Vendor takebacks are making the rounds for investors looking to tap into alternative funding sources. But there are pros and cons to consider, reports Jemima Codrington.
Video transcript below:
Jemima Codrington: A vendor takeback or VTB is a popular investment strategy among investors, particularly in light of the new lending rules. But is it right for everyone? Hi, I’m Jemima Codrington and welcome to Investor Insight on Crew TV.
In the current lending climate, investors are seeking out ways to make their capital go further. So what exactly are the benefits of a VTB.
Shawn Maher, Maher Property Holdings Ltd.
Shawn Maher: I think the benefits of a vendor takeback is you can use very little of your own money to get into the deal and increase your return over time.
Marcel Greaux, Toronto Real Estate Club
Marcel Greaux: The benefits, one of the main benefits of Vendor Takeback I would say is definitely being able to leverage your investment capital. For instance, a bank might allow you to place only 10% down, if you have a 10% VTB and behind the first mortgage at 80%. That being said, there are some challenges in this financial climate. Most A lenders, pretty much all of them are non-existent on the VTB and so you definitely have to look at B lenders for that type of financing. Vendor takebacks are actually more so common on the commercial side of the business.