payment rent to own scam ventures that are launched. Such scams revolve around asking for a down payment to be wired as a deposit on first month’s rent. Such wire requests are made by people that are out of the country and have never even set foot in the home. Worse yet, the would be renter has never seen the home. He or she is only going on photos provided to them via the internet. Really, paying anyone in this manner and under such dubious circumstances truly is asking for being scammed.

Ask the landlord to see proof that they are in fact the owners. Performing a little due diligence is highly advised.

Until next time… make the Smart Choice!

With our rent to own program, your rent is guaranteed not to increase over the period of your term. One of the best practices we always advise our tenants is to have 2 bank accounts. One for wants and one for needs.

Pay cheques and any source of income should always go into the needs account. Total how much you need for the month and divide by 2. Every pay period (usually bi-weekly) that amount will be held in the needs account. This includes, rent, utilities, cell phone bills, car payments, tenant insurance etc.

The difference goes into your wants account.  This is used for food, gas and entertainment. By doing this you will always have enough to pay your rent and utilities on time. It’s a great feeling to not have to try and come up with money and know that the funds are there.
Over a period of time you will find that by adopting this simple budget style you now have changed your spending habits.

Successful tenants put the needs before the wants.

Next Lesson…… No Rental Increase

Over the last 40 years there has been a number of times where the economy has seen great appreciation and other years a bit sluggish however, I think we’ll all agree that in the long run Real Estate is a great investment and in the long run always goes up.

One of the things we like to do is to look at history to help determine how we are going to appreciate our homes to make sure that it’s not only fair to the investor who’s purchasing the home for you, but also fair to the future home owner/tenant (you) as well. One of the things we did to determine the future price is to see what Real Estate has done in the past. Below is a chart that illustrates the appreciation of homes over the last 70 years;

Now if we use the average of the last 40 years we get an average of 6.5% appreciation rate year over year.
If we use a 70 year average rate, we get an appreciation rate of 5.6%.

Now to be conservative the numbers we have used in the past vary between 5-4% per year depending on the home and the area we are in.

The one thing that we are very cautious of is not over appreciating the house. We want to make sure that the home is going to be approx. where the market value will be in the next few years.

The major advantage to you locking in the price in advance is, if the homes start to appreciate faster than what we appreciate the home to be, you still get to purchase that property for the agreed amount.

So how do we figure out the buy out price?

Lets say we find a home and it is valued at $250,000. Below will illustrate the buyout price in year 1, 2 and in year 3.

Buyout Price
Year 1 = $260,000
Year 2 = $270,040
Year 3 = $281,216

Now lets say you move into your home and we are assisting you with saving $400 a month.

Credits earned
Year 1 = $4,800 saved
Year 2 = $9,600 saved
Year 3 = $14,400 saved

Now to determine your mortgage amount, subtract the buyout price from the credits earned each month

Mortgage amount
Year 1= $255,200
Year 2 = $260,440
Year 3 = $266,816

So now, when you look at a home that you bought for $250,000 and you buy it in year 3, your mortgage amount would only be a difference of $16,816 over a 3 year term which isn’t much at all.

I’m sure you have heard me say this before. If you can purchase your own home, that’s the way to go…. if you can’t Rent to Own is a much better option than just renting.

Over the years Darlene and I have been to a lot of weddings but we both agree, this was by far one of the best weddings we’ve been to. From the food, the incredibly friendly staff, the dancing lite-up Dragons, the talented Irish dancers… the list goes on and on. It was just a perfect night, except for the headache in the morning. Ouch.

Customized Rent to Own Terms

When it comes to your payment plan, the choice is yours. Now to clarify, when we say customized, there are obviously limit and boundaries in what payment plan you get to select. In other words, you can’t pay $10 a month for a $300,000 home. I would love that kind of payment plan myself but obviously not realistic.

When we say customized, what we are referring to is your monthly rent amount. So let’s say you have gone out with a Real Estate agent and you have found your dream home. Based on the purchase price of the home, property taxes in the area and the cost on the house insurance we are able to determine your initial rent price.

Let’s say we’ve determined the rent price to be $1500 a month for your new home. Based on this amount we will give you back $200 in credits. Now if you have the income and feel comfortable and what to earn additional credits on a monthly basis, you can raise your rent amount by $100 and receive an extra $400 in credits.

