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FREE Rent-to-own Training #3Pulling it together

CRAZY THOMAS

Lease Option Specialist

Who am I?

• Crazy Thomas• Thomas Wong• Your rent-to-own

specialist• A real estate

investor with a process improvement background

• Have done over 30 rent-to-own projects in the last few years

What did we cover so far?

• In our first video, we covered– The basics of RTO– What is rent-to-own/Lease Option?– Why RTO is good for tenant and

investor?– What are the risks of RTO?– The basics of making money with RTO

projects

What did we cover so far?

• In our second video, we covered– The marketing of your RTO business

• For RTO clients• For investors

The Rent-to-Own Process

What do you need for a Rent-to-Own project?

• 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

The “Bag of Tricks” of Crazy Thomas

• The key steps to pull a rent-to-own project together– Qualify the tenant– Find the right property for the tenant– Decide on the property– Negotiate the purchase– Structure the deal– Communicate with investors

Rent-to-own Client Qualification Checklist

Process for finding a house for RTO client

• 3 steps process to find property– Meet with real estate agent

• Schedule a showing (5-6 prop.) Observe what is important to tenant!!

– Search again to meet their criteria and our criteria.• Find motivated sellers.

• Go and see properties with realtor without tenant.

– Present 3-4 selected properties to tenant

• Start negotiation on the chosen property

Analysis of the property• Input (about the property):

– Market value of the property– Market rent of the property– Any renovation cost– Property tax of the property– 5 year average appreciation rate– Any other on-going expenses (condo fee …)

• Input required (about the investment)– Down payment, interest rate, amortization years

• Input (about the tenant)– Monthly payment target, initial deposit availability

Feasibility Analysis SpreadsheetLease Option Feasibility Analysis:

Dash Board

Result Matrix DCRInvestor Profit

Tenant % Down

Tenant MonthlyPayment

Current Value 1.17 65% 10% 2,025$ Target 1.10 60% 10% 2,000$

Description of the property: 13 Ecclestone DriveType of Property: Free Hold

Current Purchase Price: $281,000

Monthly Market Rent: $1,500

Land transfer taxOther Ont. City $2,690

Rehab cost/setup cost: $2,000

Closing legal fee $2,500

Avg. Annual Appreciation 5.0%

Assignment fee $5,000

Adjusted Cost base: $293,190

Annual property tax: $3,200

After Repair Market Value: $296,000

Annual Insurance: $600

Selling commission: 4.50% $13,320

Financing:

1st MortgageInitial Cash Investment $54,390

1st Mortgage Amount 80% $224,800 DCR(Free Hold) 1.17Interest rate 4.00%

# of Amortization Years 35

2nd Mortgage RRSP 2nd Mortgage Amount $14,000

2nd Mortgage Interest rate 14%

Total Mortgage $238,800

Lease Option Arrangement: Note: Input field are highlighted in

Initial Down Payment $8,000 yellow

Monthly Rent (% of avg. rent) 99% $1,485

Monthly Option Premium (% of avg. rent) 36% $540

Monthly Condo Fee $270

Tenant Total Monthly payment $2,025

Monthly Option Bonus $200 (extra money to credit to Leasee's downpayment)

Tenant's Preferred Length of Lease (# of Year) 3

Lease Term: 3-Year

What can help to increase profit (ROI)

• Lower purchase price

• Higher after repair value

• Higher rental portion of monthly payment

• Higher appreciation rate

• Lower tax and insurance cost

• Add a RRSP 2nd mortgage – 14% (reduce cash investment from cash investors v.s. 20%ROI)

Crazy Thomas’ Way to Structure the Joint Venture

35%35%> 50% ROI/YR> 50% ROI/YR

65%65%= 20% ROI/YR= 20% ROI/YR

Partner # 1: (5% of $$)Partner # 1: (5% of $$)

Thomas (Project Manager)Thomas (Project Manager)

Bob (Mortgage partner)Bob (Mortgage partner)

Partner # 2: (95% of $$)Partner # 2: (95% of $$)

Cash Investors Cash Investors

80% Mortgage80% Mortgage

20% 20%

Down Payment Down Payment ($$)($$)

The “Bag of Tricks” of Crazy Thomas

• We still have many more tools in our “Bag of Tricks” like how to firm up the deal and run the project to ensure that we are making money at the end.

• We will cover them in the videos that you will receive next time.