The most critical aspect of a rent-to-own transaction is the company facilitating it, which is why so many rent-to-own deals have historically gone sour. Without a proper risk management approach or applicant screening process, a tenant buyer can be approved for a program they have no chance of succeeding in. Lacking the proper insight into how a reputable, professional business operates, many rent-to-own operators run sloppy, touch-and-go outfits that are plagued with uncertainties. Without the proper financial and legal backing, some rent-to-own companies are one bad transaction away from collapse.<\/p>\n
Fortunately for investors, not all rent to own companies are created equal.<\/p>\n
Since its inception, Homeowners Now has been among the top rent-to-own companies in Canada. The company\u2019s unique management team \u2013 a combination of finance professionals, successful real estate investors and mortgage experts \u2013 provides a rock solid foundation, while its exacting and comprehensive evaluation of potential tenant buyers paves the way for highly attractive, highly predictable returns for investors.<\/p>\n
\u201cWhen we were initially researching the sector,\u201d says Homeowners Now co-founder Dale Monette, \u201cwe found that rent-to-own was, in the general realm of residential real estate, the lowest risk, highest return we could find for our time and money. It had so much potential, but no one we could identify was doing it the way we thought it should be done.\u201d<\/p>\n
As the company took shape, Monette and the Homeowners Now team studied why so many rent-to-own deals fall flat, with an eye toward avoiding the mistakes made by so many of their competitors.<\/p>\n
Size matters<\/strong><\/p>\n \u201cWe found that a lot of rent-to-own companies were small-time operators who only do a few deals a year as a way to make a little extra money. Doing things on such a tiny scale means they\u2019re unable to provide the tenant buyer with the services they really need for a rent-to-own transaction to be successful,\u201d Monette says, adding that many operators can\u2019t provide the credit remediation processes or mortgage expertise necessary to ensure tenant buyers are in a position to purchase their chosen homes.<\/p>\n \u201cWe offer what we call the Homeowners Now Program, which offers credit coaching, tax advice, and a host of other services geared toward improving our tenants\u2019 financial standing. It has been a big factor in our 100% success rate.\u201d<\/p>\n Monette says smaller operators are often also limited to their own local markets, which results in a painfully small pool of available applicants to choose from.<\/p>\n \u201cThese companies may find themselves agreeing to deals with clients who wouldn\u2019t have been approved if they had had a few more deserving applicants to choose from. When you can only choose between a small number of applicants in your local market to do a rent-to-own transaction with, your success rate is going to suffer.\u201d<\/p>\n Monette says Homeowners Now, because of its strong national presence, receives approximately 300 applications a month from right across Canada.<\/p>\n \u201cOf those 300 applications, we filter down to the top one or two percent to find the people with the best income, the best credit profiles, and the largest down payments. These people should qualify for financing, but there are unique scenarios that hold them back.\u201d<\/p>\n Doing it right<\/strong><\/p>\n Homeowners Now also differentiates itself from other rent-to-own operators in how they handle their tenant buyers\u2019 deposit. This simple twist on an age-old rent-to-own flaw has allowed both the company\u2019s investors and tenant buyers to succeed at an unprecedented rate.\u00a0<\/p>\n The typical rent-to-own operator often takes the initial down payment provided by the tenant and gives that money directly to the investor. Monette says doing so puts a significant strain on the applicant to be able to qualify for their own mortgage at the end of the lease period.<\/p>\n Monette says Homeowners Now places the funds directly into a trust account to be held for the benefit of buying the house for the applicant. Every month, a portion of their rent goes into that trust account, adding to their funds and inching them closer to homeownership<\/a>. Monette adds that partnering with a rent-to-own company that makes use of trust accounts should be a primary focus for investors who have an altruistic purpose for investing in rent-to-own.<\/p>\n \u00a0<\/p>\n