To simplify;
Regular Savings Program – $1500 = $200 in monthly credits
Super Savings Program – $1600 = $400 in monthly credits

Now if you are in a three year term and opted for the Regular Savings Program, you would have saved $7,200 at the end of your term, not bad. Now, if you switched over to the Super Savings Program, you would have $14,400 and the end of the term. You can see the huge difference $100 a month can make in a Rent to Own program. At the end of the term when it’s time to get approved to take over ownership of your home that cost savings will go into your pocket by lowering your total mortgage amount.

What we have seen many families do in the past when deciding which payment plan to go with is mixing the two into a combo-plan. In other words, they prefer to stay in the Regular Savings Program for the first year. They do this to get a good feel of what the water, hydro, gas and the other bills will be like on a monthly basis. At the end of the first year and for the remainder of the term, they will switch over to the Super Savings Program. By doing this, at the end of the 3 year term, you will have $12,000 saved up for your down payment.

The payment plan decisions are made at the beginning of the agreement and are usually not made on the fly. Now there are cases where you could move up into a higher payment plan in the middle of your term however, that would require amendments to the agreements and signing by both parties. Another thing to be cautious of is once you move into the higher Savings Program, in many case you can’t move back into the lower payment plan. So prior to changing plans, make sure you’ve done a budget and feel comfortable with the additional monthly cost. If you have, paying that additional $100 a month will save you thousands in the end.

Next Lesson…… Know Your Purchase Price

Until next time…. Make the Smart Choice!!

The Smart Home Choice Team
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Not surprisingly we’ve had several clients contact us with concerns about the new Mortgage change and if it will have any impact when they are ready to purchase their home?

So What Are The Changes??

Starting on July 9, 2012 borrowers with less than 20% equity will no longer be able to get a prime mortgage with;

• a 30-year amortization, the max. will now be 25 years
• a refinance to 85% LTV (Loan To Value), the max will now be 80%

For Families currently in their Rent to Own Home

During your 3 year term and at anytime you are ready to purchase your home you will still only need 5% down as long as you have successfully restored your credit.

When you are ready to take possession of your home you will now be required to qualify for a 25 year mortgage.

Although your monthly mortgage payments will be a bit more, you will be paying your mortgage off much faster and saving thousands in interest payments.

For anyone thinking about getting into a Rent to Own home, you will want to get your applications in as soon as possible.

For New Rent to Own Clients Currently Looking For Their Home

**IMPORTANT** If you get pre-approved before July 9 and want to avoid the new rules, you’ll need to:

Have a purchase agreement dated before July 9 and have a full mortgage approval before this date.

The latest day we would want to find a home for you would be July 1st which is not much time.

If anyone is still interested or would just like some more information on how our program works and would like a FREE consultation please give us a call. We we would be more than happy to walk you through our program and show you how easy of a process it is.

***PLEASE READ*** For all the families that have recently moved into their homes, please give Darlene a call to ensure you are on track to get your credit scores where they need to be. Remember, this is a free service so take full advantage of it. Darlene can be reached at 905-706-9565.

Until next time…. Make The Smart Choice.

Maximum Leverage – Lesson #9
It’s been a while, but we are back onto our lesson’s.

Our goal at Smart Home Choice is to educate you so that you can make the best decision for you and your family. Rent to Own is not for everyone however, if you have decide that Rent to Own is right for you, Smart Home Choice is here to help you acquire the perfect home that suits your needs.
Maximum Leverage

So what exactly is leverage? From an investment perspective, here’s what the dictionary has to say.

Essentially you are using a small amount of money to control a very expensive and very profitable piece of real estate. Yes markets and home prices fluctuate from time to time, that’s completely normal but if you look at the overall trend of Real Estate you’ll see it’s always on an upward movement. Let’s go back in history and take a good look at what the price of the homes were several years back. Home prices always trend up based on a number of different important factors including inflation rate, population increase, fixed amount of land space etc….

With Rent to Own, that’s exactly what you are doing. Using a small percentage of the price of the home to take full control of the property within the next 2 to 3 years. If you follow what most successful people do, they use a very small amount of their own money to control large assets. In many cases, they don’t even use their own money. Instead, they turn to other people or in many cases to the Bank using a line of credit or other lending products.

Below is a graph illustrating the price trend of homes over the last 30 years.

So what does this mean to you? Well, if you are in a position to purchase your own home, there never really is a bad time to buy Real Estate and we can assist. If you are not in a position to purchase your own home due to poor credit or lack of a down payment, we can assist you as well. The great thing about rent to own is you are able get into your dream home NOW and not three or four years form now even if your credit is blemished or in some cases have been through a bankruptcy or a consumer proposal. Keep in mind, rent to own isn’t for everyone.

Each families scenario should be properly analyzed case by case as they come in and directed into the appropriate program that suits their needs. In some cases we’ve had people call us thinking they no other choice but to do a Rent to Own. Once we went through their application we were able to determine that they could go out and purchase their very own home.

Leveraging is a such a powerful tool. To take full advantage of this strategy we would be more than happy to assist.

Last Week – It’s My Birthday

On the weekend (Sunday) we went to a surprise fund raiser for a very close family member who’s 3 year old son was recently diagnosed with Autism. It was a great turnout and an emotional time for everyone involved. Sometimes in life you get so caught up in your day to day activities that you forget to take a timeout. Sunday was our timeout and it allowed us to spend some quality time with family and friends and to give our support.

As a way of giving back to our community, going forward we have decide to contribute 10% of our earnings each year to a worthy cause. I know it may not seem like a lot.. but it’s a start.

Gary

No Taxes, Less Liabilities – Lesson #8

Our goal at Smart Home Choice is to educate you so that you can make the best decision for you and your family. Rent to Own is not for everyone however, if you have decide that Rent to Own is right for you, Smart Home Choice is here to help you acquire the perfect home that suits your needs.
No Taxes, Less Liabilities

So here’s an interesting topic and something talked about everyday… taxes! Guess what, since you don’t own the home you don’t need to pay any property taxes and your liabilities exposure will be dramatically reduced for the time being.

Like most people I hated paying my taxes. Yes the tax man is greedy, there’s no doubt about it but here’s my new opinion since I’ve grown more wiser. Better to have a fat goose than no goose at all.

So what do I mean by this?

Very simple, I have no clue on how to pave roads, get electricity to my home, run my own television cables, launch my own satellite, run drainage systems to my home…. the list goes on and on. So yes, no one likes paying taxes, but it’s an important and allows for the necessary services required to do your day to day activities you have become custom to.

So we have two choices, we can complain about the outrageous tax prices or enjoy the services we receive and just pay it.

The bottom line for you and your family is this…… for now, you don’t have to worry about paying any property taxes so enjoy it!

On another note, we have a number of families that have located their new dream homes this past week…. CONGRATULATIONS!! We also have a number of families currently searching for their dream home with Don. We are starting to see more homes hit the markets which will make finding the right home much easier.

If you are tired of renting, give us a call to see what you can be approved for… you never know.

Check out this week’s Hot Property of the week below.

Enjoy your week and until next time… Make The Smart Choice.

Hot Property Of The Week

In order to view any of our hot properties of the week, you have to complete the following;

• Fast Approval Application has been sent in
• Approval process has been completed

Our Own Personal Renovations

Last week was incredibly busy. I know most of you are used to receiving our newsletters on Monday morning and we sincerely apologize for the delay. We were busy repainting our living/dining room to freshen up the spacel. What I thought was going to be a 3 hour project (According to  Darlene) turned into a 12 hour back breaking, paint splashing Sunday morning, afternoon, evening and night. For any of you that are in the process of putting our home on the market, you should consider light renos for an easy sale.

Here are a few of the pictures to show you the fun we had over the past couple of days.

Hot Property Of The Week

This week’s hot property is located in Courtice – - one of our most successful locations for Rent To Own properties. It’s a beautiful freehold townhome featuring a finished basement. If you’re interested, give Darlene a call at 905-706-9565to start the approval process.

THE FEATURES:

- Open concept kitchen with eat in area

- Laminate flooring throughout the main level

- Property backs onto green space

- Finished basement featuring laminate floors

In order to view any of our hot properties of the week, you have to complete the following;

• Fast Approval Application has been sent in
• Approval process has been completed

Hot Property Of The Week
This week’s hot property is located in a new Bowmanville development. It’s a freehold town home featuring a walk out basement. If you’re interested, give us a call at 647-977-3795 to arrange a showing of this property and get an offer prepared.

THE FEATURES:

- Eat in kitchen with stainless steel appliances and walkout to the backyard

- Spacious open concept layout throughout the main level

- Master bedroom has a four piece ensuite

- House is less than 1 year old

In order to view any of our hot properties of the week, you have to complete the following;

• Fast Approval Application has been sent in
• Approval process has been completed